In the early to mid 2000s a fortune was made wholesaling houses. We did eight to twenty houses a month and earned fees anywhere from $5,000 to $50,000 per house. It was a fantastic way to make money int he real estate business. It was easy because there were so many investors in the business until the bubble burst.
The vehicle for making bucoo bucks didn’t go away. It’s still a viable way to make a lot of money, FAST! But, you have to know what you’re doing.
First and foremost you must understand that you can do this with very little money. You see, you don’t have to buy the house to wholesale it. You simply have to put it under contract and then assign your contract to a new buyer. When you put the house under contract, you have to use a “buyer friendly” contract that you can get out of if you are not able to find a buyer. If you don’t have a “buyer friendly” contract, email me at RJP@BuyCashFlowProperties.com, and I will send you one.
So, here are my 6 easy steps to wholesale a house:
Step #1: Only deal with the owner of a home.
If you try and tie up properties with realtors and you don’t close, it could cause you a headache. Plus, the realtors will insist on using their form which protects the seller. You can still buy from realtors including HUD houses, Fanny Mae, etc. but you will need the money to close as they don’t allow assignment or double closings in most cases.
Step #2: Know the value of what you are putting under contract.
You must know that there is equity in the house for the person you assign the contract to. You can use the property appraiser in your town or a realtor. I use RealQuest reports which give me instant, comparable sales in most parts of the country. This is a critical step to your success.
Step #3: Find your cash buyers!
You may find a lot of deals but you need a buyer to make any money. There are a number of ways to find buyers. One is to put signs up all over the area where the house is located and direct people to call you. These signs are known in the business as bandit signs. But they are prohibited in many towns and cities.
To avoid this headache, we use a bandit phone. For more information on this solution go to www.banditphone.com. This is how you find retail buyers as well as rehab buyers. The problem is many retail buyers need to borrow from a lender and you may need to close sooner. The best solution is to sell to a cash buyer that is in the business of fixing and selling houses. You can find these buyers at local real estate meetings, ads in the paper, or by going to foreclosure and tax deed auctions to introduce yourself to real cash buyers. This is a great way to find out who the players are in your area.
Step #4: Find some houses to buy!
There are so many ways to find houses also known as lead generation. The key for you is to have a system in order to find undervalued properties on a consistent basis and then select the best opportunities. Here’s the most popular ways we find houses to wholesale: TV advertising, mortgage foreclosures, and realtors. We also use newspaper run ads to buy houses and look at for sale by owner, tax deed sales, other wholesalers, abandoned properties, building code violations, city inspectors, drive through neighborhoods and look for neglected properties then contact the owner, and through the internet. You can direct people to your website using SEO – search engine optimization and look for wholesalers, or buy leads from other lead generating companies. These are just a few ways to find properties.
Step #5: Write the contract!
Try to extend the closing as far out as you can to give yourself the opportunity to find a buyer. The only way you are going to get a house under contract is if you are able to meet the needs of the seller. They have to believe that you solve their situation. Your sale skills will determine just how successful you will be, but know this: You can’t help the seller and be prepared to walk away.
Step #6: Market the house and assign the contract to your buyer.
In 2005, we did over 130 houses this way and it doesn’t take a rocket scientist, but it does require knowledge to put into action!