Real Estate Wholesaling
Can Change Your Life...
If You Treat It Like A Business!
Real estate wholesaling can change your life if you start fast and start right. On the other hand, if you approach the real estate flipping business carelessly, or any other real estate niche opportunity for that matter, you will waste time, burn out and earn nothing.
It's very important that you understand the factors that can lead to your success or failure as a real estate flipper.
On this page, I'll summarize the real estate wholesaling business (and it is a business) and what a fast start looks like. I caution you to use this only as a general guideline. After the first section, each subsequent section will be built around the time line to your first nothing down deal.
I also highlight the main factors you'll have to deal with to achieve your goals in the time frame described in the headline.
Please enjoy, and give me your feedback if you have any ideas on how to make it clearer or more user-friendly to you.
The "Quick-Turn" Real Estate Business Model
House flipping Is A "Middleman" Business Model
Depending on your attitude about this, the bad news for you is that no money down real estate is about building a business...
and not about investing!
(I suspect this "definition" problem gets glossed over to remove any marketing barrier for beginners to buy)
And while it is a simple business, it's not always easy.
You must be prepared to work smart often, and hard, sometimes.
Your primary success traits will be:
- A goal and possibility-oriented mindset
- Aggressive and continual self-education
- Direct Marketing Superiority
- Aggressive networking and alliance-building
If you can initiate an action plan that incorporates all the above, you'll be golden!
Track 1: 30 Days To Your First Deal
This is a possible (but highly unlikely)success time line for someone who is completely new to quick-turn,no money down real estate. Here's why:
Making a profitable offer on a property requires confidence in your knowledge of how much the property will re-sell for, how much repairs might cost and confidence in your ability to deal with the inevitable contingencies that come up. Such knowledge takes some time to develop... and the confidence lags a little, even after people have the knowledge.
In any case here's what you can do to put a bargain property under contract in 30 days (after your study is done).
This assumes that you have completed a beginner real estate investor study plan (even if it's a self-study plan) and you understand:
- Understand real estate contracts and clauses, as well as the mechanics of contract assignments.
- Know which local neighborhoods professional rehabbers and rental property investor (landlords) are hungry for and how much they are willing to pay for properties there.
- Know which title companies or settlement attorneys can seamlessly process assignment contracts and creative deals
Reasonable Action Plan within the first 7 days:
- Order outdoor signs
- Print Business Cards
- Print contact flyers for referral sources: Real estate agents, loan officers, mortgage brokers, attorneys, property scouts/bird dogs
- Approach front desk of local real estate and mortgage broker offices and request flier placement (or distribution to every mailbox).
- Approach the small businesses in the target area and speak to the manager or owner about flier placement.
- Create free reports for loan seekers who may not be able to refinance out of their debts, telling them the ways you can help. Call on mortgage brokerages and offer your report to their clients.
- Google local REIAs (Real Estate Investor Associations), online forums with local guys (yahoo groups). Contact and join.
- Go to Meetup.com and join any FREE (or even paid)group, hit up members to find out what category they fall into - beginner investor (set up accountability partnership or get them to bird dog for you), established investor (you can learn market from), actively buying investor(you can ask what they want to buy and which neighborhood).
- Check with local restaurants and businesses that might have free room for small seminars. If you find one, lock down a seminar for Week 3 - create a topic that would draw your target audience. If you're afraid of speaking, invite a complementary professional like a loan officer to speak on a complementary topic and you just include your own pitch somewhere in there.
(Note: This means seminar flyer distribution in Week 2)
- Create online classified ads (Craigslist.com and Backpage.com and tons more sites)both for sellers and for property scouts. A wonderful and affordable online service for managing such lead scouts can be accessed at www.TeamWorkLeadSystem.com
- With your free time, do a "boldness excercise" and cold call at 1 real estate agent + 1 mortgage broker daily. Within 20 working days, you'll have called 20 of each.
SPECIAL NOTICE: Join my House Flipping Tips Vault for even more detailed treatment in my newsletters and more comprehensive resources - manuals,guides,contracts,videos, etc when I send them
2nd Week: Day 8 to 14
- If you've received your outdoor signs (witnessdesigns.com usually delivers in 10 days),distributing those signs throughout your target area is often an effective strategy. Take note of local ordinances before using this method. Just like the big real estate developments do, you might put them out on Friday and pick them up after the weekend. You can convince homeowners to "host" your signs on their yards for a cut of profits (their phone numbers could go on the signs).
- Attend a local real estate investor club or association meeting, as well as any meeting of landlords. Advertise aggressively for investors to join your buyers list. You also want to advertise for newbies at the meeting who may not be ready to sign their own names to a contract, but would be willing to feed you their leads (and deals) in some sort of joint venture partnership.
- Find 2 or 3 people who have investment property deals available and see if you can arrange joint venture partner with them to find a buyer. Then advertise their deals on Internet and newspaper classifieds to build your buyers list.
- Advertise for sellers on the internet using 20 to 30 classified sites (including Craigslist.com). If you can afford to use Pay Per Click to drive keyword+local combinations to a capture page, then do it.
(NOTE: Not as easy as it looks if you don't want to lose your wallet. Study it!)
- Open a relationship with a real estate agent to obtain access to the MLS(Multiple Listing Service)- most of these systems can do filtered sorts. Have your agent friend create a list of people who bought "quick closing required", or "cash buyer only" type deals in the last 3 months. Contact them and ask them if they're still buying and what types of properties and which neighborhoods they want. Add to buyer's list
- Have your agent friend sort lists of types of properties and locations that your buyers are interested in. Make offers. If agent balks, suggest using "letters of intent" if necessary.
- Flyers should be distributed far and wide (a good friend netted his first deal after spreading 2,000 flyers - that deal was a $60,000 creative real estate deal).
You can advertise for sellers in the paper. Just understand that this is not always a high-yield method for immediate results.
- If you have a big budget, you should consider direct mail campaigns to highly targeted and narrowly focused groups like:
- Real estate attorneys
- Mortgage brokers
- Absentee landlords
- Code Violating (or abandoned)property landlords
- Landlords filing legal actions against their tenants
- Bankruptcy and pre-foreclosure lists
- Divorce filing lists
- Probate filing lists
Note: Direct mail takes a serious amount of studying to get proficient. Subscribing to the house flipping tips newsletter will help you greatly.
Having said that, headline your letter with a benefit-oriented offer. Make sure the offer is free or otherwise very compelling.
Make sure you give a clear "call-to-action" of something they should do upon completing the letter (i.e. Call, email, return enclosed card).
The last thing you want to do is match that compelling offer with a response deadline.
I hope this micro-course is enough to get you started.
A postcard campaign of less than $1,500 dollars netted me the properties below and total profits of over $20,000 dollars despite the fact that I bungled most of the leads generated. You can see pictures of these properties below:
Make sure that you have a way to receive the incoming phone calls as soon as possible. The shelf life of motivation is extremely short.
You'll have a decided advantage if you set up a way to have sellers speak to a live person. If you have a full-time job, you can delegate your inbound call handling to services like Patlive for less than $100 dollars a month. You can also use virtual PBX services like Freedomvoice.com and Kall8.
Of course it wouldn't make sense to do go to such expense if your marketing doesn't generate enough incoming call volume to make it worth it.
A powerful way to generate momentum from referral centers is to host tele-seminars addressing the needs of motivated sellers in such a way that referral centers (brokers, lawyers, etc) can refer people to you easily.
3rd Week Motivated Seller Screening, Contract signing, Due dilligence
By this point you should know clearly how to find below market opportunities. If you're not getting at least some calls by this point, something is really, really wrong!
I'll assume for our purposes that all that effort yielded at least a few calls. You should screen callers for motivation, and deals for profitability (or potential profitability).
An elegant little tool for both purposes is the motivated seller questionnaire.
When a potential seller calls you, remember that you are their host. They have overcome an emotional barrier to call you. If you pick up, you become their rescue from the terrible work of "calling another stranger" to talk about the most uncomfortable topic in the world - their distress situation.
If you can't pick up, use a service. Or set up a tele-questionnaire that pre-screens them (which I did with FreedomVoice).
Using information obtained in answer to your questionnaire, you can contact an agent or investor acquaintance (from last week) to help you obtain the after repair value (or Fair market value) of the property.
Subtract 30 to 35% of that value (investor buyer discount). Further subtract the estimated cost of repairs, and now you have the "Investor Magnetizing Price". Don't make an offer here though, because this leaves no wholesale profit for you.
Your Maximum Allowable offer must be lower than this to account for your profit, negotiating room, and potential contingency costs.
Next, make your verbal offer. If your seller agrees, send them your contract. Make sure your contract allows you an inspection and financing period (just to allow more options).
After you obtain the signed contract from your seller, you'll want to immediately initiate 2 processes simultaneously:
- Due Dilligence Process
- Is seller in bankruptcy? Is there an outstanding judgment against seller?
- Are there liens on the property? Does property have clean title?
- Does property inspection turn up any surprises in HVAC/Foundation/Roof?
Order a title abstract.
Ask around your local investor community for a recommended title company or attorney.
For property inspections, when I first started, I would pay a contractor about $20 bucks to go out with me with the promise that I would use them if I got the job. Sometimes, I was able to convince a contractor to help me for free. You have to try.
- Marketing Process
- Contact your buyer's list
- List property on Craigslist and other classified sites
- List with real estate agent on MLS (flat-fee or full service)
- Sell on the internet through Pay per click
- sell through JV partners
- Share your deal at Real Estate Investor Association meetings
Master How To Find Opportunities
Just remember to keep an eye out for the two DP's:
- Distressed Properties
- Distressed People
Distressed properties include pre foreclosure properties, abandoned and code-violating properties, properties with deferred maintenance (wet basements, leaking roofs, etc).
Distressed people would include pre foreclosure situations, tired landlords, probate estate representatives and others who may need or want to sell their house fast.
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