Wholesaling real estate step by step doesn’t have to be complicated if you have a plan. In this guide, we’ll go though investing in wholesale real estate step by step, from finding houses to buy, up to wholesaling these houses to real estate investors.
As we have seen, when wholesaling real estate, you locate houses below market value and put them under contract to buy. You then sell them at wholesale prices to real estate investors through contract assignment or simultaneous closing, without doing repairs.
These are the 9 simple steps you follow when wholesaling real estate:
Step 1: Get A Good Real Estate Investing Website
At the very least, you’ll need a place to process your leads, and build a buyers list to succeed in wholesaling real estate. For this, you need a good website for your real estate investing business.
Most people looking to sell their houses start their search online. In order for them to find you, you need a website with good organic SEO, that also dominates your local market through Google Local, Bing Local plus others.
Your real estate investor website will:
- Handle the job of attracting most of your leads online through SEO.
- Help tell your story to potential leads, e.g. when you communicate through direct mail.
- Engage these leads to take a specific call to action such as fill out a form or call you.
- Follow up with cold leads for you and nurture them until they are ready to do business with you, so you can close deals with them.
- Automate most of your daily tasks, and keep you well organized so you can close more deals using less time, money and effort.
- Build a buyers list and sell your properties quickly.
There are a lot of benefits for having a good website for your real estate investing business. This is covered in a separate article.
Step 2: Build A Buyers List
Now you can use your website to build a buyers list.
A real estate buyers list is a list of real estate investors that buy wholesale properties in your area, preferably with cash. A cash buyer is someone who has the cash to buy the property outright, without having to take a mortgage.
Cash buyers will close quickly on any type of property, even if it needs repair – especially if it’s going through foreclosure.
A buyers list allows you to sign up potential buyers of your wholesale properties, and to market these properties to them.
This list will become a golden when wholesaling real estate. I can’t recall the last time I had to advertise a wholesale deal. I typically have a buyer within hours of emailing my properties to my buyers list.
Since I have done this long enough, some preferred buyers beg me to always send them my deals before I send them to anyone else.
Which comes first, the buyers list or the property?
I hear some real estate investors say they want to build their buyers list before they can buy their first property.
Don’t turn down a good deal just because you don’t have a buyers list! If you get a property before you have a buyers list, you can advertise it, sell it and build a buyers list at the same time.
Wholesaling Real Estate – How To Build A Buyers List
If you don’t have any properties for sale, create a landing page (squeeze page) on your website where potential buyers can sign up. It takes just a few clicks from the virtual back office with Interactive real estate websites.
Once they sign up, they’ll get an instant email thanking them for joining your buyers list and that you’ll be sending them deals as they become available depending on their needs.
If you already have properties, the website show-cases them to potential buyers. Set it up so they join your buyers list before they can view full property details.
Once your website is set up this way, you can now sign up potential buyers to your buyers list using the following methods:
1) Advertise to wholesale buyers
Place ads on Craigslist and other media, including your web address with “Wholesale properties at 70% ARV”. This is how I built my first buyers list of about 200 real estate investors on newspaper ads.
Also, provide a phone number with a voice mail that points them back to the website.
2) Network with other investors
Attend your local real estate meetings – you’ll build your buyers list pretty fast.
Every time I attend one, I come home with a bunch of cards of people who want to join my list.
3) Attend Courthouse auctions
People that buy properties at courthouse auctions have cash and are usually looking for good deals. Strike up conversations and you’ll build a very valuable buyers list.
4) Talk to hard money lenders
Hard money lenders lend to real estate investors. These investors have cash to buy wholesale deals, and also use hard money. If you develope relationships with these lenders, you’ll get a terrific source of cash buyers.
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Step 3: Secure Financing That Works For You
When wholesaling real estate, you usually need $100 to $500 in earnest money, especially if you do contract assignment.
However, if you’re doing a double closing (simultaneous closing), you might need some money to do the second closing. This is because most lenders today do not allow their money to close the first transaction. Therefore, you need short-term funds for this before you can complete the second transaction.
The most common type of short-term funding is transactional funding. Transactional funding, also called flash funding or same-day funding, is a short-term funding to finance purchase of a property, provided an end buyer will purchase the property shortly afterwards. The wholesale real estate investor buys the property using transactional funding, then sells it to his end buyer in a simultaneous closing.
You can get real estate transactional funding from the following sources:
a) Lenders
There are many lenders in the real estate market such as hard money lenders and other non-conventional lenders.
You can easily find these lenders by attending local real estate meetings or a simple search on the internet.
A quick search on Google for “transactional funding lenders in Dallas” gives me the following results:
Most of these lenders will finance you on the strength of the deal, not your personal credit.
Talk to other real estate investors in your area to identify the best lenders for your needs.
b) Private money
Private money is the cheapest way to finance your transactions.
In most cases you define the terms of the deal.
Again, a quick search on Google for “private money lenders in dallas TX” gives me several results including resources such as this one.
Note that most of these companies lend privately, including individuals that can lend you money privately.
This will be the cheapest source of private money for you.
c) Partners
It’s quite easy to find partners when wholesaling real estate, especially in your local real estate investors meetings. These partners can put up money on a deal to deal basis on terms as you agree.
Since they are putting up this money just for a few minutes without any risk, it’s really cheap money.
When all is said and done, the supply of money for your real estate deals will not be a problem as long as you can locate good deals.
Step 4: Identify Cheap Properties
In order to succeed in wholesale real estate investing, you must have a constant supply of leads that you convert to closed deals. By targeting motivated sellers (people that NEED to sell their houses), you’ll have a constant supply of properties and good deals.
There are 2 ways to target motivated sellers.
a) Through your real estate investor website
As we have seen, a well SEO optimized real estate website that targets your local market will attract leads for you indefinitely. It will also help you engage and nurture them to close deals with you.
b) Target local people in legal trouble who own real estate
People who are in legal trouble and own real estate usually happen to be real motivated sellers.
For example, people who have inherited properties (probate properties) have a real valuable goldmine looking for cash buyers.
Others are people going through divorce, bankruptcy, have expired listings, etc.
Most of these motivated sellers have no idea they can sell their houses to real estate investors until you contact them. They think they can only sell their house through a real estate agent.
When you reach these people you become a savior. Targeting these people happens to be extremely easy.
Since this can become a long topic on its own, we have covered this in a free Ebook.
You can also almost fully automate this process, and have your leads coming like clockwork so you can spend more your time closing your deals.
Between online and offline sources of leads, you should have more leads than you can handle in your local market.
And hopefully lots of wholesale real estate deals.
Step 5: Sign A Contract To Buy The House
Once you identify a motivated seller and agree to buy their house, you then put the house under a binding contract – also called a purchase agreement.
Each state has a real estate contract used by real estate agents mandated by their real estate commission. These are the best, and they are free. You don’t need to be a real estate agent to use your state’s real estate contract.
They are more popular with people selling their houses. Since they are mandated by the local state real estate commission, most people feel more comfortable dealing with you. It’s also updated regularly to cover changing federal and state laws, so you can never go wrong with it.
Secondly, if you take your own contract to a title company, they will want to pass it through their lawyer – for hefty fees.
What To Put In The Contract
If you use your state’s real estate contract, you’ll mainly need to fill in the blanks such as price, buyer, seller, disclosures, etc.
First, when wholesaling real estate using contract assignment, put the buyer with “and or assigns“, e.g. “My Company Name and or assigns”. Without this little clause you will not be able to assign the contract. Check if your state disallows assigning contracts (such as Illinois).
Secondly, explain this to the seller. I usually tell them that I could partner with another real estate investor to close the deal, or that my partner can close the deal on the same terms. I’ve never met a motivated seller that objects to this.
Step 6: Do Title Work
Now it’s time to take your contract to a title company to get the title work done before you proceed any further.
Title work checks if the seller actually owns the properties and searches for any mortgages and liens owed on the property. When you buy the property, you have to clear all the debt owed on the property to own it free and clear.
The title then gets transferred to you as the new owner.
We’ve written a full article about title work here.
At the very least, complete title work before spending any money on the property.
Example – How I lost $1000 because of not pre-screening properly.
I once got a great deal with 2 mortgages. I thought I’d make some more money if I negotiated short sales for the mortgages. Both offers got accepted.
The house needed just some light repair. Before I could wholesale it, I had to clear a lot of junk, overgrown yard and some touch-ups. This cost me $1000. I did this work before title work was completed.
I quickly found a buyer with cash.
When my title company completed title work, they found two mechanic liens the seller did not disclose!
One of these liens had been sold twice and none of the contact information on the lien was working. Only a foreclosure could wipe it out.
I lost the deal and $1000 because I did not do title work before moving ahead.
Step 7: Identify A Wholesale Real Estate Investor Buyer With Cash
Now is the fun part of wholesaling real estate – to sell your property.
Send it to your buyers list if you’ve already built one. You can do this from your virtual back office with a few clicks if you have one of our websites, .
However, if you don’t have a buyers list, advertise your property, and build your buyers list as you find a buyer.
How To Pre-Screen Your Wholesale Cash Buyers
Once a potential buyer calls, I’ll take down their full contact information and either give them the lockbox code if I know them, or go show them the property.
Then I’ll need to know their source of cash.
- Do they have cash in the bank?
- Did they just sell a property?
- Do they have a line of credit?
- Are they using a private money lender or a hard money lender?
Don’t sell to buyers who are hoping to get a mortgage from a bank. They must have cash, and the ability to close quickly.
Step 8: Sign Contract To Sell
Once you have identified a real estate investor buyer, sign a contract with you as the seller so you can sell the property. In this contract:
- Always collect earnest money – I collect at least $500.
- Make sure the earnest money is non-refundable if they do not buy the house.
- Always make sure the contract expires by a certain date.
Which type of contract do you use?
It depends on if you’re using contract assignment (where you simply assign the right to buy the property) or simultaneous closing (double closing), where you actually buy the property from the motivated seller, and then sell it to your buyer.
In my business, the type of contract I use depends on the amount of money in the deal.
If I stand to make less than $5,000 I prefer to do a contract assignment.
But if I am making more than $5,000 or my profits are near or the same as the real estate investor I sell to, then I prefer to do a simultaneous closing. The buyer won’t know what you are making in the deal. This way your buyer won’t feel obligated to re-negotiate or look for another deal.
Contract to use for simultaneous closing:
Just use a regular purchase and sale agreement, just like the one you did for buying. However in this case, it should not contain “and or assigns” since your buyer must have verified source of cash. They must close the deal themselves.
Contract to use for contract assignment:
If you wholesaling real estate by assigning the contract, then you just need to sign a simple agreement for them to take over your contract for an assignment fee.
Here’s an example assignment contract (click on the image below).
Again remember to consult your attorney first.
Step 9: Follow Through Until You Close The Deal
Your wholesale buyer will now go through the process of funding the transaction for closing.
If all goes well, you will walk home with cash.
If you do a simultaneous closing,
Your Profit = Selling Price – Buying Price – Closing Costs
If you do a contract assignment,
Your Profit = Assignment Fee
Most wholesale real estate deals take 14 days or less to close.
I have closed a deal in 2 days because it was a really good deal and it would have otherwise gone into foreclosure.
Keep a close eye on the progress of the closing process.
Make sure the financing has been confirmed in a timely manner and that it has been wired to the title company.
You should not have any issues if you pre-screen your buyers properly.
Congratulations on your closing.
Rinse, repeat and make more money.
Your Take:
Hopefully this guide for wholesaling real estate step by step will get you started in your journey in wholesale real estate investing.
Got any comments? Questions? Please leave your comments below.
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