What Is A Wholesale Deal?

Buy Low – Sell High…

…but low enough so the next guy has a profit…

…but high enough that you make a profit.

One way they do this – by putting the property under contract and then assigning that contract to another buyer who plans on rehabbing it themselves. While a real estate wholesale deal may not be as profitable as a flip or rental property; if you complete successful deals in volume, your commission checks can be systemized… and creating a factory of deals is always an advantage.

A wholesale deal is when an investor finds a buyer. If a seller doesn’t have the means to find a buyer and get their house off the market, then they might sell it for less than what it is worth.

As a middle-man, the wholesaler takes an often not insignificant cut of the profit for facilitating and closing on property sales. They will search out motivated sellers who need to sell their homes quickly but are unable or unwilling to do so themselves by being stubborn with pricing or not renovating the property for retail standards.

When a wholesaler makes the agreement with the seller, both parties agree on an agreed-upon price. The buyer will now take over and have to identify another person willing to pay more than what was originally offered for it from this point forward in order to assign their new terms of sale to the new buyer.

Wholesale Deals In 4 Steps

Find a property
Build a buyers list
Negotiate
Close the deal

Wholesaling in the real estate industry is a simple process, but it’s not necessarily easy, and it can take time to master. If you’re willing to put in research and effort into understanding marketing skills and communicating with clients then your chances of success are greatly increased. So what exactly does wholesaling entail? Well for starters before we get started on that there are 4 steps:

1. Find A Property

The main goal of wholesaling is to find properties that are being sold low enough for you to quickly assign the contract. There are a few different ways in which this can be done, but it’s important not only to know how best to deploy these methods so as not to waste time and resources on ineffective ones; one must also have an understanding of what motivates sellers into making decisions about their property. In order for your campaign strategy (whether direct mail or bandit signs)to work effectively, you need consistency! If campaigns aren’t well-timed with each other nor consistently executed – then there will inevitably come a point where they stop working altogether. Tracking results ensure this doesn’t happen too soon by identifying when things start going wrong and changes. Here are a few strategies to help you get started:

Driving For Dollars: Drive around your target market looking for potentially vacant or distressed properties. Look up the address to find details about the ownership.
Direct Mail Campaigns: Launch a direct mail campaign to target motivated sellers, just be prepared to follow up multiple times.
Bandit Signs: Place bandit signs in your area with contact information so sellers can reach out to you. Remember to consult local laws before making your signage.
Create An Online Presence: Create social media accounts and a simple website for your real estate business so leads know how to reach you.
Listing Sites: Check websites that pull from the MLS for possible REO properties or foreclosures.
Network: Leverage your real estate network for potential leads, and make sure you consistently form new relationships with people in the industry. You never know who will lead to your next deal.

2. Build A Buyers List

Wholesalers can stay ahead of their competition by building and maintaining an active buyers list. Whether you are a first-time investor or seasoned pro with decades of experience under your belt, there is no denying that having someone ready to buy when it comes on the market is crucial for success as both parties benefit from this mutually beneficial arrangement.

Successful wholesalers encourage the momentum of their businesses by building and maintaining an active buyers list. You can think of this as a Rolodex that contains real estate professionals who are actively interested in purchasing off-market properties! A buyers list is generated through networking, such as attending auctions, meetings, and events or marketing campaigns.

Pro-Tip: you can even search county records for cash buyers and try to market to them specifically.

3. Negotiate

Once you’ve identified a motivated seller who is willing to sell their property for below market value, it’s time to try your hand at negotiation. First, do some research and determine what the owner owes on the property if they have any outstanding liens or additional moving costs.

You can research the property at Dynamic.RE to find out the estimated value of the home, and potentially even the last recorded deed that shows you the loan amount and date.

Then get ready to make an offer on your wholesale deal – leave plenty of room for negotiation so don’t be afraid to start low! An easy formula for calculating the MAXIMUM allowable offer (MAO) would be the After Repair Value(ARV) multiplied by 70% minus the repairs.

MAO= (ARV x 70%) – Repairs

Ex:

ARV = $200,000

Repairs = $50,000

MAO = ($200,000 x 70%) = $140,000 – $50,000 = $90,000

MAO = $90,000

4. Close The Deal

You’re done with the hard work, and now it’s time to close your wholesale deal within a set amount of time. This is when you need to clarify for the seller that you are not buying the property yourself but will be selling on contract in order for them still get their full price. The most critical thing here is an assignment clause which allows you to sell someone else’s interest if things go awry or take too long before finding a buyer during this specific timeframe (or let expire). Once everything goes smoothly and find someone willing to purchase from a third party who has agreed-upon terms, collect deposit money upfront then assign a contract!

Then, work with a reliable title company to order title insurance and prepare all necessary paperwork for all parties to sign. Once you have reached your closing day, you can expect to be paid your portion within 30 to 60 days.

Summary

To be a successful wholesaler, you need to know how the system works. Be diligent and educate yourself on everything from business practices to marketing campaigns. Remember that your time is valuable so don’t waste it by doing any of these things halfway! It’s also important for wholesalers to be good communicators as well as fully understanding what legal documentation they are going into an agreement with others about – make sure you’re both clear on this before moving forward or else there could come consequences if it all goes south later down the line. Take your marketing seriously and measure your metrics to identify areas of improvement bit by bit. Lastly, rely on software just as Dynamic.RE to help make your job easier and analyze the numbers for you.

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What Is A Wholesale Deal?