Wholesaling Real Estate for Beginners

Written by Gavin Finch 
Wholesaling Real Estate for Beginners

Wholesaling is a great way to become a real estate investor. Unlike other investing strategies, it doesn’t require you to have much capital or investing experience, so you can get started as soon as you want!

However, there are several steps involved in closing a wholesale real estate deal, so we’ve compiled this list to give you a step-by-step guide to landing your first deal and cashing a check!

How is wholesaling different from other real estate investment strategies?

Unlike other types of real estate investing, wholesaling rarely involves buying properties. Instead, wholesalers sign contracts on properties for below-market prices and then sell those contracts to cash buyers for an assignment fee. 

Sometimes real estate wholesalers will close on a house before selling it to a buyer in a double-close, but this is rare. Usually, wholesalers put down a small amount of earnest money to secure the contract and flip it to a buyer. This means there’s little financial risk and a lot of opportunity for profit.

The following steps will help you start pursuing your first wholesaling deal.

Generating leads

The first step to real estate wholesaling is generating leads. Wholesalers look for homeowners who have some motivation to sell their homes. This motivation may come from financial distress, such as pre-foreclosure or deep debt. It may also come from damage to the property that the owner can’t afford to fix. Finally, owners may be motivated to sell because of a recent life event like a divorce, inheritance, or simply being tired of owning the property.

These factors mean that motivated sellers are usually willing to sell for less than market value. Wholesalers can secure a low price on the property and then make a large profit when selling the contract to an investor.

Secondly, distressed properties are usually off-market, because they aren’t technically for sale. Wholesalers don’t have to compete with prospective homeowners willing to pay market value or higher. While they may have to compete with other investors, they won’t typically end up in the fabled bidding wars you hear about in the homeowner market.

Traditionally, wholesalers would identify motivated sellers by searching local government records for pre-foreclosure data. Today, most wholesalers generate leads with a combination of tactics, including bandit signs, driving for dollars, and lead generation software. These platforms, like BatchLeads, make it easy to find motivated sellers, distressed properties, and detailed insights that help wholesalers make informed investing decisions.

Identifying distress factors

Wholesalers identify distressed property and motivated sellers by looking for certain characteristics, life events, or situations. The following distress factors are examples of what wholesalers are looking for:

  • Pre-foreclosures
  • Long-term absentee owners
  • Recent divorces
  • Recent inheritances
  • Properties in probate
  • Visibile property damage
  • Abandoned or vacant properties
  • Other signs of financial distress
    • Peeling paint
    • Broken windows
    • Broken down cars

These factors are characteristic of owners who are in financial distress or who may want to get rid of their property. Often, they are willing to sell to fix a financial problem or simply remove the property from their lives, and they will accept a below-market price to do so.

Skip tracing owners

Once you find a list of properties you’re interested in purchasing, you’re ready to market to their owners. But you can’t start marketing if you don’t have contact information. 

In the past, finding contact information was hard, because the sources were unreliable. Wholesalers had to spend hours searching through white pages, social media sites, and other websites to find contact information.

Now wholesalers use skip tracing services to find contact information. Skip tracing is the act of searching public records for people who are hard to find. It is traditionally used for debt collection and bounty work, but it is also effective for finding contact information when all you have is an address.

Skip tracing services allow wholesalers to upload lists of addresses and get property owner contact information within minutes. This gives wholesalers more time to focus on contacting property owners and negotiating deals.

Marketing to motivated sellers

Once you have contact information, you’re ready to market to property owners. Traditionally, wholesalers relied on bandit signs and direct mail campaigns to inform property owners that they were interested in purchasing a home. While these strategies are still very popular, there are many new ways to reach out to property owners.

Sequenced direct mail campaigns

Sending direct mail campaigns used to be very tedious, because it was a manual process. But many modern platforms allow wholesalers to customize and order direct mail campaigns, removing the manual work from the process. Many platforms also include the option to send sequenced campaigns, so that you can automatically reach out again if you don’t hear a response from your first letter or postcard.

SMS marketing

Texting is one of the most effective modern communication tools. People read most of the text messages they receive, so reaching out to sellers via text is a great way to start the conversation. BatchLeads is one of the few lead generation platforms with a fully compliant texting platform. It also includes several options for maximizing efficiency, including customizable quick responses, merge fields, and easy access to property details mid-conversation.

Cold calling

One of the most well-known methods of reaching out to prospective sellers is cold calling, which involves calling the leads on your lists and offering to buy their homes. While this can feel daunting to a new wholesaler, it’s arguably the most effective way to market to sellers. Just be aware of how cold calling regulations are changing at the federal level before you start calling so you can set yourself up for success from the start.

Comping wholesale deals

Once you’ve found someone who wants to sell, you’re one step away from making an offer. But you need to know how much a property is worth before you submit a contract. To find it, you’ll need to look for comparable properties and average their sale value. Comparable properties are properties near your deal that have similar square footage, number of rooms, number of stories, etc. 

In the past, wholesalers had to get their real estate license or network with real estate agents to find comps. Now, the best way to find comps is to use BatchLeads, because it is one of the only property intelligence platforms that gives investors access to data from the Multiple Listing Service. BatchLeads also automatically displays comparable properties so that you don’t have to spend time looking for them. With this data, calculating the after repair value (ARV) of your deals is easy!

NOTE: If you intend to make an offer in your initial call, you should calculate the ARV before you start marketing.

Negotiating and closing deals

Once you know the ARV of a property, you’re ready to try closing the deal. This is one of the parts of wholesaling that many investors struggle with, but with practice, this will become the easiest and most enjoyable part of the process.

First, make sure to establish rapport with the property owners. While you should keep the conversation professional and business-like, it’s important to form a connection with the seller. Otherwise, you’ll struggle to get the right price on the property.

Second, be prepared to negotiate when you make your offer. Sellers won’t usually accept your first offer, so come prepared with a few negotiation tactics to help you close the deal.

Assigning contracts to cash buyers

Congratulations! Once you make it to this step, you’re close to putting a nice check in your pocket. Now you just need to sell the contract to a cash buyer.

We recommend you have a cash buyers list before you sign a contract, but finding buyers is usually pretty simple. You can network at local real estate events, go to property auctions, reach out to local real estate agents, or use BatchLeads’ cash buyers quick filter to find investors in the area. 

Just remember that once you find an investor who is willing to buy your deal, be ready to negotiate again. Investors want to spend as little as possible, so don’t always accept their first offer.

Key takeaways

Wholesaling real estate is an incredibly rewarding process. Although several of these steps will require a lot of work, the feeling of chasing and winning a deal is incredibly rewarding.

If you’re looking to change your financial situation by building a real estate business, wholesaling is one of the best ways to start. You don’t need any capital, you don’t need a team of employees, and you don’t need to know how to renovate a property! All you need to do is find the right opportunities and get them in front of the right investors. If you follow the steps in this guide, you’ll be well on your way to wholesaling success!

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Gavin Finch

Gavin Finch

Content Writer at BatchService

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