Real Estate Investing Guide: The Wholesaling Strategy
What many people probably don’t know is that there is more than one way to start investing in real estate. While most are familiar with the traditional buying and reselling real estate cycle, people usually neglect the significance of other investing strategies.
However, strategies such as wholesaling or buying off market properties can really put you on the map when starting out your real estate journey. With that said, I wanted to take time and cover the basics of wholesaling in real estate and ensure you’re familiar with the concept before moving onto the next step of your investing path.
What is Wholesaling in Real Estate?
Most simply put, the goal in real estate wholesaling is to sell a property to an interested buyer before the contract with the original owner closes. Your job as a wholesaler is to find buyers for off-market properties and make it easier for the seller to sell the property without listing it on the market traditionally.
When Wholesaling houses, you are essentially alleviating the burden the homeowner has when selling their home on market. For example, the need to do showings, fix up their home before selling, as well as paying realtor commissions and fees.
The benefit to the Wholesaler, is that once you find an off-market property, and connect them with the future buyer, you make an assignment fee for finding the property from the purchase discount received for elevating the homeowner’s burden.
How to Start Wholesaling
While wholesaling sounds so simple that it seems like anyone can do it, you still need a detailed plan of action before you dive into it. In fact, even though the strategy might seem doable at first, you are going to need a good system to get things started and maintain profitability within this investing route.
Here’s a brief step-by-step action plan on how to start wholesaling and close your first deal:
#1 Research and analyze the market
Before you start looking for properties, you should dedicate at least a month to researching and doing an in-depth analysis of the market you’re interested in. While doing so, search for a profitable market and find at least three neighborhoods that are suitable for your business. Write down goals as to what you’re trying to achieve and try to find a market and location that aligns with those goals.
#2 Build a Buyers List
As the name suggests, a buyers list is a list of potential buyers who might be interested in the deals you offer. With networking being one of the most important segments of the wholesaling strategy, you should start building a buyers list as soon as possible. These are the people you feel comfortable reaching out to in case you land a deal. Even if you start off slow, make sure to network consistently and keep finding new ways to add more people to the list. Focus on quality over quantity.
#3 Dive into Marketing
Now that you know what market and neighborhood you’re aiming at and you have a somewhat decent buyers list, it’s time to dive into marketing. On top of networking, marketing is going to be one of your main activities as a wholesaler. Some of the marketing strategies you should be focusing on is direct mail, bandit signs, and networking strategies through social media. These should be enough to keep you busy on a regular basis. The key to making your marketing work is consistency so don’t give up if you don’t see any results right away.
#4 Find a Property Deal
This is where the real work kicks in. In this step, you have to negotiate with the current owner of the property to get it under contract. A couple of things you should keep in mind is that once you agree on the terms, you must get them in writing or else everything could go to waste. Working with a lawyer can help you understand all the ins and outs of creating a contract and accepting offers that will keep your business profitable at the end of the day.
#5 Get Your First Buyer
The best way to approach wholesaling is to have an end buyer already lined up way before you even start looking for properties. That way, you will know exactly what to look for and what kind of deal to negotiate for. However, even if you don’t manage to find a buyer beforehand, you can still market the property and communicate with the members of your buyers list to see if there are any potential leads.
#6 Close the Deal
Lastly, once you have the buyer ready, all that’s left to do is to close the deal and create a contract agreement that covers all the important points of the transaction. On the closing day, the buyer should sign the contract and you’ve got a done deal!