Wholesaling real estate can be a great strategy for a beginner, or someone who only has a limited amount of time and money to start with.
Many people consider it a ‘transitional’ real estate strategy, because it allows you to ramp up over time and get involved in a way that can suit your schedule and budget.
However, nobody's suggesting that wholesaling real estate is easy. Every kind of real estate deal comes with its own complexities and risks, and wholesaling is no exception – actually, it's even more complicated than some other kinds of deals, in its own way.
Here are some of the basic components of how you find properties to wholesale when you've committed to this type of real estate strategy:
Targeting Properties and Property Owners
At the ground level, the core mission of wholesaling houses is to find properties that can be bought cheaply.
The idea is that you make a contract with the seller for a low price, and then find a buyer at a higher price and pocket the difference.
This is completely legal if it's done the right way and according to state requirements. It's simple in the sense that the wholesaler never has to buy the property outright. But without the right approach and protections, it can be pretty risky.
To start out getting a general feel for how to find wholesaling deals, you want to be able to target specific types of property scenarios. Distressed properties are the primary category that many wholesalers are looking at.
Distressed properties are often sold at a discount or bargain price because the owner doesn't want to deal with whatever problems have occurred at the site. For example, distressed properties can have:
- Mold or water damage
- Fire damage
- Structural damage
- Insect or wildlife infestations
- Damage from pets
These and other problems can cause sellers to give a property up at extremely cheap prices. It's also a good idea to look for absentee owners and landlords who may be in over their heads.
Using the Right Media
Marshall McLuhan said “the medium is the message” – and he was right?
Many experts in real estate wholesaling suggest that wholesalers have to cast a wide net.
These four types of strategies are very common in the real estate wholesaling outreach process.
1. Direct mailers –
By sending out specially crafted direct mailers, real estate wholesalers can attract a list of interested sellers. This can form part of the overall strategy for creating a “base” that will hunger after the deals that you find.
2. Bandit signs –
Outdoor signs, prominently placed, can also get your offer in front of a lot of sellers’ eyes.
3. Word-of-mouth –
Another common strategy is to utilize real estate meetups and other public events to try to get the word out about a wholesaling offer.
4. Internet marketing –
Although many wholesalers don't primarily use the Internet to offer wholesaling opportunities, there are corners of the web such as Craigslist where some Internet marketing can be effective, usually as a supplement to signs and direct mailers.
Caution – Advertise Correctly!
One of the pitfalls of real estate wholesaling is running afoul of the law.
For example, in the state of Texas, state officials have clearly explained in state code that a real estate wholesaler must advertise the nature of the deal correctly and transparently.
The wholesaler cannot claim to be selling the property directly. He or she has to disclose that what's in-hand is buyer interest in the property, not an actual sale deal.
With the right care and compliance, wholesaling is something that generates capital instead of generating liability.
Here's another way to use the context of a particular real estate deal to isolate and find the best real estate wholesaling deals.
Some of the smartest real estate wholesalers come into the market looking at a particular neighborhood or local area and evaluating what's going on at the ‘street level.’
They’re looking at items like the following:
- Number of sales made in a month
- Average property sale price
- Average property size and amenities
- Average time-to-market for investors
- Types of flipping that are predominant
All of this data goes into a strategy that looks at a particular wholesaling deal in the context of its surroundings.
For example, if a home that is worth maybe $150,000 according to the neighborhood is selling for $75,000, you have a basic understanding of the money that's to be made after repairs. But without a neighborhood context, it's harder to figure out which wholesaling deals will really generate money.
That's where Privy comes in: as a next-generation digital platform, Privy allows users to get live comparisons and accurate information about community real estate processes and markets. By tying investor activity to active comps, this platform gets you tried and tested deal potential!
Learn more about how Privy as a state of the art real estate tool that can help you to automate your real estate research – it’s the only one of its kind, and sure to be valuable in building your real estate empire!
If you're looking to take the next step and find the right REI tool to help you find more promising properties faster, this free guide is for you: