Wholesaling Houses for Quick Cash

By
Real Estate Sales Representative with Cid Solutions

Wholesaling Properties for Quick Cash.

Ever see those late night infomercials that have telling their stories of how they made 40K within days in real estate without using any money and no credit? Well, technically, that is possible. What most of those infomercials are referring to is a strategy called, wholesaling. In case you are wondering, no, wholesaling is NOT illegal, no matter what ignorant lawyers and brokers tell you, and YES, it can be a very lucrative once you get up and going.

Here is the simple process of wholesaling broken down for you. First you set out looking for investors in the areas that you’re looking to wholesale in. Once you get a few solid investors with similar criteria, you start finding them property. Ideally you’re looking for a property that is neglected and in need of serious rehab work. You then find who the owner is, contact them, and ask if they are interested in selling. You both agree on a price and put a contract together to purchase the home. After the contract is signed, make sure to get unlimited access to the property with a lock box and a spare key. Once it’s under contract, go to your list of investors and let them know what you have and where it is. If the price of the property is properly negotiated and it meets the criteria of your investors, they should have no problem picking that piece of property up. Here is where you assign the contract to your investor for your fee. Fee’s can range from $2,500 and up, I’ve seen checks as big as $55,000!! In THIS market!

To be a good wholesaler you must learn to love two things:Marketing and Negotiating

Marketing for Wholesale Deals: Why do you have to love marketing? Because that is the only way you can fill up your pipeline with leads on a regular basis. Marketing needs to be strategic, consistent, measurable, and effective. When the guru’s say you can make cash with no money, that’s true, but what they DON’T tell you is how much your marketing is going to cost and how much time might lapse before your first deal. Do not worry, if you’re passionate and serious about your craft, you will do whatever it takes to do so.

Here are the quickest and best strategies for generating leads from motivated sellers:

  • Bandit Signs – Those annoying, “we buy houses” on the side of the road, yeah, that’s us
  • Direct Mail – Not as hard as you think, there are many online list providers and fulfillment companies that make this easy
  • Fliers - Put these on cars at the mall, in the grocery stores, and anywhere else you think people might look
  • The Internet – Obviously when someone wants to sell their house today, the first thing they do is go online. Having a capture site that draws leads is ideal in today’s industry

Negotiating Wholesale Deals: This is as important, if not more so than marketing because this is where you make your money. Unfortunately many beginning wholesalers start off hot but get burnt in their first few deals because they did not take time to learn what the best price is to offer on a home. Many do are not savvy enough to estimate a rehab cost and over estimate resale value. If you do not know these two things, have someone who is, walk you through a property.

Here are quick tips on what to do when negotiating:

  • Get Comps – If you are a realtor great, if not, find one. Have them look up recently sold property within the last 3 months, within 1 mile of the property. Comps should be similar exteriors, bed and bath, and square footage. Do not compare a brick 3 bedroom with a frame 2 bed
  • Repairs – Unless you’re a G.C., here is a quick trick for repairs. Go through the house and decide if it’s a small, medium, or major rehab. Multiply the square footage by 10 for small, 15 for medium, and 20 for major. Add 10% to it, and you have a decent estimate
  • Know Your Maximum Allowable Offer, MAO - Once you estimate the repairs and you know what the after repair value, ARV, will be, follow this formula. ARV x 70% - Repairs – YOUR FEE = MOA.

Example: You find a house worth 200K once it’s fixed up. Multiply 200K by 70%, which is 140K. The place needs 40K in work, and your fee is 5K, so your MOA is 95K. Make an offer of 89K and see what happens!

Like anything, wholesaling will take time, dedication and enthusiasm. You might get a good deal your first time around, but this is not always the case so brace yourself for a unique ride into real estate investing. For wholesaling deals in Chicago, check me out at www.ChicagoCashFlowProperties.com, check me out on twitter at www.twitter.com/Chicagoinvestor

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Tags:
real estate investing
chicago real estate
wholeale real estate
wholesaling
investments
strategies
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