How To Wholesale[1][1]

How to Wholesale

How to Wholesale

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How to Wholesale

How to Wholesale............................................................................... 1 INTRODUCTION .......................................................................................... 3 WHOLESALING DEFINED ..................................................................... 3 Advantages and Disadvantages of Wholesaling ......................................... 4 Wholesaling Profit Centers ......................................................................... 5 Real Life Examples..................................................................................... 6 Wholesaling Profit Potential ....................................................................... 7 THE METHODOLOGY OF WHOLESALING ............................................ 8 Acquisition Phase............................................................................................ 8 Areas to Target............................................................................................ 8 Properties to Target..................................................................................... 9 Farming ..................................................................................................... 10 Locating and Attracting Prospects ............................................................ 14 Contacting Seller Prospects ...................................................................... 14 Attracting seller prospects......................................................................... 16 Profiling Prospects .................................................................................... 17 Estimating Market Value .......................................................................... 19 Estimating Repairs .................................................................................... 19 Constructing an Offer ............................................................................... 19 Presenting the Offer .................................................................................. 20 Filling out a Purchase Agreement............................................................. 22 Due Diligence Period................................................................................ 22 Exit Phase...................................................................................................... 23 Locating and Attracting Prospects ............................................................ 23 Contacting Buyer Prospects...................................................................... 24 Attracting buyer prospects ........................................................................ 24 Profiling Prospects .................................................................................... 25 Conducting Showings ............................................................................... 26 Providing Financing.................................................................................. 27 Negotiating with Buyers ........................................................................... 27 Transfer of Title (Closing) ........................................................................ 28 Follow Up ................................................................................................. 28 CONCLUSION............................................................................................. 29 APPENDICES .............................................................................................. 30 Common Questions New Wholesalers Ask.............................................. 30 Common Mistakes New Wholesalers Make............................................. 33 Real Estate Glossary, Wholesaler’s Edition ............................................. 35 Putting Your Business on Autopilot ......................................................... 38 Bootstrapping Your Business ................................................................... 40 The Importance of Education.................................................................... 41

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How to Wholesale INTRODUCTION Welcome to the exciting and lucrative world of quick turn real estate. If you are a person with an entrepreneurial spirit and a driving ambition to improve yourself and achieve above average wealth it is not at all surprising that you are attracted to a career in real estate. After all, the power of this industry to change people’s lives and make wealthy individuals out of Average Joes is legendary. However, real estate as traditionally practiced has a few drawbacks for the highly ambitious individual, including substantial barriers to entry and a long-term maturation process to generate substantial wealth. This work is an examination of a non-traditional model of real estate business that can not only be used to generate wealth very quickly, but that has very few barriers to entry and is accessible by nearly anyone with the desire and persistence. Wholesaling is the central strategy of quick turn real estate, which is a model that relies on engineering and closing large numbers of transactions quickly, rather than owning property for long periods of time. WHOLESALING DEFINED Wholesalers in any industry are the people who buy from manufacturers and sell to retailers. In real estate wholesalers buy directly from a property source and sell to rehabbers, landlords, or other investors. A few key characteristics of wholesaling in real estate include the following: • Properties are purchased directly from the source (i.e. the property owner) and sold to investor clients. • Properties are intended to be bought and sold quickly. • Transactions may be done by assignment of contract, double closing, or less frequently by cash or financing purchase. • Properties involved are usually in need of work and purchased at a steep discount for cash with no financing terms (i.e. all cash to the seller at closing). A business activity related to wholesaling is bird dogging. Bird dogging essentially means finding leads for one or more investors and getting paid by referral fee (or a per-lead fee). Whereas a wholesaler who finds a good deal would make an offer, get the property under contract to purchase, perform a fair amount of due diligence, and sell it by assignment or double closing to another investor, a bird dog would perhaps collect some information about the lead and then pass it on for the investor to follow up on and pay a referral 3/41

How to Wholesale fee if it turns into a deal and closes. The referral fee will vary with the bird dog’s experience and relationship with the investor. It may be possible to do fairly well, financially speaking, as a bird dog, if you have just a few solid investors to work with and a reasonable amount of skill in finding leads and collecting information like the owner’s name and contact info, repair costs, and market value. However, bird dogging is mainly a transitional “earn as you learn” way to make an entry into the real estate business, whereas wholesaling is a full fledged business model with essentially unlimited profit potential. Much of what can be said about finding deals and buyers applies to both, however. The practice of wholesaling could even be considered to include bird dogging, since it would be a rare wholesaler who would turn down a referral fee for passing on a lead! Whether you consider yourself a bird dog or a wholesaler at first is practically irrelevant, as long as you are gaining valuable experience and moving in the direction of greater autonomy and greater control over your own deals. Advantages and Disadvantages of Wholesaling There’s no doubt about it, wholesaling is one of the best starting points for a career in real estate. Countless investors have begun as wholesalers only to move on to other niches or to build an entire business around wholesaling. Some of the main reasons are: • Very little training is required to begin; this is a business that you can learn as you go along. • A wholesaling business can pay for itself very quickly. You can start and run it on a shoestring budget if you are willing to invest time, energy, and imagination instead. • There is very little risk involved in wholesaling because you tie up little to none of your own money and never have to personally guarantee a loan or have your credit profile examined for any reason whatsoever. • A wholesaling business can generate quick lump sums of cash. • You can work from wherever you choose, at home or in any location. • You only deal with professional buyers rather than selling to the general public. • A wholesaling business is scalable, meaning you can increase the size of the business without increasing the amount of your

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How to Wholesale personal labor involved. This means there is no ceiling on the profit potential for a single individual in this business. • You don’t have to do any repairs or work directly with contractors (though you will want to be able to refer them to your buyers). • You operate as a principal in the transactions, meaning you represent only yourself and nobody else, so there are no licensing requirements or fiduciary responsibilities to clients involved for a wholesaler. (Being a principal means you get paid by assignment fee or by going on title; check your state licensing laws regarding referral fees if you intend to get paid on a referral basis.) So, if wholesaling is so great, are there any disadvantages? Depending on the business modality you choose to pursue as an entrepreneur, you may find some or all of the following to be drawbacks: • Your purchase prospects are limited to houses that can be bought for a steep discount, almost always with repairs needed. • You only get paid once from each deal you do; unlike with certain methodologies such as lease options, there is no residual income or back end profit, just a single paycheck up front and then you are out of the deal. • You will generally find it more difficult to work, i.e. to find sellers and buyers, the higher priced the neighborhood is. This means you can’t get by on three or four deals a year. Wholesaling is a volume business. Think of doing three or four deals per month, or better yet, per week. Wholesaling Profit Centers If you start out as a bird dog you are basically at the whim of your buyers, as they generally have more leverage than you do to determine the amount of the referral or lead fee they give you. You either get paid a set fee per lead delivered, or you get a set percentage or dollar amount as a referral fee when a deal closes. Your earnings are protected only by the quality you provide and by your relationship with your investors. As I mentioned before, as a wholesaler you can also collect referral fees to your heart’s content, which is one profit center of this business. If you are doing your job well as a

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How to Wholesale wholesaler you will know everybody in the business in your local market, so you will be able to pass along deals that you don’t find worth pursuing but know somebody else who might. The main profit center in wholesaling, however, comes from the assignment fee you earn when you sell a property. Typical assignment fees range from $3,000 to $20,000, but there are no set rules. You might take an assignment fee of $500 in order to establish a good relationship with a buyer, and you might take one of $50,000 if the opportunity presents itself. (At least, I don’t expect you would turn this down.) Real Life Examples Example 1 You get a lead for an inherited property owned by a brother and sister. You estimate that the value of the property to a home buyer after it is fixed will be about $50k, and that it will take about $15k to do the fixing. Based on the wholesaling formula (see Constructing an Offer section) you calculate a Maximum Allowable Offer (MAO) of $15k. You negotiate with the sellers to purchase the property for $11k. Within a week you have a buyer willing to pay $13k for the property. You sign the assignment agreement with your buyer, send the contracts to the title company, and collect an assignment fee of $2k when the transaction closes. Example 2 You talk to a sweet old lady who agrees to sell you her house for $25k. She says it’s in pretty good shape. Several of your investors look at it and all but one say the foundation is damaged beyond repair. The remaining one offers you $23k for the property. You say to the sweet old lady, “I know we agreed to pay $25,000 for the house, but we’ve looked at the foundation and I’m afraid it’s damaged much worse than we believed. The most we can pay you is $20,000. Are you still interested?” The sweet old lady agrees, you sign a new contract, sign an assignment agreement with your buyer, and have the title company send you your check for $3k when the deal closes. These two examples are illustrative of the types of situations that you will typically encounter as a wholesaler. The amounts of cash involved are small but can be adjusted upwards percentagewise in higher markets. Two important points to be taken away from these examples are: 6/41

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• If you’re uncertain of the price to offer or how to calculate after repaired value or repairs, just get a contract for the best price you can get and let your buyers make offers. If the best offer you get is lower than the price you contracted for, it’s not a disaster, it just means that you renegotiate with your seller. If you are working with flexible sellers like you should be they will probably be reasonable. • You don’t have to look at the house yourself. Think about it, after 1) negotiating the lowest price you can with the seller you can either 2) go look at the house yourself, then 3) let your buyers look at it and accept the highest offer you get, or you can just skip step 2 altogether and go straight to step 3. When you embody this realization it is a major time saver. Look at houses if you enjoy it or feel like you need to, but when you start to feel like it’s a waste of your time don’t feel guilty about cutting it out of your routine. Wholesaling Profit Potential Suppose you set out to design a wholesaling business capable of closing four deals per month. Whatever market you are in it is reasonable and conservative to suppose that over time your business will enjoy an average profit of at least $2,000 per deal. This business would have an overhead of under 10% and would nearly get you into the six-figure pre-tax income bracket all by itself. If that’s not a large enough income to suit your aims, take into account the fact that successful wholesalers in widespread markets around the country typically report their average assignment fee to be between $10,000 and $15,000. Then just consider that if you want to increase your income, you simply increase your volume of business. The profit potential of your business, assuming all other parts are functioning optimally, is directly proportional to the number of qualified sellers and buyers you are able to contact with your marketing. This is why it is often said that wholesaling is not a real estate business, it is a marketing business. Though at first you may not be able to make many offers due to time and/or capital constraints, reinvesting your profits into marketing to bring you more deals can lead to very rapid growth of your business. Just make sure you keep your education and business infrastructure up to speed while you’re doing it.

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How to Wholesale THE METHODOLOGY OF WHOLESALING The emphasis in wholesaling is on buying and selling. Hence the functionality of the business can be broken down into two elements, acquiring and exiting from properties. Acquisition Phase Real estate deals generally fall into two categories based on whether the owner is distressed (i.e. due to job loss, divorce, etc.) or the property is distressed (as in needing a lot of work). Deals that you target for your wholesaling business will generally fall into the distressed property category. The owner may be motivated, in the usual sense of being under time pressure to sell, but some sellers will be flexible without being particularly motivated. A flexible seller is someone who is not necessarily under time pressure but is not dependent on getting the highest possible price for their property and is willing to sell for a price that is attractive to an investor. Many elderly people, heirs of inherited properties, and landlords will fit this description. Let’s look in more detail at the types of distressed properties you will be looking for and the types of areas you will be looking for them in. Areas to Target First be aware that wholesaling takes place in every market in America and in every price range. However, wholesaling is most common in low- to middle-income markets. The advantage to working in a lower priced market as a wholesaler is that motivated sellers and qualified buyers will be the most plentiful. You can earn larger assignment fees from doing larger deals, but larger deals are also much less common. Generally speaking, wholesaling is easier the lower the price range you work with, until you get into the “war zone”, which is the worst part of any city, with low values and little growth. Low to middle income blue-collar neighborhoods are the most productive farm areas for wholesalers. War zones and high-income neighborhoods are both niche markets and tend to have a smaller buying pool than moderate-income neighborhoods. Selling houses in either of these types of areas requires specialty buyers. The advantages to having connections with these types of buyers are that high end properties turn into highly profitable deals, and distressed properties are VERY plentiful in war zones. 8/41

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The neighborhood you select should be one you feel safe and comfortable in. If a neighborhood is improving it will tend to be easier to find buyers and less easy to find deals. If a neighborhood is tending downwards it will be a little easier to find deals but not as easy to find buyers. You should have a mind to who you will be selling to and who they will be selling or renting to. While there are niche buyers in any market, markets with the most buyers, both wholesale and retail, will be the easiest to sell in. Here are some of the common characteristics of the best neighborhoods for wholesaling: • Homes have two to four bedrooms, one to two bathrooms, 1,000 to 2,500 square feet • Decent schools • Occupied homes are fairly well maintained • People who can qualify for a home loan would want to live there • Some abandoned and distressed properties are scattered throughout • A healthy mix of owner occupied and rental properties • Rental rates run around 1% of the property value • Reasonable growth potential Properties to Target As a wholesaler you will be constantly on the lookout for deals. It’s like being a kid on an Easter egg hunt, or a detective on the case. Clues you are looking for are anything that might potentially lead you to a flexible seller. These are some of the things that should catch your eye: • • • • • • • • • •

Tall grass Spray paint Piled up newspapers Neglected notices or fliers on the door Broken or boarded up windows Disconnected utilities Structural damage Fire damage Peeling paint Rotten wood 9/41

How to Wholesale • No curtains and bare rooms You will want to be alert to these clues as well as others you might think of or notice. There is actually an art to spotting prospect properties. Any time a house is empty and neglected it is most likely a drain on someone’s finances, so such properties often represent golden opportunities. The ideal situation for wholesaling is a house that is vacant and accessible so your buyers can inspect it freely, but very ugly houses may be candidates even if they are occupied. A house does not have to be advertised for sale to be a prospect. You should also pay attention to things like garage sales, estate sales, and moving trucks to turn you on to potential leads. Once you start to notice these types of properties automatically and can see the pretty house hiding underneath the filth (if there is one) you will have developed a highly profitable condition known as “investor’s goggles”. If you notice this happening to you, take encouragement. Farming One of the best ways to gain experience if you are starting from ground zero is to choose one or more neighborhoods as your farm area. Factors you should consider are the comfort and convenience of spending a lot of time in your farm area, but also the presence of deals and buyers. To select a farm area you can drive through several parts of your city while paying special attention to clues and signs of investment activity. When you are considering the selection of your farm area, don’t be shy about getting to know the neighborhood and the people in it. The more you study and are familiar with the home values and available inventory in your farm area the more easily you will be able to spot deals. Learn everything you can about the area, including: • • • • • •

the demographic make up the school system common amenities typical sizes and construction of homes ratio of rental properties to owner occupied properties the number of properties listed for sale and the average days on market, or DOM, for listed properties • average sale price per square foot for houses and land

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How to Wholesale • anything else you can dig up or discover While you are in the neighborhood notice how people tend to take care of their lawns, what kinds of cars they tend to have, whether there seem to be a lot of young families or a lot of retirement age folks. Do people tend to be at home during the day or away at work? What sort of work do they tend to do? Do the houses tend to be fenced? How many of them have garages? How long have people lived in their homes? Are there a lot of new folks? Are there signs of criminal activity or rampant drug use? Talking to people you encounter in the area can be a good way to get a feel for the neighborhood, so being outgoing and a good conversationalist will work to your advantage. If you think this is a problem for you, you are going to have to get around it one way or another anyway if you want to enjoy profound success in any sort of business. You can also collect information from signs for properties for sale and for rent in the area. As well as getting to know your farm area, you want to get it to know you by saturating it with your marketing message. You can advertise in your farm area by direct mail in the form of postcards or letters, fliers or door hangers, business cards given out to individuals, bandit signs or other outdoor advertising, and notices posted on public bulletin boards (in Laundromats and other local businesses, for example). In addition to advertising you can actively work your farm area by regularly driving the streets, collecting leads, placing your bandit signs and fliers, and networking (i.e. meeting people). To work your farm area you should have the following kit permanently stationed in your car: • • • • • •

digital camera dry erase board clipboard business cards maps of the area spare markers, highlighters, pens, and batteries

Drive your farm area street by street, tracking your progress on the map with a highlighter. Capture leads photographically with your digital camera, using the dry erase board to record relevant info within the photograph. Clues to look for include anything that might potentially lead you to a flexible seller or a professional buyer, such as:

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How to Wholesale

• • • • • • •

vacant or ugly properties FSBOs (for sale by owner) FRBOs (for rent by owner) FSBIs (for sale by investor) WE BUY HOUSES and other investor signs ongoing rehab projects ongoing construction projects or signs for builders

If you see ongoing rehab construction projects, walking up with some business cards and introducing yourself can be a great way to build your credibility and meet potential clients face to face. Here are some samples of the types of leads you should capture:

abandoned property lead

for rent by owner lead

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for sale by owner lead

“we buy houses” lead You can also use a clipboard for extra notes in case you need it, but capturing leads photographically makes cataloging and referencing them easier and is generally more reliable than writing them down. It also allows you to have a picture of the house in front of you later when you are talking with the seller, making it seem like you have a photographic memory: “Hi, Mr. Jones, are you the owner of the house at 123 Elm street? That’s the house with the green paint and the chain-link fence, right? Well I drove by the property and it didn’t look like anybody was there. I couldn’t see much except that the grass was tall and it looked like some shingles were falling off the roof. I was wondering if the property might be for sale?” You can gather even more information by photographing the houses on each side of the lead you capture, or by talking to the neighbors to the left, to the right, and across the street to find out if any of them know how to contact the owner.

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How to Wholesale Some neighborhoods will be more productive than others for certain types of leads. It’s best to choose a farm area where you can capture at least 20 good purchase leads on a typical day of driving, say for 2-4 hours. If you are getting less than 10 leads per hour you are probably not using your time optimally. If you are handling your own farming and follow up, you should spend enough time farming to generate plenty of leads to keep you busy, but don’t spend so much time in the field that you neglect to follow up with all of your leads on a regular and consistent basis. You may need to spend more time driving neighborhoods at first to build up your database of leads, and less later on as you are more busy with following up. Locating and Attracting Prospects For all ventures there are two basic ways to get in touch with your prospects. You can either locate and contact them through their advertising or other sources, or you can get them to locate and contact you through your marketing. We will look at how both of these approaches can be applied to wholesaling, starting with you contacting them first. Contacting Seller Prospects You can locate many sellers through their advertising in the classified ads or other places. It is easy to make a prospect list by scanning the Sunday classifieds for real estate for sale. Look for terms like “reduced price”, “seller motivated”, “must sell” or similar clues. You should pay special attention to ads that have been running for a long time. You can even use classifieds that have been aged for three months to a year as a source of prospects (readily available from your local library if you don’t have your own), as well as lists of expired listings (available from a friendly real estate agent). In addition your farming will generate a list of seller prospects in the form of abandoned property leads or properties that are otherwise not on the market and not being advertised by the owner. The unique benefit of contacting owners of properties that are not on the market is that you are not likely to have much competition over a particular owner. Chances are you will be the only investor they are talking with. There are at least three different ways of contacting these types of owners, and probably more. One is to leave fliers 14/41

How to Wholesale on the doors of abandoned properties while you are farming stating that you are interested in buying the property and asking the owner to contact you. Another is to mail an envelope to the property address with the words “Do Not Forward: Address Service Requested”. This will instruct the post office to return a notice containing the previous occupant’s forwarding address, where you can send another envelope or postcard containing your marketing materials. Probably the most direct and productive way is to get the property owner’s name from the county clerk’s office (most have online property records nowadays), look up that person’s phone number, and call them. There is a bit of skill and specialized technology required to find people, but if you are not skilled in this art and don’t wish to become so, you can hire this work out. One option is to use a local private eye who provides this service; another is to use an online service like findtheseller.com, which provides a skip tracing service tailored to real estate investors. Note that a professional skip tracer will provide you with multiple phone numbers and addresses for the person you are trying to contact as well as possibly relatives and neighbors, but it is up to you to actually make contact with the person. Sometimes you don’t have any luck learning anything until you have contacted the third or fourth relative or neighbor. This is real estate detective work at its finest. If you do want to do the database work yourself there are online services such as NetDetective and Intellius that will provide the information you need for a reasonable fee, which is cheaper than what a professional skip tracer would charge to supply the information. When you contact a prospective owner you should realize and be prepared for the fact that most deals will not get made upon first contact. You should look to establish a rapport with the seller first and to determine if there might be a deal involved second. If you noticed there was a code violation notice on the property, for example, don’t you think the owner would appreciate being informed of it? You’re not looking to make a hard sell right off the bat, you’re looking to make conversation and gather information, all of which makes following up easier and more effective. Get the owner to talk about what they plan to do with the property. Whatever the answer is, ask if the owner might consider selling. If the answer is not affirmative for the time being, try to get permission to call back and check later. Then add the seller to your follow up list, including notes about the date and time of the conversation and any notable details that were discussed. That way when you can call back you can make it sound like you remember the conversation perfectly: “So Mr. Jones, how is your daughter doing in college?” Also be aware that some of the people you contact will be interested in buying 15/41

How to Wholesale property themselves. If you determine from your conversation that this might be the case, treat them as a usual buyer prospect and add them to your investor database. Attracting seller prospects There are many avenues of marketing available to real estate investors to attract prospective sellers. Sellers who contact you first will be uniquely qualified by having responded to an advertisement to sell their home. The main avenues of marketing available are ads in publications, direct mail, outdoor advertising, networking and referrals, and the Internet. Ads You can make use of all types of classified ads in printed publications, including newspapers, magazines, bulletins, and newsletters. Most publications will allow you to buy advertising space for larger ads as well, but classifieds are a good place to start and possibly to stick with. Factors to consider are a publication’s location, distribution area, and readership. You want to find the publications that have the greatest pull with the types of motivated sellers you’re targeting. Direct mail Direct mail is another marketing tool commonly used by real estate investors. List brokers are businesses that provide lists of prospects based on criteria you specify, including geographic location, home ownership, mortgage balance, age, and any other you might think of. There are many different ways to do mailings, including postcards or letters, handwritten or typed, for example. Two consistent principles are to test different marketing pieces constantly and select the ones that work best, and to send repeat mailings to the same prospects. The response rate from direct mail will be very low on the first mailing but will increase as you send multiple mailings and the people get used to seeing your marketing pieces. Outdoor Advertising Many real estate investors use bandit signs to deliver their marketing message, but you should keep your mind open for other ways to advertise

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How to Wholesale out of doors, such as bench signs and car signs. Placing outdoor advertising can be a great way to target your advertising to specific neighborhoods. Networking Networking basically means marketing by meeting people and encompasses nearly everything you do that brings you in contact with people. Always have business cards available, especially if you are networking actively by attending a function such as a local real estate investor club meeting. Networking can take place any time you are in the field or around people and can also encompass such activities as going door-to-door and leaving fliers or door hangers. Networking hinges on referrals, so tell everyone you talk to about your active referral program whereby they can receive a fee for referring you to an active buyer or seller. Also be generous about passing on referrals, and this will help stimulate more to come your way. The Internet The Internet is a whole subject to itself and provides plenty of opportunity for wholesalers to contact prospective clients. The main purpose for mentioning it here is completeness. Just be aware that if you are not informed about the many ways you can use the Internet to attract sellers then you should go out of your way to become informed so that you can put this powerful tool to work for you. An excellent place to start is with a Realnopoly Membership. Profiling Prospects Your first contact with a seller should serve to allow you to determine whether or not the deal is worth pursuing. You should aim to gather at least the minimum information necessary to calculate an offer. You should also aim to determine how flexible or motivated the seller is and the likelihood of your offer being accepted. There is a bit of skill involved in discerning a seller’s motivation level, but all it takes to develop this is practice talking to sellers. There are a few signs that will usually give them away when you come to recognize them, but just realize that a truly motivated seller will be someone who is in need of your help and is willing to work with you without resistance. You shouldn’t aim to convert an unmotivated seller into a motivated one, just recognize the difference and spend as much time as

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How to Wholesale possible with the motivated ones and as little time as possible with the unmotivated ones. The information you collect from the seller should include at least a rough estimate of repairs and ARV. This will allow you to calculate an offer. You should also find out how much money the seller really wants, which will help you to determine the seller’s motivation. Ask the seller something along the lines of “If I can pay cash and close fast, how much would you have to get to even consider selling this property?” and follow up with something like “Is that really the least you could accept?” With a little practice, the answer to this question should allow you to determine whether to spend more time on the phone with the seller or whether to put them on your follow up list and move on to the next prospect. If the lead seems worth pursuing then it is best to collect as much information as possible, such as the following: • • • • • • • • • • • • • • • • • • • •

Date Lead Source Owner’s name Owner’s phone # Owner’s fax number/email address Property address Type of property Beds/baths/garage spaces Size (sq. ft.) Lot size Construction type Year built Heating and A/C Repairs needed First mortgage balance and payment Second mortgage balance and payment Other liens against the property Rental income Reason for selling Other properties for sale

The information you gather should be relevant to your purposes. You shouldn’t burden the seller with too many questions. Just get the basic 18/41

How to Wholesale information and whatever else you can, then move on. Either present your offer or tell the seller you’ll follow up with them later and thank them for their time. Estimating Market Value The primary way to estimate the market value, or ARV (after repaired value), of a property is to look at close by recent comparable sales, or sales comps. Licensed agents can get sales comps from the MLS (multiple listing service), but if you do not have a source for these then there are other services like realquest.com that will supply the information for a fee. As you become familiar with your farm area you will develop a sense of property values in the neighborhood and won’t always need to look at sales comps for properties in your farm area. And of course you can always ask the seller if they happen to have an appraisal on hand, which will happen from time to time and can be used to inform your estimation of value. Estimating Repairs The first step is to get as much information as possible from the seller about the condition of the property, but realize that this is not likely to be highly accurate. If the seller can send you pictures of the property this will help, but many won’t be able to. You can get a more accurate estimate by having the property inspected yourself and filling out a repair cost worksheet appropriate to your local market (you can get one of these from another investor you are friends with). Whoever looks at the property (and it doesn’t have to be you) should take photos of the exterior from all sides and of each room, taking care to show needed repairs as well as possible. Pay particular attention to the roof and foundation, then to cosmetic and functional items. You don’t have to have an estimate accurate down to the last penny. As long as you can tell the difference among a teardown, a gut job, and a fluffand-buff you’ll probably be okay. Constructing an Offer The offer formula used in wholesaling is a very simple formula based on the ARV and repairs: Maximum Allowable Offer (MAO) = .65 × ARV – repairs

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How to Wholesale In other words, this says that the maximum allowable offer is going to be 65% of the ARV, minus the repair costs. So, if a property had an ARV of $100,000 and needed $15,000 worth of repairs to be made market ready, its MAO would be $50,000. Where does this formula come from? The industry standard loan to value ratio (LTV) for hard money is 65%. This formula allows for the investor to purchase the property and complete the repairs for no more than 65% of the ARV. This may make it sound as if the investor stands to make a 35% profit, but in actuality the investor’s profit is more likely to be 10% to 20% of the ARV, with the rest being absorbed by closing costs when buying and selling, any down payment assistance given to the end buyer, holding costs, agent fees, loan interest and points, and repair overruns. Investors who are paying cash generally follow this guideline as well, purchasing properties for between 55% and 65% of the ARV. Note that this formula supplies you with a MAXIMUM allowable offer, meaning that this is the price below which rehabbers and other investor buyers will be interested in the property. That means that the offer you make to the seller should be lower than this amount. How much lower depends on circumstance, but obviously the lower your offer the more profit you are building into the deal for yourself. If the above discussion is confusing to you at first, just use 50% of the ARV as a ballpark when making offers. So if the seller says that the house is worth $100,000 and needs moderate repairs, offer $50,000. If the seller says the repairs are heavy, offer 40%, or $40,000. This will usually get you close enough. Presenting the Offer A good rule of thumb if you are just starting out is when making an all cash offer the amount should embarrass you. If it doesn’t embarrass you it isn’t low enough. Seriously, though, you need to develop a thick skin about this. When a seller asks how much you think you can pay you shouldn’t hesitate to give an honest answer, and you shouldn’t expect to do deals for free. If you make too high of an offer you will at best get a marginal deal and a marginal paycheck, and at worst you will get a contract that doesn’t go anywhere. Either one is a waste of your time, not to mention the seller’s. Promising more than you can deliver doesn’t do anybody any good. When presenting your all cash offer it may or may not behoove you to bring up the fact that you intend to perform an assignment of contract. It’s all a 20/41

How to Wholesale matter of the seller’s sophistication and priorities. There’s no reason it should be made an issue of in any case. If the subject somehow comes up you shouldn’t try to hide the fact that that’s how you do business, and if the seller has a problem with it, either change tactics (such as using an option) or politely decline to work with them if necessary. If the seller doesn’t bring it up though, there’s no reason you should. Plenty of sellers wouldn’t even understand the concept and are just happy knowing that they will be getting a specified amount of cash on or before a specified date. Understand however, that if you make a promise you can’t back up then you could have a major impact on the seller’s life and finances. Never take any chances without the seller’s knowledge. Let the seller know that your offer is contingent upon inspecting the property, and make this explicit in the agreement. If it seems like you are not going to be able to sell the property, don’t put off letting the seller know this. An alternative to a written purchase agreement is an option agreement, which just gives you the option to purchase the property, and can be written to give the seller leeway to withdraw as well. This might be a better agreement to use with some sellers, especially those who are professional buyers or landlords. Just sign the option agreement, market the property to your buyers as usual, and when you have one ready to purchase and can set a closing date fill out the purchase agreement with your seller and do the assignment as usual. It is important to be calm and collected when delivering offers. You want to inspire trust and confidence with your voice and manner. Therefore if you get the jitters when it comes to this part it might help to role play in a safe environment until you can do it without breaking a sweat. Oftentimes you will be making a verbal offer over the phone, in which case you should send the written agreement, signed by you, immediately afterwards by fax or email. If you are making the offer in person you should have two copies of the agreement and be prepared to talk the seller through it if they have any questions. If there are multiple owners they should all be present and sign at the same time. This would also be a great time to get some sort of proof of ownership, such as a copy of the deed, if possible. One way to get around making offers verbally is to simply collect the seller’s information, including a fax number or email address, then send your offer afterwards in the form of a filled out and signed purchase agreement. That way if they yell and cuss when they see it you won’t have to listen. 21/41

How to Wholesale You can send out lots of offers this way and basically forget them. You’ll be surprised by some of the ones that come back. Filling out a Purchase Agreement There are just a few essential contract clauses for wholesaling. Your wholesaling purchase agreements should include: • Assignability: most contracts will automatically be assignable, if not this needs to be written in; check your state laws for specifics • Purchase price: should specify the amount and cash or financing • Earnest money: should be $100 • Property accepted “as is”: the seller performs no repairs and provides no disclosures • Survey, title insurance, and other closing costs: can be attributed either to the buyer or the seller • Closing date: should be as far in the future as the seller will allow, but the sooner it is the more enticing the offer will be; two to four weeks is a good fast time frame • Refund of title search costs: if the seller turns out to not have clear title to the property then the seller agrees to pay for the title search • Contingent upon inspection: the buyer’s offer is contingent upon a formal inspection of the property • Sole remedy: in case of the buyer’s default the seller is entitled to the earnest money as the sole remedy Your contract may also contain any special provisions you desire, such as a clause to allow the buyer access to the property for due diligence. You want to avoid any kind of specific performance clause, which says that you can be forced to buy the house. If you feel uncertain about anything have the contract you intend to use checked by a real estate attorney or title company in your local market. Due Diligence Period

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How to Wholesale The due diligence period occurs after you have a property under contract and before you go to closing. This is where you check out everything you can about the property, and if you find anything wrong that you weren’t expecting then you get to lower the purchase price. If you were a full service wholesaler you would do a thorough inspection of every property before offering it to your buyers, perhaps including ordering a formal inspection report, termite report, professional repair estimates, and appraisal. The more information you provide to your buyers the more value you provide as a wholesaler. However, you don’t have to be full service when you’re starting out. Just make sure your buyers can have access to the property to do their own due diligence. The second component of due diligence, besides the physical state of the property, is the title search. The seller’s unrestricted right to sell the property must be verified before ownership can be transferred. This is normally handled by a title insurance company or by a real estate attorney’s office, depending on your state. The title company will do a thorough public record search and guarantee that the title to the property is clear aside from whatever clouds or encumbrances they find. If items turn up, whose responsibility is it to get them cleared? Technically it’s the seller’s, but as a matter of practicality it’s yours, if you want to get the deal done, though you should at least be able to enlist the willing help of the seller. Some of the problems you might encounter include unprobated wills, uncooperative relatives on title, or involuntary liens. Some problems can be fixed easily, some can’t. The title company will require an earnest money deposit to initiate a title search. A full service wholesaler would have this done before marketing the property, but you can market the property first and have your buyer put down the earnest money instead of using your own funds. Exit Phase Locating and Attracting Prospects When you have a deal under contract and ready to close ASAP your primary marketing efforts should be towards your own buyers list. It’s always best and fastest to deal with buyers you know or have had contact with before. However, you should always be marketing broadly to increase the size of your buyers list, in addition to getting to know and catering to your existing buyers.

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How to Wholesale Contacting Buyer Prospects Many professional buyers will be easy to find because they market themselves to the general public, but there are a few other tricks that you can use to go directly to those who do not make themselves publicly known as well. Here are some of the ways to reach out and make contact with wholesale buyers: • Call the numbers on the “We buy houses” signs in your farm area. • Attend meetings of your local investor groups and meet as many people as you can. Be prepared to give out and collect lots of business cards. • Call the numbers from the “We buy houses” ads in your local newspapers, and other ads in the “Real Estate Wanted” section. • Attend foreclosure auctions and tax sales and network with as many of the buyers there as you can (don’t forget the business cards). • Call ads for houses and apartments for rent. • Call the numbers of houses you see for sale that are totally rehabbed or advertised as “rent to own”. • Ask agents, mortgage brokers, title officers, and other real estate professionals to refer you to any active investors they know. Tell them that you can bring them deals and they will like the sound of that because it will probably mean more business for them. Also send them referrals for the types of clients they need whenever you can to initiate reciprocity. Attracting Buyer Prospects You can attract prospective buyers to contact you as well. Signs in your farm area will attract buyers interested in the area you are working in. “Handyman special, cheap, cash” or “Rehabber’s delight” and your phone number are tried and true marketing messages for attracting investors. The same message that you use on signs can be used in classifieds in print publications or on the Internet. In addition there is a whole new world of real estate investing online and it's at your fingertips.

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How to Wholesale With buyers, sellers, investors, now turning to the internet as their #1 way to look for houses, investments, services, and an immediate answer to their real estate problem, this creates a unique opportunity for those in the know. And by unique opportunity we mean the ability to generate thousands of real estate buyer, seller, and investor leads for free using the Internet. To learn about a complete content management and real estate lead generation system that will allow you to tap this gold mine check out the Realnopoly Club. Just 32 hours ago we launched a new cash investor lead website with our Realnopoly system, spent 20 min and $0 marketing it on the internet, and have 17 leads, totaling $6.8 million in cash, that we received for free. Realnopoly is a complete content management system and lead generation system for real estate investors, bird dogs, and wholesalers. It comes with 3 lead websites for buyers, sellers, and investors, website builder, lead databases, tracking, mentoring, webinars, and more. Profiling Prospects Your buyers list is your most valuable asset as a wholesaler. You should have a well-organized database of every investor or potential investor you talk to, including as much information as possible. It isn’t necessary to get every bit of information from every investor in the first conversation, but stay in contact with all of your buyers on a regular basis by phone and/or email and collect more information over time about their buying preferences, financial situation, and how they do business. The more data you have on your buyers the better off you will be. Also keep information in your database on every other type of real estate professional that you come into contact with that you might be able to refer some business to. The better connected you are, the more people you will be able to help and hence the more powerful you will be in your business. Mind this principle by making actively growing your rolodex a priority. Types of professionals you encounter besides other investors will include: • • • •

real estate agents and brokers mortgage brokers and loan officers hard money lenders inspectors

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How to Wholesale • • • • • • •

contractors appraisers title companies real estate attorneys private money lenders note buyers property managers

These are all people you might be able to refer business to and who might be able to refer business to you to express their gratitude. Your buyers list should be growing automatically and all the time, even before you have deals under contract. That’s right, you don’t have deals in inventory to begin talking to buyers, just talk to them normally and let them know that you’ll contact them when you have a deal for them to look at. An automatic and cheap way to generate thousands of niche buyer leads across the country is with a Realnopoly Membership. You can’t have too many buyers on your list; just don’t spend so much time on it that you neglect to actually spend time finding deals! Also realize that your set of active buyers will be constantly fluctuating as different buyers change their priorities and experience changes in their financial circumstances, so don’t spend so much time finding deals that you neglect to update your buyers list. It’s a fine balance to strike. Your investor questionnaire should include information about the area, price range, and type of property they are looking for, the amount of rehab they are willing to handle (light, medium, or heavy), and their source of financing. Some investors won’t know exactly what they’re looking for until they see it, and most of these will never see it. It’s okay to have these people on your list and notify them of new deals, but don’t let tire kickers take up too much of your time. The best buyers will know exactly what they want and when they see it they won’t hesitate to put down earnest money and show a proof of funds available to close (POF). It’s best to work with buyers who are actively buying properties on a consistent basis as much as possible. Conducting Showings

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How to Wholesale If you are working with a house that is vacant and accessible then this will be simply a matter of telling your investors how to get inside and letting them check it out on their own time. If the house does not fit this category then other options are to get a key from the seller or if that’s not possible to coordinate showings with the seller. If your seller has to come unlock the property for inspections and showings, it is best not to send a buyer unaccompanied unless it’s someone that you trust and whom you know isn’t interested in stealing your assignment fee. If someone has to be there to let buyers in then you should only show it to the most interested and qualified buyers and coordinate it so that they all come at once. There are generally better uses of your time than running out to the property every time an investor wants to take a look at it, although this can be a useful opportunity to meet a new client face to face the first time you do business together. Providing Financing Your first preference should always be to work with cash buyers. However, as your wholesaling business becomes more full service you will deal more and more with buyers who need a little help with one thing or another, including securing financing for their purchase. You should be able to assist them by referring them to a mortgage broker or hard money lender you have a relationship with. Any time you are working with a buyer who is using financing you should try to have them work with a source you are familiar with to minimize unknown factors. The added benefit is that if you send them business they are likely to send you business in return. Negotiating with Buyers Your main source of leverage with your buyers will come from having multiple backup offers. The more offers you receive the better position you will be in. Once you receive a verbal offer from an investor the first thing you should ask for is a POF. The POF may be a bank statement or a letter from an account executive at a bank verifying that the buyer has funds available to close. The next thing is to ask if there are any contingencies. Only when there are funds available and no contingencies are you ready to accept the seller’s offer. You should make it clear to your buyer up front that the deal will be done by assignment. Once the investor’s purchase price is agreed upon the amount of the assignment fee should not be an issue. Simply send the investor the purchase agreement along with an assignment

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How to Wholesale agreement. The amount of the contract price plus the assignment fee will add up to what the investor agreed to pay. Transfer of Title (Closing) It’s best to close with familiar closers whenever possible. If you don’t already have a relationship with a title company, you will need to develop one. When it comes time to open title ask your buyer which title company they prefer using, and there you go. Whenever you contact a title company for the first time, you should have a contact person in mind and be able to mention who referred you. Title companies like to do business with familiar clients as well, and if you know somebody they have worked with before it will go a long way towards getting you past the stranger barrier. You can open title by calling the title company and retrieving the email address and fax number of your contact person then sending them the purchase agreement and assignment agreement. If your investor is putting forth the earnest money then they can swing by the title company and sign the assignment agreement at the same time as they write the check for the earnest money. Once title is opened you should stay in touch with the title company to monitor progress, but expect that it will take one to two weeks to complete the title search. When title is ready the title company will notify you, and you can schedule the closing date with your seller and buyer. On the day of closing the buyer must appear, sign, and bring a check, while the seller must appear, sign, and pick up a check. You can have your proceeds wired into your bank account, so you don’t have to show up at all, but you might want to just for the social contact with your buyer. Follow Up Just as important as making sure the closing happens smoothly is following up with all parties afterwards to make sure everyone is satisfied. If for some reason there is a problem after closing there may or may not be anything you can do about it, but you should still be aware of it even if it isn’t your fault so that you will be able to improve the quality of your service. You might consider placing follow up phone calls or sending thank you notes to the buyer and seller.

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How to Wholesale CONCLUSION Each of us is an individual with unlimited potential and a calling to put our talents to work in the world. If you feel that your calling is to be a wholesaler then you will probably be a success in this business, not only financially but intellectually, emotionally, spiritually, and in any other sense you can think of. If you don’t feel so inspired that’s fine too, and I wish you the best of luck in finding your life’s purpose. Either way my hope is that you got something out of this work and that you will continue to make pursuing your dreams a reality in your everyday life.

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How to Wholesale APPENDICES Common Questions New Wholesalers Ask Q. Will I need earnest money? A. No, but it can come in handy on occasion if you have it. Usually you should sign contracts with $100 of earnest money unless there is some compelling reason to use more, and you can let your buyer supply the earnest money to the title company. Q. Does this business require a real estate license? A. Short answer: no. Long answer: every US citizen has the right to make offers on properties and the right to assign contracts. As a wholesaler you participate as a PRINCIPAL in the transaction, meaning that you are involved directly, not as a representative of another party. A real estate agent has a fiduciary responsibility to his or her clients, whereas a wholesaler doesn’t claim to represent his or her buyers, only to bring them good deals. Q. How do I get access to properties to inspect them once I have them under contract? A. Generally speaking, you don’t have to. Someone will have to look at the property, but it doesn’t have to be you. This is a good reason to work with vacant, accessible properties. If you have to get the owner’s permission each time you want to show the property to a prospective buyer it is more tricky. Q. What happens if I misestimate the repairs? A. Nothing bad except that you get lower offers from your buyers than you expected. Listen to your buyers’ feedback any time you show them a property. Also make a habit of accounting for a margin of error in repair costs. Q. Will I be in default if I sign a contract and can’t close on it?

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How to Wholesale A. Not if you have an appropriate contingency in your contract. Your seller should understand that you have to look at the property (or have your buyers look at it) before you can guarantee you will close. If you do run out of time the seller may be willing to allow you to have more time to perform, or if not the seller has a right to demand the earnest money as the only remedy. If you are on good terms with the seller you should be able to handle this with no hard feelings either way. Maintaining a good reputation and treating people with integrity is your primary defense against being sued. Just don’t be afraid that someone can force you to buy a house, because they can’t. Q. What if I assign a property to a buyer who doesn’t perform? A. You should be ready for this by always having a backup. Continue to market each property until it closes and you have received the funds, and even further if it continues to get you calls from new investors. Having multiple backups gives you negotiating leverage with both the buyer and the seller and allows you to change plans on short notice. However, you should also be in tune with the financial situations of your buyers, and before you do an assignment with an investor verify that they have the cash available to close. They might show you a printed POF letter, or you might contact their banker directly, or ask an escrow agent they have worked with if they have closed previous transactions with cash. Q. How do I protect myself from having my assignment fee stolen? A. Stealing your assignment fee would mean that the buyer and the seller collude to do the deal without you. While this is not as common as one might guess, it does happen under the right circumstances. There are no guarantees that people will be honest, but there are measures you can take to look after your interests. Having an active, signed purchase agreement with the seller is of primary importance. You can make this agreement a matter of public record by recording an affidavit of contract, which will effectively cloud the seller’s title, making it impossible for them to sell the property to anyone without your consent. This should only be used when called for, however. As always the most important factor is the human one. Maintaining good relationships with your sellers and buyers and providing a valuable service is your best defense. Staying in control of the deal is important too. This means that you should be aware of everything that is going on and be the one to coordinate and notify the other parties involved about the closing process. And finally, treat everyone you meet with 31/41

How to Wholesale integrity and honor and these are likely to be returned to you, and keep multiple deals active all the time so that you won’t be too dependent on the outcome of any one deal. If you lose an assignment fee it shouldn’t be the end of your world. Q. What is a double closing? A. A double closing is where you buy a property and sell it in the same day. An assignment closing involves one purchase agreement between you and the seller and an assignment agreement between you and the buyer. A double closing involves two purchase agreements, one between you and the seller and one between you and the buyer. A double closing will incur closing costs for you, and you will be required to place down earnest money, but the advantage is that it keeps the amount of your profit hidden from the buyer and the seller in circumstances where revealing it would be problematic. A double closing is appropriate when you are collecting a large assignment fee from a single deal (over $10,000) and you are working with a closer you are familiar with. If you have never done one before the best thing is to ask your closer to walk you through it.

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How to Wholesale Common Mistakes New Wholesalers Make • Problem: You’re getting contracts but you’re not able to sell them. • Solution: Listen to your buyers’ feedback. Ask if they are willing to buy the property at any price. If not is it the area that is a turn off, the type of property, the amount of repairs, or some other factor? Adjust your buying strategy according to your buyers’ preferences. Also make sure you are showing properties to as many buyers as possible. For every buyer who wants a property there will be nine who don’t. • Problem: You’re agreeing to pay too much. • Solution: Make sure your first offer embarrasses you. It may take some practice to be able to deliver realistic offers to sellers, but once you get the hang of it you will be able to do it without batting an eye. • Problem: Agents are getting in your way. • Solution: If you want to work with agents there are plenty out there, so look for one you can get along with. Or you could just make a policy of not working with agents, which is what many wholesalers do. • Problem: You are worried too much about repair costs. • Solution: Make sure your contract has an inspection contingency, and make sure your seller understands this, then understand that the repairs are your buyer’s problem. Just let your buyers make offers, and if you have to renegotiate with the seller you won’t lose face because you pointed out to begin with that you would have to verify the repairs needed. • Problem: You’re thinking that you have to have money to make offers. • Solution: Stop thinking that! You don’t have to have the money to close to make offers. And in the wholesaling business you won’t have

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How to Wholesale any money unless you are making offers. So don’t let this hold you back. The more offers you make the more results you will see. • Problem: You’re dealing with unmotivated sellers • Solution: Pay attention to how you prescreen your sellers. You should determine as quickly as possible which ones are not motivated (most of them) and which ones are (a minority), and spend as little time as possible with the former and as much time as possible with the latter. Deal with the prospects, kick out the suspects. • Problem: You’re not able to make enough offers. • Solution: Increase your lead generation so that you can spend more time making offers and negotiating, as this is where the majority of profits will be created in your business. Assuming everything else is equal, the more offers you make the greater your profits will be. • Problem: You’re not following up the way you should be. • Solution: Create an organized follow up system, such as a calendar or tickler file, to keep track of everyone you talk with and systematize your follow up. Most business is done only after repeated contacts, so the follow up is where the fortune is. • Problem: The offers you are getting are too low. • Solution: Either renegotiate with the seller to lower the price, or realize that you contracted too high with an unmotivated seller and resolve to do better next time.

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How to Wholesale Real Estate Glossary, Wholesaler’s Edition After Repaired Value (ARV) – The market value of a property when it is in move-in condition. Agent – A licensed real estate professional, who has a fiduciary responsibility to their client. Assignment of contract – The act of assigning the rights granted by a written agreement to a third party. Assigmnent fee – Fee paid from the assignee to the assignor in exchange for contractual rights. Cash flow – Monthly income produced by a property. Cash offer – offer for all cash; should be at or below 65% of value, including repairs. Civilians – Individuals involved in the real estate game who are not real estate professionals. CMA – Comparative Market Analysis prepared by an agent to show the value of a subject property. Contingency clause – clause in a contract that stipulates conditions for buying; e.g. “Subject to inspection”, “Subject to approval by all board members”. Contract – Written agreement between parties sealed with signatures. County detail report – Publicly available county property records containing details and tax assessed value for real property in a given county. Double closing – Buying and selling a property in the same day. Due diligence – Physical inspection of a property and verification of critical numbers: ARV, repairs, rental rate.

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How to Wholesale Equity spread – the difference between the lowest price a seller will accept and full market value of the property, accounting for repairs; the potential profit for the investor Farm – A neighborhood that you choose to target your marketing efforts in. Handyman Special – A rehab project waiting for the right investor to come along. Hard money – Rehab financing; generally short-term, high-interest, nonrecourse, secured by property, 70% LTV or below. Investor buyer – Buyer who buys professionally or for profit LTV – Ratio of a loan to the value of the property securing it; a $70,000 loan on a $100,000 house would be 70% LTV. MLS – Multiple Listing Service; listing service used exclusively by real estate agents. Motivated seller – Seller in a need-to-sell situation (job transfer, pending foreclosure, divorce, etc), as opposed to want-to-sell (upsizing to larger home, want to move to better school district, just seeing what we can get, etc.) Option offer – Option contract, gives you the right to buy, but not the obligation. This is generally used as a marketing tool rather than with the intent to purchase POF – Proof of funds, shown by buyer to demonstrate ability to close. Rehab – House that needs work. Repairs – The cost of repairs necessary to make a home move-in ready. Retail buyer – Buyer who buys to have a place to live. Title – Ownership of property as established by public record.

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How to Wholesale Turnaround time – Amount of time elapsed between finding the lead and closing the deal. Wholesaling – The art of buying cheap and selling to investors, or generally any strategy that involves marketing contracts rather than taking ownership of properties.

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How to Wholesale Putting Your Business on Autopilot The basic principle of automating any business is delegation. Delegation can be practiced using people, technology, or services provided by other businesses. Besides the traditional route of hiring full-time employees some other options open for delegating are: • • • •

working with partners working with freelancers or commission-paid employees virtual assistants part-time employees

The basic approach is to break your business processes up into independent functions and then put systems in place to see to the carrying out of those functions. For example, you could divide your working wholesaling business into the following categories: • • • • • • • •

marketing for sellers marketing for buyers screening prospects inspecting properties making offers and negotiating with sellers networking with buyers coordinating closings web site maintenance

When you are new in business chances are you will have to wear most or all of these hats yourself, but as time passes and you gain experience you will be able to delegate the ones you don’t enjoy doing and keep for yourself the ones that are most satisfying. Negotiating with sellers is probably the main profit creating activity, and networking with buyers is probably the next. For access to a custom-made system designed to handle all of this for you, check out the Realnopoly Club. Another key element of automating your business is your referral program. To encourage people to send you leads you should actively inform them that you pay referral fees for sending you buyers or deals. You can also pay bird dogs on a per-lead basis, say $5 to $15 per lead depending on how much 38/41

How to Wholesale information they supply. Bird dogs can be recruited from anywhere, the only requirement is the ability to drive. You should encourage referrals to come to you by sending referrals to others whenever you can, and you should keep an organized system to keep track of your referrals and pay referral fees promptly. A thank you note would be nice as well. Whatever you do, don’t rely on your own memory to keep track of these if you want to do a lot of business.

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How to Wholesale Bootstrapping Your Business Wholesaling is a business that can be started on a small scale and grown to almost any size. You don’t have to be from a background of privilege to enter this business, but you do have to have patience and persistence. Starting small requires discipline, but there are no true barriers to entry into this business and no limit to how large you can grow your income. If you are using only free lead sources it might take you several months to find a deal, especially if you are working part time. That’s okay as long as you understand that you will find one eventually and don’t get discouraged. Browse the Sunday classifieds, drive a neighborhood once a weekend, do an internet search for motivated sellers, or purchase a mailing list and send out 50 mailings at a time. Persistence will net you a deal eventually. If you want your business to grow quickly, you should not rely on it for your living expenses at the beginning. When you do the first and second and third deal you should reinvest as much of your profit as possible into your business in order to increase your capacity to do deals, so that your fourth and fifth and sixth deal will come more quickly and easily than your first three did. Money that you invest into your business should first and foremost go into marketing to increase the rate at which you pull in new buyers and sellers, and second into the systems that will allow you to handle the increased volume of leads. Marketing and infrastructure must proceed in lock step or else your investment will be wasted. The end result of this process of bootstrapping is a highly profitable business that runs itself and provides you with freedom to do what you want with your time and money.

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How to Wholesale The Importance of Education The rule of riches is this: income follows personal growth. What this means is that if you want to be bringing more money into your life than you are right now, you have to become a different person than you currently are. You will not go from a novice to a pro or from a pauper to a prince without learning a lot and changing a lot as a person. Therefore, education and selfdevelopment are the most important factors to being successful in business and increasing your income. Education is not just a temporary stage, it should be made a habitual part of your ongoing business practices. The moment you stop learning your business will stop growing, so ongoing education is key to your business’s long term success. Some of the avenues available to you for continuing your education in real estate and business principles include: • You will talk to a lot of real estate professionals as a wholesaler. Keep your ears open and your mind engaged every day to maintain peak awareness. • Work with other wholesalers and other investors. Partner up on deals to gain experience or take someone more experienced than you as your mentor. • Attend local investor clubs, workshops, and meetings. • Avail yourself of the many books, home study courses, webinars, seminars, and boot camps produced by professionals in the real estate education field. • Sign up for email and paper newsletters and news services related to real estate. • Join online investor forums to network and take advantage of the educational materials they provide. • Keep educational tapes and cd’s on hand to listen to whenever you can. • Share whatever knowledge you have with others. As the ancient Taoists said, “When one teaches, two learn”. Your education and your personality together form the vehicle of your success. Don’t let a limited self concept keep you from enjoying your full potential. If you don’t think you have what it takes to accomplish your goals then you simply must mold yourself into an individual who does.

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