Real estate wholesaling is becoming increasingly popular, and for good reason! With influencers like Brent Daniels, RJ Bates III, and Ryan Zolin showing people how to turn profits on distressed properties, it feels like a guaranteed way to build a successful real estate business and make a lot of money.
The good news is that in many ways, wholesaling is a guaranteed business strategy. And while it involves a lot of hard work, the process is fairly simple and there’s no shortage of opportunities available to you.
However, while the process is simple, there’s a lot involved in wholesaling, and it’s important to understand how each part works before you start looking for wholesale deals. In this guide, we’ll walk you through everything you need to know so you can start making money in wholesale real estate!
What is wholesale real estate?
In its simplest form, wholesale real estate is the process of putting homes under contract to purchase that are in some form of distress or are owned by a motivated seller and then selling those purchase contracts to other real estate investors or homebuyers for profit.
Distressed properties are houses that have some kind of damage or neglect that the owner can’t afford to address or simply doesn’t want to fix. Some examples of distress factors include:
- Abandoned houses
- Vacant houses
- Fire-damaged houses
- Condemned houses
- Structurally unstable houses
- General disrepair
Wholesalers also look for owners who are considered motivated sellers, because they will often sell at below-market value. Motivated sellers are owners who have some outside financial situation that is pressuring them to sell. These motivating factors include:
- Pre-foreclosure
- Recent inheritance
- Being a long-term landlord
- Probate (due to death in the family)
There are many factors that signal that a property is distressed or that an owner is motivated to sell. Wholesalers focus on these properties and owners because they either can’t afford to keep the property or because they can’t afford to fix the damage to it. Their only option is to sell at below-market value.
Wholesalers look for distressed properties because they can buy them at a low price and then sell the real estate contract to a cash buyer for an assignment fee.
An assignment fee is the profit a wholesaler makes from a deal. Typically, wholesalers don’t actually buy houses. Instead, they sign contracts on them at a set price, then find a cash buyer who wants to purchase the property. The wholesaler sells the contract, or the right to buy the house at the agreed-upon price, to the cash buyer. In this case, the assignment fee is the amount the buyer pays for the contract.
Wholesaling can be incredibly profitable regardless of which method you choose to follow. Depending on local competition, wholesalers can make $5,000 – $100,000+ on a single wholesaling deal.
However, as we’ve discussed, wholesaling involves a lot more than just signing a contract on a random house and then selling it for thousands of dollars. Wholesaling is as strategic as fix and flip investing or long-term rental strategies.
To be successful in wholesale real estate, you need to understand how to find real estate leads, calculate prices correctly, market to property owners, and find the right buyers at the right time. Here are the steps to the wholesale real estate process.
The steps of a wholesale real estate deal
Before you start looking for homes to wholesale, you need to understand what’s involved in finding, landing, and assigning a real estate contract.
Generating real estate leads
There are many ways to find real estate leads. Traditionally, investors used a combination of strategies to locate properties that were visibly distressed or encourage motivated sellers to contact them. These strategies included placing bandit signs in high-traffic areas, canvassing local neighborhoods, partnering with real estate agents, and attending foreclosure auctions.
While relying on these strategies meant that investors had some information about their leads, their investing efforts were limited by the properties they could find on their own, through their network, or more “guerilla-style” marketing methods.
Investors and wholesalers still use many of these strategies, but property intelligence software has made finding distressed properties much easier and faster. This technology allows wholesalers to quickly pull lead lists based on numerous distress factors and find information on virtually every residential property in the United States.
Wholesalers can even use property intelligence software to search for hyper-specific combinations of property details, distress factors, owner demographics, and motivating factors.
In short, finding wholesale real estate leads has changed drastically over the past five years. Now anyone can become a wholesaler, no real estate license or extensive network required!
Aside from just helping wholesalers find distressed properties, advanced real estate software also gives investors valuable property insights. Without this software, finding important property information, like square footage, lot size, and purchase history requires time-consuming public records searches (often using outdated and cumbersome software). Learning other details about a property requires visiting it in person, and even then there’s still a lot of crucial information wholesalers can’t gather.
But with property intelligence software, wholesalers can learn everything they need to know about a property in a few seconds. BatchLeads has over 300 data points available for each of the +150 million properties in its database. With this information, wholesalers don’t have to spend time visiting properties to determine if they want to pursue them or move on. They can simply view property details and learn almost everything they need to know immediately!
Qualifying wholesale real estate leads
The process of determining which opportunities to focus on and which to ignore is called qualifying leads. Qualifying your leads is important because it helps you avoid spending time talking to sellers who aren’t motivated to sell or who own properties that aren’t a good fit for a wholesaling strategy. It also helps you prepare for the conversations you’ll have with owners and the offers you’ll make on their properties.
While all wholesalers have their own investing strategy, there are a few general rules of thumb to follow when qualifying your leads.
First, choose what kind of leads you want to pursue, and stick to that strategy. In other words, decide on a niche. This will help you easily determine if a deal is right for you. If your business focuses on pre-foreclosures and foreclosures, you will be able to weed out fire-damaged homes, because they aren’t part of your investing strategy. Determining what you want to focus on early will help you make the most of your time and effort.
Second, determine what makes the seller motivated or the property distressed. It’s easy to get excited about an opportunity without realizing that it’s a property that would do well on the market. Remember, motivated sellers are only ready to sell for below-market value because their property is distressed or they have a motivating factor. Without either, you probably won’t get a good deal on the property.
Third, you should determine the owner’s equity. The lower the owner’s equity, the more you’ll have to offer to cover their mortgage and secure a contract on the house. If you’re not careful, you could lose money on a low-equity deal if your cash buyers aren’t interested in paying a high enough price for the property.
However, high-equity homes are wholesaling jackpots, because you can buy them at a low price and earn a large assignment fee when you sell the contract to a cash buyer.
Deciding which real estate leads to prioritize
After you qualify your leads, it’s time to identify the properties you want to focus on. One of the most common problems wholesalers experience is trying to pursue too many leads at once. Of course, larger real estate businesses often run campaigns that target tens of thousands of properties at once, but even they need to prioritize the most promising leads to maximize their ROI.
The best way to quickly identify promising leads is to use a list stacking tool like we offer in BatchLeads. With this tool, you can select two or more different lists that are divided by motivating factors and then “stack” them to discover which leads are on multiple lists.
Leads that appear on more than one list are considered highly motivated or highly distressed because they are affected by two or more distress factors. These are the leads you should prioritize because multiple distress factors means the owner will probably be ready to sell and close as soon as possible. You can often buy these properties at a lower price and maximize your profit.
Skip tracing real estate leads
Once you find a list of properties you want to target, you’re probably feeling excited about reaching out and making deals. But there’s an essential step that comes first: skip tracing real estate leads.
Skip tracing is the process of finding contact information for the property owners you want to reach out to. It’s an essential step in the wholesaling process, because you won’t be doing much marketing with just an address and a name.
There are a few ways to skip trace. You can search public records and white pages online. However, this process is time-consuming and the data it returns isn’t always reliable. You can also scour social media sites to find property owners, but this process can feel intrusive and is also very time-consuming.
The most popular form of skip tracing is using online skip tracing services or lead generation software with skip tracing built-in. These services are much faster and more efficient than manual searches, and can usually return thousands of results in just a few minutes.
Using a skip tracing service
Using a skip tracing service is much easier than you might think. If you’re using a standalone skip tracing service, just upload the list of properties you need contact information for. If you’re using a lead generation service with skip tracing built in, just select the list you want to skip trace.
You can usually expect to receive results in a few minutes, so you won’t have to wait long to get started on the next step: marketing. You can also expect to receive several phone numbers, email addresses, and contact information for close relatives, such as the primary owner’s spouse.
Skip tracing services aren’t only faster and easier than traditional skip tracing methods. They’re also usually more accurate. However, you should be careful when choosing a skip tracing service, because they’re not all created equal.
The importance of right-party contact information
Unfortunately, most skip tracing services only return accurate results 2-18% of the time. Frustration isn’t the only cost of low quality data. You’re also paying for each skip tracing record you pull, and the cost doesn’t stop there.
LeadJen recently reported that sales reps spend one-third of their time chasing bad data. That’s why it’s very important to choose a skip tracing service that you can rely on. Here are a few key factors you should look for when choosing a real estate skip tracing provider:
- Tier-one data
- Pay-per-match guarantee
- Pay once per record guarantee
These factors guarantee that you’ll receive quality data and you won’t have to pay for the same record multiple times if you have it on several lists.
Calculating the value of real estate leads
The final step you should take before starting a marketing campaign is calculating the value of your leads. You can take this step after launching a marketing campaign, but you run the risk of finding a motivated seller who is ready to accept an offer when you aren’t prepared to make one.
Calculating the value of a property is much simpler than it seems. But first, you need to understand the factors that affect a property’s value.
Most properties that you’ll wholesale have some repair or clean-up needs. Therefore, you’ll need to calculate the after repair value (ARV) of the property and estimate repair costs to figure out how much you should offer.
The after repair value of a property is how much it will be worth once you fix damage, clean up the yard, and renovate the house. Depending on the state of the house and the factors motivating the owner to sell, the ARV could be far higher than what the owner is willing to sell for. If this is the case, you have a great deal that might earn you a high assignment fee.
To calculate the ARV and discover how much a property is worth, use the following formula:
Using comps to calculate ARV
As you may have noticed, you need to compare your deal to other properties to calculate its value. This practice is known as comping.
To comp your deal, you’ll need access to the sale price of properties that have recently been sold near the property you’re pursuing. The best way to find this information is to use the Multiple Listing Service (MLS), but you’ll need a real estate license or the right real estate software to access it.
Unless you’re interested in becoming a real estate agent, you’ll need real estate software that has MLS data. While most platforms don’t have MLS data, BatchLeads does.
Once you have access to recently sold real estate data, you can calculate the average square footage of houses similar to your deal and then use the formula listed above to calculate the ARV of your leads.
Of course, picking the right comps is very important. Comparable properties have similar square footage, similar property characteristics, and are located close to the house you’re comparing them to. Because real estate comps have specific requirements, simply driving for dollars or looking for houses near your deal isn’t always a reliable way to pick comps.
How do you pick comps?
As always, you can rely on your network of real estate agents to help you find comps, but if you don’t have a network of agents, you have two options: guess which houses are comparable to your leads or use property intelligence software to find them.
BatchLeads has a comping tool built into its property details panel. Not only does it give you a list of comparable properties, but it shows where they are on a satellite map, their last known sale price, and how they were purchased. The comping tool also gives you several filtering options so you have complete control over which properties the system displays.
BatchLeads doesn’t just show you comparable properties. It also has a built-in comping calculator that will show you the approximate ARV of your deal, so you don’t have to do the math yourself and worry about a miscalculation ruining your deal.
However, you should remember that when you’re wholesaling, you’re not the one who will be doing the repairs. The ARV is an essential number, but you should buy at a low enough price that you can still make a profit when you assign the contract to a cash buyer. This is where the 70 percent rule applies.
Using the 70 perfect rule in real estate
The 70 percent rule is a crucial fix and flip concept that most real estate investors live by. In short, real estate experts recommend that your offer should never exceed more than 70 percent of the property’s ARV.
This allows you to make room for expected costs like repairs and unexpected costs like having to hold the house for longer than planned.
While this is primarily a concern for fix and flippers, it’s important for wholesalers because they’re selling to cash buyers who live by the rule as well. Understanding what factors affect the 70 percent rule allows you to make informed investment decisions and identify the best deals to pursue.
You can calculate the 70 percent rule with the following formula:
Marketing to motivated sellers
Once you know what to offer on a deal, you’re finally ready to launch a marketing campaign! This is an exciting step in the wholesaling process, because there are several strategies you can choose from.
Cold calling
Cold calling is the practice of calling leads that you haven’t spoken to before. It’s one of the most famous wholesale real estate marketing strategies, and for good reason. Some of the most successful wholesalers, like Brent Daniels and Tiffany High, have relied on cold calling to build businesses from the ground up.
While it’s popular and effective, there’s a lot to know about cold calling before you pick up the phone and start calling home owners.
Cold calling best practices
Cold calling is a skill that takes time to develop. Of course, the best way to develop it is to call people, but there are some best practices that you should understand before you start.
First, you should know that scammers and spam callers have done a lot of damage to consumers’ trust in the US voice network. As a result, the FTC and carriers have implemented strict measures to deal with these kinds of calls. If you call people in ways that make you look like a scammer, you’ll place your business at risk by lowering your connection rates, getting your numbers labeled as spam likely, or even incurring fines.
Here are some best practices you can take to protect your business when cold calling leads:
- Don’t call a consumer multiple times in a day
- Never call the Federal DNC list (unless you have consent)
- Use agents with good pronunciation and grammar
- Use live agents instead of pre-recorded messages
- Never speak aggressively
- Don’t call people after they ask to be removed from your list
Aside from basic phone etiquette, there are a few technical best practices you should be aware of as well. They include:
- Monitoring your number performance
- Resting poorly performing numbers
- Calling from numbers that accept call-backs
- Removing disconnected numbers from your lists
- Using a trustworthy dialer
If you follow these best practices, cold calling will be one of the most effective tools in your business.
Developing cold calling skills and scripts
Of course, best practices aren’t the only factor that make a good cold-calling campaign. You also have to develop your phone and sales skills to build rapport and draw property owners in. There are a few key ways to do this.
First, cold calling scripts are a great way to launch calling campaigns, especially if you’ve never worked the phones before. They’ll show you how to greet property owners, how to direct conversations, and how to handle the various situations that may come up during a call.
You should also understand how to deliver a hook and start a conversation, whether you’re using a script or not. Knowing how to sound natural will help you increase talk time, build rapport, and kick off great conversations.
Driving for dollars
Driving for dollars, also known as canvassing, has been an important part of real estate investing for a long time. While it’s predominantly a lead generation method, it doubles as a marketing strategy, because it puts wholesalers in front of their leads as they find them.
Many wholesalers also call this method door-knocking. It’s simple: you identify neighborhoods with distressed properties, you find properties you want to wholesale, and then you knock on their doors to speak to the owners.
Real estate software has made this process simpler and more intuitive, because now you can access detailed property information before knocking on the door. If you have a team, you can also track their canvassing progress with the new BatchLeads mobile app so you can assign routes, optimize productivity, and keep your team from reworking neighborhoods.
Combining property intelligence software with traditional canvassing methods is effective because it gives you the chance to learn almost everything about a property’s condition immediately. For instance, you can see rotting wood on the porch, broken windows, peeling paint, overgrown grass, and much more. These details are prime indicators that an owner is likely motivated to sell or a property is distressed.
Driving for dollars is also effective because you can start conversations with property owners as soon as you discover a property you’re interested in. Like cold calling, this might seem daunting at first, but it’s a great way to take your offer directly to motivated sellers. As Brent Daniels says, one of the most important things you can do as a wholesaler is talk to people.
Sending direct mail campaigns
While direct mail is one of the more expensive wholesale marketing strategies, it’s effective in ways that other strategies aren’t. For starters, it doesn’t take any manual work if you choose a real estate lead generation platform like BatchLeads. All you have to do is write your message, choose who you want your letters or postcards to go to, and then launch the campaign. You won’t have to worry about stamping and sending mailers yourself.
Direct mail is also effective because it gives your leads something they can hold onto. After all, motivated sellers can’t put a phone call on their fridge or in a desk drawer, but they can keep a postcard.
In fact, many top wholesalers say that sellers will call them months after a direct mail campaign ends. The property owner wasn’t ready to sell when they received the mailer, but a few months later they made up their mind and knew who to call.
Finally, direct mail is great because you can pair it with other marketing strategies without it becoming intrusive or annoying. If you send someone direct mail and then call them a week later, they probably won’t feel harassed, and you may take the “cold” out of your cold call!
Texting motivated sellers
SMS marketing has become one of the preferred ways to contact real estate leads. You can text everyone on a list quickly, it doesn’t require the same team structure as a cold calling operation, and it has one of the highest response rates of any marketing strategy.
Like direct mail, texting is also less intrusive and lets a seller come back to your message at any time. They don’t have to be ready to talk immediately.
To text a list of motivated sellers, you’ll need a compliant texting platform. While there are many options, the texting platform in BatchLeads has everything you’ll need to start and continue conversations with motivated sellers. You can buy local phone numbers, choose the third party integration you want to use, and create texting templates and quick replies. It even includes a popup that shows you property information mid-conversation.
Texting regulations you should aware of
While these tools make texting an invaluable way to reach motivated sellers, recent regulation changes mean that you have to be strategic. In the past, wholesalers could send thousands of texts every day. Now, that number has dropped significantly; experts recommend limiting outreach to 200-300 texts per number, per day.
However, this advice is standard for telecommunications marketing. As we mentioned earlier, cold calling regulations limit businesses to 150 calls per number per day. Additionally, sending fewer texts will save you money, as you create hyper-targeted lists for your SMS campaigns.
Overall, ongoing regulation changes haven’t made SMS less effective, they’ve simply changed how it works. If you choose to market via SMS, be aware of the regulations before you start sending texts.
Pay-per-click marketing
Pay-per-click (PPC) real estate marketing is usually limited to real estate businesses that are using a variety of lead generation and marketing tactics. However, it can be very effective if you have the budget for it.
PPC marketing is the use of paid search engine and social media ads to convince potential leads to share their contact information and set up a call with you. The benefit of PPC ads is that search engines and social media platforms have access to an incredible amount of demographic information, and you can target your ads to very specific subsets of the population.
While PPC ads are used idependently of real estate lead generation software, they can be very effective at targeting leads based on different sets of data. Lead generation platforms let you pull lists based on distress factors, financial situations, demographics, and life events, but PPC ads let you target consumers based on interests, demographics, and internet activity signifiers.
Fortunately, there are plenty of readily available videos online that explain how to set up an effective campaign. Set expectations correctly though – turning on an ad campaign doesn’t mean leads will start to pour in. You’ll want to be very intentional with your strategy and be open to running ads for at least a couple of months. Advertising can also quickly become expensive and yield a poor ROI if your strategy isn’t tuned.
Traditional wholesale real estate marketing
Before wholesalers had real estate lead generation platforms and marketing channels that allowed them to go directly to sellers, they relied on low-tech strategies. These strategies included bandit signs, billboards, networking, and auctions. New technology hasn’t made these options ineffective though, and for many wholesalers they are just as important today as they were a decade ago. They are, however, geographically limiting.
Bandit signs and billboards
Wholesalers place bandit signs and billboards in heavily trafficked areas to generate leads and let motivated sellers know who to contact if they’re interested in selling. These signs usually say something like “We buy houses fast,” and include a phone number.
These signs can be highly effective because they are affordable and can stay in one location for a long time. If you’re ready to answer your phone when people call, you can land deals with this timeless inbound marketing strategy. This method also cuts out the canvassing and lead generation part of wholesaling, so it can be a good way to maximize your time and ROI.
Bandit signs and billboards can work against you though. While they remove the lead generation part of wholesaling, they also take away your chance to qualify leads before talking to sellers.
Some homeowners looking to list on the market may think you’re a real estate agent while others may call you with houses that don’t fit your investment strategy. While you can screen calls with an IVR, the only real way to learn if an opportunity is worth pursuing is to talk to the seller or visit the home in person. This takes time and money, and it doesn’t always pay off.
If you want to market with billboards and bandit signs, just understand that the lead generation and marketing process will look very different than what we’ve described here.
Building your network
Finally, some wholesalers focus solely on building their network. They call real estate agents, attend property auctions, and let the people around them know that they buy distressed property.
This word of mouth marketing strategy is highly effective for many wholesalers, but it does require a lot of initial relationship building. To build a successful business through networking, you’ll need to find some success wholesaling first. Then, when you’ve demonstrated your ability to find deals, you can approach local real estate professionals and let them know that you’re the one to call if they find distressed properties that aren’t ready to be listed on the market.
When it comes to wholesale real estate marketing, you have several options. But it’s important to choose one when you start and really master it. As Tiffany High, CEO of Heels Homes, said on a recent BatchTV webinar, a lot of wholesalers never master marketing because they bounce between marketing strategies. If you’re tempted to launch multiple campaigns at once, slow down and focus on one. Once you become proficient at it, you can start adding others!
Negotiating with motivated sellers
Once you find a property owner that’s interested in selling to you, you’re on the verge of securing your first wholesale real estate deal! Now you just have to negotiate and get the owner to accept the right price.
Many wholesalers feel like this is the hardest part of the process, but it doesn’t have to be. The first step is as easy as understanding what the seller’s needs are and finding a way to help them solve their problems.
The process of understanding a seller’s needs and working together to solve their problems is called building rapport. This is a crucial negotiation concept. Think back to your memories of dealing with salespeople. When you think of positive interactions, it’s likely because they built rapport with you. When you’ve had negative experiences, it’s likely because the seller didn’t try to understand your problems. They just tried to sell something to you.
To become a skilled negotiator, remember that your job is to be courteous and solve the problems that motivated sellers are facing, but you’re not there to become their new best friend. While there’s a benefit to being friendly, spending too much time building rapport can hurt your chances of signing a wholesale real estate contract.
As we mentioned earlier, most motivated sellers have some form of financial distress. The type of financial distress they’re experiencing will determine what they need and how you can help them. Just be sure to think carefully about your solutions before you present them. While your most common solution will be a suitable offer on the property, there are times when creative finance will be in everyone’s best interest.
This is also why it’s important to find properties with high equity, because the more money a motivated seller needs to get out of their mortgage, the higher price you’ll have to pay for the property.
Once you understand what a motivated seller needs, you’re ready to make an offer. Getting them to sign a contract on the right offer is crucial, but don’t expect them to accept immediately. No one wants to sell their house for a below-market value, so you may need to haggle.
Haggling is the second step of negotiation, but it’s probably the one you think of first. It’s an art and a skill, so there are many tactics you can use to your advantage. Your main goal is to show property owners that your offer is a good one without trying to convince them. It’s a delicate balance that will take time to master, but with time and the right strategies, you’ll learn how to regularly secure real estate contracts at your ideal price.
Assigning wholesaling contracts to cash buyers
Once you make it this far, the last step is finding a cash buyer. This can be easy or difficult depending on the state of the economy and your wholesale market, but there are always cash buyers looking for promising investments.
To find cash buyers, tap into your network, attend local real estate events, or contact real estate agents. They always have sizable networks and if they don’t know someone looking to buy, they can use their network to connect you to someone who does.
You can also use property intelligence software. BatchLeads has a quick filter option that will allow you to pull a list of cash buyers in your search area with the click of a button. You can also filter cash buyers by the number of properties they own so you have control over the investors you’re targeting. Then all you have to do is skip trace their contact information and start calling. Often, you’ll have a decent offer by the end of the day.
Just remember that cash buyers are real estate investors. They’re looking to buy as low as possible, so when you contact them, be ready to negotiate. If an investor doesn’t want to pay you what the contract is worth, be willing to move on and offer it to other potential buyers.
Different kinds of wholesale real estate deals
Most wholesale real estate deals involve signing a real estate contract with a property owner and then assigning, or selling, that contract to a cash buyer for profit. But there are a few other ways you can wholesale real estate. Before we explore them, you need to understand how a wholesale real estate contract differs from a standard real estate contract
What is a wholesale real estate contract?
Standard real estate contracts are simple purchase agreements. They outline the terms of the deal, the earnest money required, any factors that would nullify the contract, and the closing date and time.
Wholesale real estate contracts are a bit different, because they clearly disclose the intention to assign the contract or sell the property to an end-buyer.
Assigning a real estate contract
As we’ve mentioned, most wholesaling deals involve contract assignments. In this scenario, you sign a wholesaling contract called a purchase and sell agreement with a motivated seller.
This contract states your intention to sell the property or contract to an end-buyer. Then you find a cash buyer and assign the contract to them. After this, you’re no longer involved in the real estate transaction. The cash buyer will attend the closing and pay the contracted price.
In essence, you haven’t bought the property. You simply secured a contracted sale at the right price and then the cash buyer purchased the right to buy the property from you. The amount that they paid for the contract is called the assignment fee.
This scenario is popular because it involves very little financial risk. The only money you have to involve in the transaction is the earnest money you put down when signing the contract.
Double close
Double closing is the process of signing a real estate contract, following through and closing on the wholesale deal (including paying for the house), and then immediately selling it to a cash buyer in a separate closing.
This process is less common, because it is more complicated and involves more financial risk. With a double closing, you’re responsible for securing funding to purchase the property. You’re also responsible for finding a buyer before the closing so that you don’t have to hold the property for any length of time.
If something happens and your cash buyer falls through, you may still be required to buy the property. This law varies by state, but if you’re forced to pull out of the purchase agreement because you couldn’t find a cash buyer, you will still lose your earnest money deposit.
Wholetailing
One relatively new real estate strategy that’s gaining popularity is wholetailing, a mix between wholesaling and fix and flipping.
In this strategy, you find a distressed property, but instead of immediately connecting with a cash buyer, you purchase the house and identify several quick but important improvements you can make to raise the resale price. Then you sell it to an investor who is interested in a longer-term project or flip.
This strategy allows wholesalers to maximize their profit by taking on quick projects that other investors don’t want to take on. Because some of the renovations are already completed, the end-buyer will ultimately pay you more for the house, because they won’t have to spend as much time and money on repairs and renovations!
Reverse wholesaling
One other way to wholesale is to find a cash buyer before securing a contract on a property. This is often a more efficient and low-risk way to wholesale, because the buyer can tell you what kind of property they’re looking for. Once you find a fitting property, the process continues as it normally would.
You should be careful if you choose to reverse wholesale, because there are legal implications for acting as an unlicensed real estate agent. If a cash buyer says that they are interested in a specific property, securing a contract on it for below-market value may be illegal depending on the state you’re working in. It’s important to know state laws and regulations before you sign any real estate contracts so that you don’t accidentally get into a legal situation.
Wholesale real estate legality
Of course there’s more to wholesaling legality than acting as an unlicensed real estate agent. Because wholesale real estate has become so popular, state legislators are starting to take notice and question how the process works.
Important Note: The information below is not considered legal advice – please consult your attorney for clarity on where you plan to operate.
As a result, wholesaling laws differ from state to state, but here are some general rules of thumb you should follow:
- Don’t bring the buyer to the deal before you sign a contract with the seller. If you do, you’ll be acting as an unlicensed real estate agent, which is illegal.
- Verify how many deals you can do per year in the state. Some states require you to have a real estate license if you exceed a certain number of deals.
- Include a clause in your real estate contract that clearly states your intent to double close or assign the contract.
- Disclose if you are a real estate agent. If you are an agent, be careful not to mix the two roles, especially when acting as a seller’s agent. As a seller’s agent, you are responsible for getting your client the best possible price on their home.
Wholesale real estate best practices
Now that you know how to wholesale real estate and what laws to be aware of, there are a few best practices you should keep in mind.
Wholesaling ethics
Wholesaling real estate can be profitable, but it’s important to prioritize ethics. You’re almost always dealing with motivated sellers, and some of them may be desperate to find a solution to their financial problems. It’s important that you always remain honest, empathetic, and helpful so as to not create additional issues for motivated sellers and keep yourself out of legal trouble.
Another thing to consider is the reason that wholesaling laws are changing across the US. Because not everyone is ethical, more people have become critical of wholesaling. In order to keep wholesaling legal, everyone involved should operate with honesty and transparency. Otherwise, more and more legislation will pass over time and it will become more difficult to wholesale real estate.
Developing the right mindset
Wholesaling real estate is difficult. It involves a lot of steps and you have to be ready to handle rejection. One of the most important best practices you can remember is to keep a positive, entrepreneurial mindset.
As we discussed, your job revolves around solving people’s problems. So while you should have a positive, winning mindset, you should also be looking for chances to solve problems. In fact, if you find that you’re struggling to secure contracts, you may not be trying hard enough to solve problems. As with any business, the wholesaler who comes up with the best solution to a motivated seller’s problems will win the deal.
Wholesaling resources
Becoming skilled in wholesale real estate is a commitment to continued learning and skill development. There are countless resources you can use to learn more about wholesaling, keep track of developments in the real estate market, and work with other wholesalers.
These include:
- BatchService’s YouTube Channel BatchTV
- Our monthly BatchBulletin newsletter
- Top wholesalers, including Brent Daniels, Jamil Danji, and Pace Morby
There are also numerous tools you can leverage to make each step of the wholesaling process more efficient and easier. With these tools, you can minimize the time and resources it takes to transform leads into profitable deals. These tools include:
- BatchLeads for lead generation, comping, marketing, and finding motivated sellers
- BatchDialer for cold calling and scaling your acquisitions team
- BatchSkipTracing for skip tracing (if you’re not using BatchLeads for lead generation).
Leverage all the tools you can to make finding and landing deals easier. Wholesaling can be a difficult and involved process, so use whatever you can to learn fast and find deals even faster.
Key takeaways
Wholesaling real estate can be a low-risk path into a very lucrative real estate career. It takes a lot of work, though. You need to be prepared to find motivated sellers, comp your deals, skip trace property owners c, launch and follow up on marketing campaigns, and find buyers.
Thankfully, real estate software has made the wholesaling process easier and faster. But whichever wholesale real estate strategy you choose, just remember to be consistent, understand local laws, and find ways to help motivated sellers. If you make these three things a priority, you’re almost guaranteed to land deals and build a successful real estate business.
