Wholesaling real estate has become the gateway into real estate investing, but that doesn’t mean you can attempt it blindly. While it may be one of the first exit strategies you try, it is important to learn how to wholesale real estate step-by-step. Only investors with a proven system in place will be more likely to make success habitual. A blueprint can make the entire process more efficient and profitable. Therefore, it’s in your best interest to study real estate wholesaling step-by-step.
First, let me commend you for taking the initial step of wholesaling houses: developing the right mindset and moving forward. Real estate is a complicated industry riddled with confusing jargon and complex strategies, but I digress. Real estate is only as complicated as you make it. It’s entirely possible to break down real estate wholesaling into manageable steps. There are goals each investor should set for their first few months in the industry. They are as follows.
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Learning how to wholesale real estate step-by-step starts with understanding the concept from the inside out. That said, investors need to know what it is and when it should be used. To be clear, wholesaling typically has nothing to do with buying an actual home. Instead, investors acquire the rights to buy a home through a contract, and they then sell their rights to buy the home to an end buyer. That’s an important distinction to make. Over the course of a wholesale deal, the investor never buys the home; they simply negotiate for the right to buy the home. They make their money when they sell their rights to buy to an end buyer. It is worth noting, however, that there is more to the process, which comes in the form of an eight-step system:
Conduct An In-Depth Market Analysis
Start Building A Buyers List
Get Your Logistics In Order
Market, Market, And Market Some More
Get Your Property Under Contract
Find Your End Buyer
Assign The Contract
Close The Deal
The first month of real estate wholesaling really has more to do with preparation than anything else. That said, those looking to land their first wholesale deal should mind due diligence and pay special consideration to the following goals within the first month of initiating a wholesaling campaign:
By the end of the first month, investors should strive to learn as much as they can about the particular market they intend to deal in. To do so, however, aspiring wholesalers will need to identify said market first. The market you intend to work in may not be as obvious as you initially thought. Your first task as a wholesaler should be to identify at least three neighborhoods in which you may conduct business. Take note of what you hope to achieve, and find out for yourself which neighborhood offers the path of least resistance.
If you haven’t started already, compile a list of potential buyers that would be interested in any deals you come across. Otherwise known as a buyers list, the contacts you manage to accumulate should represent a contingent of people you would feel perfectly comfortable calling in the event you land a deal. However, it’s worth noting that the list doesn’t need to be exhaustive, nor does it need to eclipse 100 names in the first month of its existence. Instead, I recommend starting slow; there is nothing wrong with gathering five to 10 prospective buyers, so long as they are quality leads and contribute to your goals. I highly recommend focusing on quality over quantity in your first month of real estate wholesaling.
It’s imperative for anyone looking to succeed in real estate wholesaling to treat it as a business. And while it’s entirely possible to succeed in wholesaling when you view it as a hobby, the benefits increase exponentially the more time you invest. That said, if you intend to make a career out of real estate wholesaling, you must treat it like the business it deserves to be treated as.
Not unlike any other business, real estate wholesaling has become synonymous with its own complement of logistics. You can’t expect to run a business without the proper logistics in your corner, can you? Not surprisingly, you will need a way for potential customers to contact you. Within the first month, I highly recommend establishing a committed telephone line (separate from your personal line) and drafting your first set of business cards. That way, you will increase your odds of landing the deals that come your way. Remember, you can’t land a deal if nobody can get a hold of you. Mind due diligence and make logistics a priority in your first month of operations.
I want to make it abundantly clear: The first month should focus on learning your market, establishing logistics and lining up potential buyers. Notice how I neglected to include finding deals? There is a good reason: real estate wholesaling will be a lot easier with all the right pieces in place.
Without a buyers list, a means of getting a hold of you, or even simple market knowledge, it’s safe to assume real estate wholesaling is downright hard. However, you will find that success is a lot easier to come by with everything in order. Once you have laid the foundation, I recommend moving forward with setting goals in the second month. Provided you have done everything I outlined above, consider taking the following steps in month two.
The second month of any real estate wholesaling campaign should focus on only one thing: marketing. Provided you took all the steps I mentioned in the first month, your funnel is ready to start receiving leads. I recommend initiating the following marketing strategies:
As with any real estate wholesaling marketing strategy, you must remain consistent. While you would ultimately love to hear responses from your first attempt, the chances of landing a hot lead improve over time. That said, it’s in your best interest to remain persistent. Don’t stop after you mail out one set of direct mail postcards or post a single wave of bandit signs.
Studies have shown that most of your first attempts will either be ignored or disregarded, but that shouldn’t discourage you. Even though your first attempts at marketing don’t result in a phone call, you are increasing brand exposure. Soon enough, prospective sellers will start to recognize your name, and by the third or fourth marketing attempt, it’s reasonable to assume they will reach out if they need your assistance.
Understanding how to wholesale real estate step-by-step can’t be completed until you know how to get a property under contract. Consequently, as the step implies, this is where investors will negotiate with the current homeowner. Once a motivated seller is uncovered and a subject property is found, work with the homeowner to agree on the correct price and terms for the property in question. Coming to an agreement both parties like, however, will require some negotiating. Here’s a simple breakdown of the steps you should take when negotiating with a seller:
Develop a relationship with the seller: After meeting with the seller, proceed to develop a relation. The idea is not only formally to introduce yourself, but also to learn more about their situation. Doing so will give you a better idea of their motivations and how to proceed.
Work to their motivations: In developing a relationship with the seller, find out what it is they want (whether it’s money or a quick closing window). Knowing what the seller really wants will help negotiations for both sides.
Make an offer: Make an offer that truly benefits both sides. The idea isn’t to “steal” the property; it’s to help everyone involved. The offer should work within the perimeters of an impending deal, so do not offer too much.
Get the terms in writing: Once terms are agreed on, get them in writing, otherwise known as a contract. Investors must be completely transparent and disclose their intentions, so this may be a good time to work with a legal professional. Otherwise, the contract will identify the wholesaler’s rights to buy the home for a predetermined price and lay out all of the terms of the impending deal.
To be clear, this step should have already taken place, technically. It is at this time you will talk with the end buyer to progress the deal, but it is a good idea to have an end buyer lined up before you even start looking for homes. That way, you will know exactly which type of home to look for first. Of course, that’s not always the case, so this is the next step in learning how to wholesale real estate step-by-step. As the step suggests, this is where an investor will find an end buyer (usually another investor) to buy their rights to the home.
With an end buyer identified, it’s time to make things official. Now is the time the investor will create an assignment of contract agreement. The contract should state all of the important points. Namely, that you are assigning them the contract for a fee (and the contract should say exactly how much the fee is. This process will initiate the transfer of the contract.
When the closing day arrives, make sure the end buyer is present to sign his name on any necessary dotted line. They should arrive with the correct forms and payment to purchase the property, including your assignment fee. Once the title company takes the payment, they will cut the check for your fee.
Learning how to wholesale real estate step-by-step can seem intimidating at first, and it should be. Wholesale transactions involve a lot of moving parts and require a lot of transparency. However, that doesn’t mean they are too difficult; they are the first exit strategy most investors learn for a reason. With little upfront costs and small timeframes, wholesaling real estate step-by-step is a great way to get investors’ feet wet.