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 3 weeks ago '16        #1
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Usd2bDrich409 
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Weekly dose of real estate investing
 

 
Wholesaling! Why is everyone doing it and how can you do it too?

Over the past 2 weeks I have gotten quite a few messages asking about wholesaling, what I think of it, and how to do it in todayís market. *So letís start with the basicsÖ.What is WHOLESALING. *In its most basic form, wholesaling is you a*signing your equitable interest in a property to another person/company for a fee in which that person/company is going to adhere to the agreement that you originally signed. *When you are wholesaling you are not selling the property. *You are simply selling the paper, the contract, the agreement that you have with the original seller. *You are saying I was able to get this property under contract for $XXX.XX amount and I am willing to sell you the rights to buy this property for under the guidelines set forth by this contract for $XXX.XX amount. *If your contract is setup correctly, it will allow you to market the property as if you are the original seller, and will give you the ability to put signs in the yard, market the property online, and have all of the abilities as the original owner would have in order to get the market moved. *It is quite possibly the easiest form of ďinvestingĒ that you can do with no money or credit, but it does take quite a bit of sweat equity to get it done if you are just starting out and donít necessarily have any systems in place. *Further down I will tell you some of the methods that I would go about using if you were just starting out and methods that I would use if you have a little capital built up. *There are people out there now that have companies formed that are strictly used for finding properties to wholesale to end buyers and a majority of those people spend most of their money on marketing. *I also want to show you later on how to protect yourself in a wholesale deal so that the original seller doesnít try to fu*k you over. *

First, letís start with the three components of a wholesale deal and the numbers. *You have the original seller, you (The a*signor) and the end buyer (The a*signee). *In wholesaling it is your job to get in front of the original seller, find out why they NEED to sell, find out what is wrong with the house in terms of repairs and the estimated cost of the repairs, and then get the house under contract at a price that allows you to sell your contract to an end investor with enough margin left in the deal so that they would be able to not only renovate the house, but also make a 20-30% ROI after purchase and renovation and can allow you to make a nice amount of money yourself. *If you have no experience on estimating the cost of repairs there is nothing to worry about. *All you have to do is find a general contractor who is willing to come out to the house and give you a bid on what they think the repairs would cost. *Typically this is free to do because they are wanting to get the rights to do the job. *When I first started out, I would go on the original appointment with the seller and have my contractor show up about 20 minutes later to show the seller that I was serious. Also this helps with getting a lower price on the house if the contractor finds issues with the house that the seller may have not pointed out or not known about. *

At the time I started out I did not inform the original seller that I was intending on wholesaling the property. *I was scolded by my mentor for that and I will tell anyone going forward that you need to be upfront with your original seller. *Let them know that you have no intentions on buying the house yourself and will simply be a*signing this contract to one of your end investors. *The reason behind this is because you donít want to be getting close to closing date, not have an end buyer lined up, the original seller is thinking the whole time that you are the person who is going to buy the property and now you fu*k them over by now having someone lined up and therefore no closing occurs. *What I have experienced in my time is that I can usually negotiate a lower price with the seller, thus making my profit on the deal higher, or giving me more wiggle room if my end investor wants a lower price. *It is much easier to tell the truth up front that you plan on wholesaling the property so that their expectations are met in the event you donít find an end buyer. *You can really waste a lot of peopleís time and ruin your reputation in the process if you mess over a few sellers this way and plan on having a lasting career in real estate investing. *Thatís simply my perspective on it, but to each their own. *

When looking for houses that are going to be good for wholesaling you can do quite a few things. *First Iíll go over the things that are free to do and then next Iíll go over the things that cost. *The first thing you can do is called Driving for Dollars. *What I used to do when driving for dollars is simply pick out a 4 square mile area and literally drive up and down the streets of that neighborhood looking for houses that looked vacant, that had broken windows, that had grass that looked like it hadnít been cut in ages, that had city code violation stickers on the doors. *Anything that would get me to feel like that house was either unoccupied or occupied by someone who had trouble keeping up with the payment. *At the time I would take a picture of the house, come back home and look up with owner of the property using the county appraisal district website and then try to find that personís number and call them and give my pitch to them to try to buy their property. *While this did take a lot of time and effort, there are much easier ways to do it now that do cost a little bit of money, but are well worth the investment. *You can use apps like Deal Machine which is great (not an indorsement for them, but hell their app is probably the best). *You can also use Land Glide which will tell you the owner of a house and link you directly to the appraisal district site for that property. Both of those apps cost each month, but they offer a free trial period that I would suggest trying out to see if itís something youíd want to pay for. *As far as finding a personís number you can pay and use Whitepages.com or for free you can use fastpeoplesearch.com or thatsthem.com. *All 3 of those sites I still use today in the event my VA canít find a number for some reason using TLO.

The next method I would suggest is to use your local mailmen/women. *They know all the houses along their routes. *They know if those houses are vacant, if someone just moved, or if someone has a lot of mail piling up. *So anytime Iíd see a mailman on their route Iíd stop them and the conversation would go something along the lines of this, ďHey howís it going? *My name is such n such and I am a real estate investor here in the area and Iím looking to acquire some more properties within this area. *Do you know of any properties on your route that are vacant? (At this point just be quiet and let them think. *Literally donít say anything until they talk) They are either going to give you some addresses or tell you that they donít know of any at the moment. *After that simply say either thank you or no problem then hand them a card with your name and telephone number on it and say, ďI pay $1,000 finderís fee to all the mailmen that work for me anytime they send me a property and I close on it. *All I need you to do is text me an address and I will keep you updated on if I am able to contract the property and get it closed at which point Iíll cut you a check.Ē *Not every mailman is going to do it, but eventually once you have that conversation enough you will notice that you start to get 10-15 properties a month send to you from various mailmen. *If you close on the property, pay them and you will notice that number increase dramatically. *Not only that, they will tell some other mailmen and you will start getting texts from them as well introducing themselves and sending you properties. *This costs you absolutely nothing and you can take their pay out of your profit and still come out ahead. *

The last free method that I would use is the ďWater Shut OffĒ list. *I canít speak for all states, but in Texas people who have had their water shut off by the city is considered public information under the Texas Public Information Act. *Therefore, what I would do is simply send an email to the city secretary requesting a list of all the houses within the city or within certain zip codes that had their water turned off in the last 30-45 days. *The reason I would request that list is because there are typically one about 3 reasons that someone would have their water turned off. 1) They just sold their house 2) The city had to turn it off to fix something or 3) They couldnít afford the bill. *Iím looking through that list for number 3. *If they are home owners and canít afford the bill then there might also be an issue with them being able to afford their mortgage and it might be a sign of things to come. *If they are a renter and canít afford their water bill then they may not be able to afford their rent either which might be a pattern that has occurred and maybe the landlord is tired of being a landlord and getting late rents. *Either way it may be a potential opportunity to get a house well below market value contracted and then a*sign that contract to someone else.

As far as paid marketing is concerned, you all probably see these signs out already, but the WE BUY HOUSES signs work. *They are also known as Bandit Signs. *I used to use dirtcheapsigns.com to get my bandit signs because their price was pretty solid. *For the sign and the stand the sign goes on you can expect to pay about $260-270 for 100 signs. *These signs take WORK. *You are going to have to go put them outÖand put them outÖ.and put them outÖ.and then put out some more. *But typically if you get 4-5 leads a month off of these signs then they will be well worth it from a financial standpoint. *I used to put them out myself, then I would hire people to go put them out for me. *Eventually you will see that them more money you bring in, the more you want to hire people to do different things for you so that you can have your time back to focus on other activities. *

The next paid marketing is going to be PPC or Pay Per Click. *This is typically done via Facebook, Google, or some other social media site. *Depending on who you are targeting and the keywords you are targeting, the cost for this can be pretty expensive, but it definitely yields results from quality leads and allows you to change your marketing based on the results that you are getting. *It will take you running a few campaigns to really define how you should market so expect to play the long game here. *Just know that it will be worth it in the end once you find out what is really working for you. *

The last thing I will hit on is RVM or Ringless Voice Mail. *The way that this technology works is that you have a prerecorded voicemail of some sort and you give the system a list of numbers to call upon. *It calls the number, immediately hangs up, and calls right back so that it will trigger the voicemail to come on. *Then it leaves the message that you have prerecorded for the potential seller. *I still currently use this and PPC in my business as it allows me to acquire properties virtually without ever having to see the house. *I personally target preforeclosures this way, but you can use it to target a wide variety of properties in different situations. *

I get asked a lot should you look for end buyers or the actual property first. *You will hear different answers to this question depending on how someone was taught or how they got their success. *I will always say that I go after the property first. *The reason being is because if you find a good deal and then market that deal at a good price, the investors will come out to play and be reaching out to you to purchase it from you. *So it doesnít make sense to me to try to build a buyerís list with nothing for the buyer to actually buy. *In the midst of you marketing a deal that you have a contract for you can actually build a buyerís list from all of the people that didnít buy the property that you had contracted, but reached out to you in an effort to purchase it. *After the sale is complete and has closed, call those people back and let them know that you get other properties. *Find out what type of properties they like to purchase, what area they like to purchase them in, how much they are looking to stay within as far as price is concerned, and how many properties they are looking for, what % return they are looking for, and what is their email address. *From there, catalogue all that info and when you have a property under contract email everyone on your list. *

Lastly, I want to go over the numbers when it comes to a wholesale deal. *You typically have control over 1 number in a wholesale deal and that number is what you are wanting to make on it. *You can raise that number and in needed you can lower that number, but either way, it is the only number you are in control of. *Typical investors usually want to get a property for about 70% of what it is actually worth. *So what that means is that if you have a property with $100,000, then they are going to want to pay at most $70,000 for that property AFTER all the repairs have been made. *Letís a*sume that the repairs needed on this property are $10,000 and letís also a*sume that you want to make $10,000 on the deal. *In order for that to work you are going to have to get this house contracted for $50,000. *If you can get the house for $50,000 then you can market the property for $60,000 to your end buyer. *They would only have to pay $10,000 to get all the repairs done and so all in they would be at $70,000 and be able to market their newly renovated property at $100,000 to make the 30% return they are looking for. *Some investors will take a 20% return. *I would typically keep those guys high on my list because it would allow me to make more money. *Either way, the formula for what you can offer for a house is this

(ARV- After Repair Value* *X .7)

Minus Cost of Repairs

Minus Your a*signment Fee

= Your offer price

*

I would even multiply my offer price by .88 and offer that so that I would have some negotiating room if I needed to increase my price. *So on a house that was worth $100k ARV that had $10k in repairs that I wanted to also make $10k on it would look like this:

(100,00 x .7)= 70,000

70,000 Ė 10,000(Repairs) Ė 10,000(My profit)= $50,000 MAX offer price. *

50,000 x 88= $44,000 (Starting Offer)

Now, while I donít personally wholesale much anymore, I hope this info helps those that do want to get started by wholesaling.
+24   



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 3 weeks ago '16        #2
Usd2bDrich409  OP
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@ @ @ @ @gaaplewood; @@ @ @ @ @ @ @ @LeMeBeGreat; @ @ @ @ @ @Shelf


Last edited by Usd2bDrich409; 02-05-2020 at 03:19 PM..
+6   

 3 weeks ago '12        #3
Esco300YMCMB 
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Wholesale is a great way to make money without touching the property.


I currently own a property I self manage and cash flows around $800 after all expenses are paid
+6   

 3 weeks ago '16        #4
Usd2bDrich409  OP
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 Esco300YMCMB said
Wholesale is a great way to make money without touching the property.


I currently own a property I self manage and cash flows around $800 after all expenses are paid
That's wassup bro! Helluva cash flow. How did you originally acquire that property?
+2   

 3 weeks ago '12        #5
Esco300YMCMB 
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 Usd2bDrich409 said
That's wassup bro! Helluva cash flow. How did you originally acquire that property?
Its was a banked owned home that foreclosed after the market crashed , it was built in 05 ' too. Bought it thru FHA in 2013 at 185k forced equity. lived in it for 5 years , now in 2020 is appraised at $390k maybe 400k but yea its renting out at $2410.00

And I moved to my primary home now about 4 months ago.
+14   

 3 weeks ago '19        #6
scondini 
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Droppin gems as always, very helpful info
+4   

 3 weeks ago '17        #7
Topofdaline 
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What city you in.. I’m in St. Louis it’s a tough market here
+1   

 3 weeks ago '07        #8
pete jr 
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 Esco300YMCMB said
Its was a banked owned home that foreclosed after the market crashed , it was built in 05 ' too. Bought it thru FHA in 2013 at 185k forced equity. lived in it for 5 years , now in 2020 is appraised at $390k maybe 400k but yea its renting out at $2410.00

And I moved to my primary home now about 4 months ago.
You ever think of refinancing and using that equity to buy more property? Rates are at a historic low
+3   

 3 weeks ago '04        #9
collegeboy58 
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Good info....anyone in Atlanta looking to meet up? I’m an agent and I’ve been looking into wholesaling. My brokerage doesn’t allow “wholesaling” but I can double close
+4   

 2 weeks ago '12        #10
Esco300YMCMB 
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 pete jr said
You ever think of refinancing and using that equity to buy more property? Rates are at a historic low
Yup I'm working on it this year. Definitely want to add more to my portfolio

 2 weeks ago '12        #11
Esco300YMCMB 
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 collegeboy58 said
Good info....anyone in Atlanta looking to meet up? Iím an agent and Iíve been looking into wholesaling. My brokerage doesnít allow ďwholesalingĒ but I can double close
Id love to buy out of state one day. But I need to a*semble a team that can watch and manage the property.

 2 weeks ago '04        #12
collegeboy58 
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 Esco300YMCMB said
Id love to buy out of state one day. But I need to a*semble a team that can watch and manage the property.
Where are you located? I'm new and willing to learn. Are you on biggerpockets?
+3   

 2 weeks ago '12        #13
Esco300YMCMB 
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 collegeboy58 said
Where are you located? I'm new and willing to learn. Are you on biggerpockets?
Yea I'm on biggerpockets . I reside in WA
+3   

 2 weeks ago '04        #14
collegeboy58 
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 Esco300YMCMB said
Yea I'm on biggerpockets . I reside in WA
Do you still wholesale?
+1   

 2 weeks ago '12        #15
Esco300YMCMB 
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 collegeboy58 said
Do you still wholesale?
No I dont wholesale I buy and hold property
+3   

 2 weeks ago '04        #16
collegeboy58 
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 Esco300YMCMB said
No I dont wholesale I buy and hold property


This is my first flip. Would actually make a pretty good rental. Confirmed rent on the street is $1400 and someone else is asking $1600.
+4   

 2 weeks ago '12        #17
Esco300YMCMB 
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 collegeboy58 said


This is my first flip. Would actually make a pretty good rental. Confirmed rent on the street is $1400 and someone else is asking $1600.
Man that's nice. Wish I could buy something that cheap in 2020 my area.
+3   

 2 weeks ago '16        #18
Usd2bDrich409  OP
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 Topofdaline said
What city you in.. Iím in St. Louis itís a tough market here
I'm in Dallas

 2 weeks ago '16        #19
Usd2bDrich409  OP
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 Esco300YMCMB said
Its was a banked owned home that foreclosed after the market crashed , it was built in 05 ' too. Bought it thru FHA in 2013 at 185k forced equity. lived in it for 5 years , now in 2020 is appraised at $390k maybe 400k but yea its renting out at $2410.00

And I moved to my primary home now about 4 months ago.
Wash, rinse, repeat fam! That's a nice a*s come up. Have you ever thought about using it for social housing? You quite possibly could turn that $2400 into $4400.
+3   

 2 weeks ago '16        #20
Usd2bDrich409  OP
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 collegeboy58 said
Do you still wholesale?
You will see more and more bro that wholesale simply gets you in the game. Once you in, its cash flow over checks all day long. We play the long game. As I've stated before, big checks are nice, but nothing beats a steady income that you dont have to work for.
+2   

 2 weeks ago '16        #21
Usd2bDrich409  OP
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 Esco300YMCMB said
Yea I'm on biggerpockets . I reside in WA
The connections that I have made on BP have been a game changer for me. Especially when I'm doing deals outside of Texas.
+2   

 2 weeks ago '04        #22
collegeboy58 
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 Usd2bDrich409 said
The connections that I have made on BP have been a game changer for me. Especially when I'm doing deals outside of Texas.
I need to get more active in the forums. I paid for the pro membership because I like the calculators but Iíve made no connections. You looking for anything in Atlanta?
+3   

 2 weeks ago '16        #23
Usd2bDrich409  OP
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 collegeboy58 said
I need to get more active in the forums. I paid for the pro membership because I like the calculators but Iíve made no connections. You looking for anything in Atlanta?
Man I look for deals anywhere where the numbers are right. My cousin is actually a realtor in Atlanta, Buckhead specifically, and he stays trying to find some off market stuff for me that fits my numbers. I really don't look at properties, I look at the numbers. The numbers goin tell me what I need to do.
+4   

 2 weeks ago '12        #24
Esco300YMCMB 
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 Usd2bDrich409 said
Wash, rinse, repeat fam! That's a nice a*s come up. Have you ever thought about using it for social housing? You quite possibly could turn that $2400 into $4400.
Can you go a little into detail about that? Is it like Air B&B? anything to help me raise my cashflow would be welcomed.
+2   

 2 weeks ago '16        #25
Usd2bDrich409  OP
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 Esco300YMCMB said
Can you go a little into detail about that? Is it like Air B&B? anything to help me raise my cashflow would be welcomed.
Air B&B is a form of social housing, but for that type of social housing you are relying on the people booking to stay at your place. What I'm talking about are halfway houses, home health care, and housing for homeless vets. It's different in every state, but I know in Texas the government is paying like $900-1100 per month per bed for halfway houses and housing for homeless vets. That's guaranteed government money on the 1st of every month. This nonprofit org called the Oxford Group can help you with halfway houses. There is definitely a bit of money to be made there.
+6   



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