How to Wholesale Houses
12 Steps from A to Z
12 Steps to Wholesaling Houses w/o Cash or Credit
1. Educate Yourself. Purchase a Real Estate Investing book, course, seminar, coach or mentor. This will make the method of flipping houses (or wholesaling houses) easier to start without chasing your tail. I would highly recommend a mentor or coach who has plenty of experience at wholesaling houses with no cash or credit.
2. Setup Communications. A dedicated cell phone or voicemail to take calls from your motivated sellers looking to sell their distressed properties. This phone number will be placed on all of your house flipping marketing materials such as bandit signs, postcards, websites, business cards, TV and Radio ads, etc. You will also need a fax number to receive faxes of documents such as real estate contracts, title work and seller info.
3. We Buy Houses Website. This is a very important tool that can save and make you a lot of money in the wholesaling houses business. Simply put, this is your 24/7 Flipping Houses salesperson because it’s working when you’re at work, sleep, on vacation, etc. Always brand your site with any marketing that you do and make sure it’s simple, concise and user friendly. I highly recommend starting with a website but it’s not necessary to flip houses in the beginning.
4. Marketing: Get Your Phone Ringing. None of this will work without motivated sellers calling you with houses that you can flip. There are many ways to market your business but the 2 most effective methods are “I Buy Houses” Bandit Signs and “Sell Your House” yellow letter campaigns. Most cities have laws on the books against Bandit Signs but a lot of cities don’t enforce those laws because they have bigger fish to fry than chasing you down about bandit signs. Therefore, if you see them in the area that you want to wholesale houses in then it’s normally ok to start your own “We Buy Houses” bandit sign campaign. Your “I Pay Cash for Houses” yellow letter campaign will be easier to implement because you will simply choose an area and target absentee owners in that area. You can purchase list of absentee owners from info brokers that sell these list based zip code, ownership, house size, etc.
5. What to Say? Once your phone starts to ring with motivated sellers you should have a script from your real estate investing course that will allow you to gather the necessary info to determine if this is a house flipping opportunity.
Address with zip code
Bed and Baths
Age of Roof
Existing Loans and Liens
6. Negotiating Price. Before you can start to negotiate price you must know what the house is worth in excellent condition and there’s a formula you can use to determine the After Repair Value or ARV as it’s called in the house flipping business.
That formula: ARV x 60% - Repairs – (Your Assignment Fee x 2) = Contract Price with the motivated seller. No matter what real estate investing course or seminar you purchase, they should explain how to determine repairs.
Ok, now don’t be afraid when speaking with sellers because “the one with the gold makes all the decisions.” There are 2 options when negotiating this potential real estate investment deal, you allow the seller to give you the bottom line price or you make the offer. If you are forced into making an offer here’s a rule of thumb that I use, if you’re not embarrassed with your offer you haven’t made a low enough offer. The other option is simply asking the seller one question with a follow up question, PAYING ALL CASH AND CLOSING QUICKLY, WHAT’S THE LEAST AMOUNT YOU WILL ACCEPT? Regardless of what answer they give you always ask this follow up question, IS THAT THE BEST YOU CAN DO?
7. Contract & $10. Now you and the seller have agreed on a price that will allow you to flip this house with no money down. What makes this work is the contract that you will use to secure and tie up this deal long enough to wholesale this house to your buyer/investor. I use a one page real estate investing contract for the simplicity and speed of the deal. Of course, I’m not an attorney so you should use a contract that you are comfortable with wholesaling houses in your state. Most real estate investing contracts are secured with earnest money to show you have a interest in the property. I normally don’t give more than $10 earnest money on each deal. There’s no law that requires you to give more but it’s more of a realtor’s industry standard to give a minimum of $500 to secure a real estate contract. You will always buy the property AS-IS and PAY ALL CLOSING COST. You will see how to get rid of the closing cost later in this ebook.
8. Let’s Flip this House. Ok, you have the contract in hand from your motivated seller. Your flipping houses business will be as strong as your real estate investor buyer’s list. Your buyers will be a real estate investors looking for income properties for rentals and the “flip that house” guys you see on TV. You will simply market your property to these real estate investors looking for deals. Of course, you can only sell this property to one real estate investor but you wanna collect data on every real estate investor that calls about the house you’re trying to flip. Simply, this data will be used to build a buyer’s list for your future deals.
9. Contract with your Real Estate Investment Buyer. You can use the same one page real estate purchase and sales with a couple of small changes. You will now require a minimum of $500 as earnest money (you gotta know if real estate investor is a serious buyer) to secure the deal, your real estate investor will pay all closing cost and you will be listed and sign as the seller on this contract in order to wholesale this house.
10. Pull Title. Some flipping houses courses and seminars will train you to pull title once you have your contract with the motivated seller but I normally wait until I have a buyer in place before I pull title. Liens and chain of title will slow and sometimes destroy your house flipping opportunity. Most of the time you can clear the title with the help of your motivated seller. Once you have a clear title, let’s close the deal.
11. Let’s Close. The title is clear and you have set a time that works for the buyer and seller. You should close your deals with a real estate attorney or title company but sometimes your buyer will want to use his folks. If so, you send your closing details to the rep who is preparing the closing docs to ensure the funds are disbursed correctly. In most cases this will be the first time the seller and buyer will meet and the way you get over the “Who is this Guy Look?” is simply introduce the buyer as your “partner on THIS deal.”
12. The Best Part: How do You get Paid? You will get paid via an Assignment Fee from the buyer.
Example: Your contract price with the motivated seller is $20,000 and your contract price with the real estate investor is $30,000 therefore the HUD-1 statement will show an assignment fee of $10,000 paid to “You the Wholesaling Houses Guy”.
So, the motivated seller will collect a check for the $20,000, you will receive a check for $10,000 and the real estate investor will get the keys for the house you just flipped to him.