How to Wholesale Properties
- 1). Decide what area you want to wholesale properties in. Pick an area that has plenty of investors buying in, particularly landlords. If you need help with this, perhaps give a call to a local real estate agent or just start driving around and looking for a lot of "for rent" signs in the area.
- 2). Find a title company or investor friendly real estate attorney to work with. You want one that can do assignment of contracts and simultaneous closings. Ask around to find who other investors are using for their real estate closings. Perhaps check out your local real estate investors meeting?
- 3). Once you find your target area, ask the local landlords there if they'd be interested in another rental property in the area and how much they'd be willing to pay for one. Also, that real estate agent that helped you with step 1? Ask them to give you a list of all of the cash sales in that neighborhood for the past few months. Go through all of the date you have now and determine what investors are paying for properties in your new target area.
- 4). Now, this is the most important step. You need to find motivated sellers in your new target area. You're not looking for houses, you're looking for the people who own them that may be motivated. Whether it be because of divorce, pending foreclosure, extensive repairs needed, death in the family, etc. Find someone that needs to sell their house. (Check out the death notices in the paper, search probates at the courthouse, drive the neighborhood looking for houses that are in disrepair.)
- 5). Once you find some motivated sellers you need to reach out to them. Knock on their door, do a reverse look-up on 411.com for their phone number and call them. But you have to get in touch with them and ask them if they want to sell their house.
- 6). When you have a motivated seller that wants to sell their house you make them an offer that you know another investor would certainly pay (see step #3) minus a fee for yourself. For instance, let's say you've determined that investors in your area pay $47,000 cash for 3 bedroom, 1 bath row houses. You have a motivated seller with a house just like that and you want to make $5,000 on the deal. So you would offer that motivated seller $42,000 cash ($47,000 - $5,000 = $42,000 offer.)
- 7). If your motivated seller accepts this offer then you write up a contract. Have your investor friendly real estate attorney or title company help you with this. You will use anywhere from $10 to $100 as earnest money when signing the contract with the seller. Try to put as little down as earnest money as possible. :-) You send the signed contract and your earnest money check to your title company or real estate attorney that you will be using for the closing.
- 8). Now that the seller and you have both signed the contract, it's time to find your end buyer! Call all of the "for rent" signs that you seen where the landlords said they'd be interested in more rental properties in the area and tell them you have something under contract and want to know if they are interested in buying it.
Also, get some blank white corrugated plastic signs with metal stands and write on them with your thick, black magic marker:
3 bed/1 ba. cheap house
$47k CASH / Must sell!
And put about 20 of them in the area where the house is. Your phone will ring off the hook. (If you don't have the money to buy about 20 of these, you're just going to be doing a lot of cold calling and research basically. Calling the landlords and calling the investors that you know bought a house for cash in the past few months....remember that list you got from the real estate agent in step #3?)
- 9). Once you find an end buyer, then you will get them to sign an "assignment contract" with you. This is a simple one page contract that basically says you are assigning your right in the contract with the seller to the NEW buyer for a fee i.e. your assignment fee. So in our example above, you will be getting a $5,000 assignment fee. Remember to collect a earnest money check from your end buyer! Be sure to let them know that the closing will happen with your title company or real estate attorney (once you trust this buyer or know what you're doing, you may decide to use their title company or attorney to close.)
Once the assignment contract is signed, send that and your end buyer's earnest money deposit check to the title company or attorney you are using to close your deal. They will handle everything else.
Show up to settlement and collect your $5,000!!! Rinse and repeat.