Real Estate Flipping in Three Easy Steps
New and seasoned investors can take advantage of this economic window of opportunity. One of the challenges you may encounter as a novice investor is a lack of financial resources. Due to a lack of capital, you cannot purchase bank-owned properties or invest in their rehabilitation. As an experienced investor, getting tunnel vision and focusing solely on your renovations and rental properties is easy. However, while you wait to pay off your other initiatives, a steady monthly income flow can be generated through wholesaling. Let’s explain what it means to “wholesale” something and how it works as a business model.
Wholesalers provide what?
Locating a property, entering into a contract on it, and then assigning it prior to closing is all there is to wholesale.
This may be an oversimplification, but it gets at the essentials of what goes on in a wholesale deal. Investing in quick-turn real estate doesn’t require you to use your own money or credit. You never even have a home of your own!
Finding Properties Is The First Step In Wholesaling
Finding homes with sellers who are eager to sell is essential for a successful wholesaling venture. A discounted sale is impossible if the seller isn’t interested in making a deal. We can’t afford to buy the residences without a substantial discount. But we’ll go into that in more detail shortly.
Finding these serious vendors doesn’t have to cost you much if any, money at all. Check out the enumerated items below:
Submit a search request to the MLS, and an agent will send you the results. Any terms identified in the listing will be used to generate a search report. Using phrases like “must sell” and “motivated seller.”
Search Craigslist for ads that use terms that you’re interested in. Only those working with a real estate agent can access the ByOwner area of the MLS search report.
Making Money by Driving Around: Drive around the areas you’re interested in buying in to find empty homes. You can utilize public data to track down the owner of a vacant house and request a purchase agreement.
Yard signs – you’ve seen them around town, I’m sure. These are the familiar “We Buy Houses” signs at intersections nationwide. Although these signs can be effective, they are often removed by law enforcement or vandals and must be replaced frequently. For 100 characters and stakes, expect to pay between $200 and $300.
Searching county courthouses for foreclosure documents is known as “foreclosure mining.” Get their contact information (name and address) and write a letter to them expressing your desire to purchase their home. You might be able to find this data on the internet.
There’s a common thread here. All of these involve or look for sellers who are motivated to sell. There is a wide variety of sellers who are motivated to sell:
Possibility of Foreclosure
Divorce
Change of Address Due to Owner’s Absence
Old Landlord Home Requires Maintenance
Bankruptcy
There are just too many to enumerate.
Most of these choices won’t cost you anything, but they’ll take up a significant chunk of your time. More alternatives are available as well. I could probably develop seventy-five to a hundred other approaches to find properties, but I’ll stick to the most elementary and straightforward ones.
The Second Step in Wholesaling Is to Make an Offer and Enter into a Contract on the Property
Schedule a viewing of the home when you find one with a seller eager to negotiate. Doing homework on the home’s worth before you get there is a good idea. If the house is in good shape and does not require any repairs, your real estate agent should be able to pull similar sold properties to help you establish the home’s value. If you’re not working with a real estate agent, resources like Trulia.com will be your only option.
Bring a contract with you when you see the house so that you may sign it immediately if you and the seller reach an agreement. Look for damaged or outdated features (such as the kitchen or bathrooms) while you’re there. Please keep track of them so you can estimate how much it will cost to fix the damaged sections.
You can calculate your offer and submit it to the seller once you have the home’s after-repair worth and the cost of the necessary repairs in hand. Maximum Acceptable Offer (MAO) = After Repair Value (ARV) minus Repair Costs multiplied by 70%. What you provide is NOT MAO. That price is a severe buyer’s highest offer for the property. Your request must be lower than MAO to profit from the transaction. This figure often falls $5,000 – $10,000 below MAO. This is your assignment or wholesale fee.
Third, wholesalers advertise the property and transfer ownership of the contract.
The first phase of this wholesaling process should coincide with the search for properties through marketing. A list of potential buyers is essential to succeed as a real estate distributor. You can still accomplish this if you don’t already have a wholesale property. Put yard signs or run an ad on Craigslist to get the word out. Put up a yard sign saying:
A “Handyman’s Special”
The phrase “Cash Only.”
“3 BR, 2 BA, in Need of Repairs.”
I Need Your Number
You can use the same basic idea for your Craigslist post and flesh it up.
You can use Craigslist and yard signs at the house and neighborhood to find buyers once you have a property under contract. If you have done an excellent job compiling a list of potential purchasers, all it may take to close a deal is a quick phone call or email.
You identify a buyer and then sell your contract to them for a commission. A deposit of $1,000 is required, and you must then fill out an Assignment of Contract form and submit it to the closing attorney. The closing attorney will handle the final distribution of your assignment fee.
This is a decent introduction to real estate wholesaling, but it doesn’t go into enough detail to be helpful. The good news is that the “Godfather” of real estate investing will teach you the ropes of wholesaling. If you’re looking for wholesale contracts and other paperwork, go to Ron’s Crazy Dollar Deal.
Because of our dedication to integrity, Port City Home Buyers LLC has become one of Wilmington and Jacksonville’s most reputable real estate investment companies. Single-family homes in difficulty (foreclosures, bank-owned properties, motivated sellers) are our specialty. After finishing renovations, we offer them to new homeowners and landlords as ready-to-rent properties or wholesale them to other investors.
We at Port City Home Buyers LLC attribute our success to the strength of our relationships and the method we utilize to acquire and resell homes. We usually purchase homes that aren’t aesthetically pleasing on the block. So when we invest in a neighborhood, the locals welcome us with open ar
s because we’re making their community look better too.
To learn more about what we do and how we may assist you, please get in touch with us at
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