The real estate market can be intimidating – but it doesn’t have to be. By learning more about wholesale real estate, you could end up pocketing plenty of profit without a lot of upfront investment.
Here’s how:
Step One – Find Properties and Sellers
Before you can start wholesaling houses, you must find properties that fit the necessary criteria. These will typically be properties that are facing foreclosure, which are damaged or distressed, or which owners are very motivated to sell.
When you are getting started in the industry, you may struggle to find the right properties and sellers. There are plenty of ways to do so, some of which might work as part of your overall strategy. These may include:
Industry networking in your area, either in person or online.Local legal professionals who may have foreclosure clients that they can suggest your services to.A direct mailing campaign or visual advertisement aimed at sellers who need to get cash for properties quickly.
Step Two – Find Your ARV and MAO
These terms may sound strange, but they are quite straightforward.
The ARV is the “after repair value” of the property, meaning the fair market value of the property after any necessary repairs. The MAO is a “maximum allowable offer” you can make to the seller of a distressed property while still potentially making a profit. Balancing these two numbers will help you understand where your potential profit margin lies – and whether a home would be worth your time.
Step Three – Negotiate and Offer
Even when your potential seller knows that they aren’t going to receive anything close to the market value of their home, you may still need to negotiate to find a price you can both agree on.
Not sure how to get them to budge from their current asking price? Some tips for doing so include:
Be ready with cash in hand, making sure to emphasize the benefits of selling promptly.Remain quiet during negotiations so you do not look overeager to invest.Remind the seller of their need to make major repairs, sell or store appliances and furnishings, and take care of other issues before they could sell on the standard market.
By remaining stoic and strong in your offer, you are more likely to receive it. If not, be willing to walk away.
Step Four – Find an Investor
Once you have put the property under offer, you will need to move quickly to find an investor who is willing to take over the contract. You may have less than 30 days to do this in many cases.
For newer wholesalers, reaching out to local industry contacts is a great way to get started with this. You may not have the connections necessary to have buyers on standby yet but sticking with your approach should eventually help you develop a reliable network.
Step Five – Find Agreement Between Everyone Involved
Once you have made these connections, it’s time to negotiate between the original seller and your new investor. Some parts of the overall contract may need to change to suit both parties. As always, maintain the sense of urgency that drives the sale; this will keep things moving and prevent either party from overthinking minor details.
Step Six – Close and Profit!
Once you have everything in place, it’s time to close on the property and walk away from the sale. The person to whom you assign the contract will take over from there – and you can pocket the profit or roll it into the investment in your next property!
Real estate is not the industry for everyone, but it is an industry for anyone. With the right education and approach, almost anyone can take a few thousand dollars and get started on a journey that has the potential to change their life. What are you waiting for?
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