Wholesaling is a great way to begin your real estate investing journey, especially if you aren’t interested in having rentals or dealing with buy and hold situations. This week we will be talking about how to wholesale real estate by getting your acquisitions. There is no wholesaling deal if there aren’t acquisitions.
I’ve had many people ask how to wholesale real estate. They want to know if they should build up a buyers list first or find some sellers. This wholesaling mini-series we are doing will help answer those questions. However, you need to know that these are not in the order for which you have to do it–not a step one, step two etc. play-by-play. A lot of this stuff happens simultaneously. There is always a bottleneck. This happens in any industry. It doesn’t just happen when you wholesale real estate. There will be times when you have too many deals and not enough buyers or vice versa.
Acquisitions Is…A Sales Job
The faster you understand that acquisition is just an outside sales job, the better your business will be. If you are building up your wholesaling business from the ground up, you probably don’t have an acquisitions person. That is perfectly fine! It will help you know how the position should work and if you are not built to be a salesperson, then you will know what strengths your acquisitions person are going to need.
How to Sell Yourself
If you have an acquisitions person, they may do lead generation and marketing. They might be too swamped and you might need to get a marketing person. We get all our deals through some sort of marketing in: direct mailers (postcards), craigslist, and social media. We also use specific filters for the kinds of sellers we want. We, for some of our buyers, look for people with 50% equity in their house or for people who are remote, but with property in Ohio. Your acquisitions should line up with your income expectations and your expertise. Don’t just contact anyone who wants to sell their house, do a little digging.
- I have a list of sellers that I use to send out my direct mailers. You could probably get access to the same list I have.
- I find out the pain points of the sellers who have shown any interest in my offer.
- The sellers who aren’t motivated might get a direct mailer with a notice that I am a cash buyer and a list of properties like their’s that I have done deals with.
- Postcards for direct mailers are great. Can’t recommend them enough. Even if 200 of the 1000 postcards I send are returned I count it as a great thing. Those returned postcards are valuable because any other real estate agent or investor is probably going to throw them out and never contact that seller again. I can find their new address or contact information and be one of the only people who has offered to buy their house. What a win.
- Don’t give up after sending one direct mailer. Once you know the address is good, you might be surprised that a person who is only one month behind on payments, might start to get desperate after month 2 or 3. They aren’t going to keep your original postcard, so keep sending them. Month 3 might be the month they decide a cash buyer is better than the no bites they got in the MLS.
- Have a website. If people look up our website, our site tells them what we do, who we have worked with, and we get a lead captured from them putting their information on our site.
- Quick Tip for Craigslist ads: if you are looking for buyers outside of your area code, you need to make sure your contact information for the add has a number with that specific area code. If you are looking for buyers in Tampa, FL your contact information better be a Tampa area code phone number. Otherwise, Craigslist will “accept” your ad and then boot it within a few hours and never tell you.
- Create a google voice number and use the local area code. You can get hundreds of phone numbers in different area codes that point back to your primary phone.
- Post ads for both buyers and sellers for lead generation. You don’t have to focus on just one at a time.
- A great way to get starting real estate investing or wholesale some real estate is to look at probate deals. You can find them in the newspaper, they are generally when someone dies, and leave their house to an executor. You can offer the families help in getting the houses cleaned up and saving them the time and emotional overwhelming from having to clean up a loved ones’ home. Sell yourself to them!
But What About the Deals?
Ok, so you’ve gotten some acquisitions. You found some sellers wanting to sell. Awesome! But what kind of money to you offer to the seller so that you get paid? First, you want to look at the house’s current worth. Them you get a comp to let you know what the house would be worth if it were fixed up to the most current level. Subtract how much it would cost to do the renovations. You will get the number a real estate investor looking to flip would be willing to pay. If you are wholesaling the house, and the number a buyer would be interested in is 50k, but you want paid 5k for the deal, you offer the seller 45k. Then you sell it to the buyer for 50k. That’s how you get paid. You stick it to the seller, and they may not like your offer of 45k. You have to sell them your offer and fix their pain points to sell it to you and be happy about it. This only works with the real estate buyer who wants to flip the property.
If you have a buyer who likes owning rentals and is into buy and hold, you have a different way to wholesale to them. The only numbers they care is what kind of ROI they are going to get on the property. That means you, the wholesaler, needs to do research on the properties in the area and how much of a return is expected for that specific neighborhood market. If all the houses in that neighborhood get a 10% return, you need to figure out how that property you got from the seller is going to make that much. Look up the rental rates. If rent for your property is about 1k a month and $500 of that is profit, that means the house the house makes 6k a year. If they want a 10% return, that means the house and all its renovations and your fee should add up to 60k for the deal.
All This To Say…
Acquisitions are very important to do any type of wholesale in real estate. You need to remember that is is a sales position and you have to know how to get a sale done! The marketing can be pretty simple, but you have to be consistent. Don’t give up because no one contacted you from your direct mailers this month. Be patient. Know how to construct your deal for a buyer, whether they are looking to flip or buy and hold. Always know that you can say no to a seller after talking to them about buying their property. If the money isn’t right or the renovations are going to cost more than you anticipated, you can renegotiate or walk away from the deal.
If you love the returns of real estate investing, but don’t want to deal with any people, you have the option to be the bank. You can be part of a trust or a fund. Right now, I have a fund set up for accredited investors with over $5 million in assets. The fund has preferred interest and 70% profit sharing. Visit me at investwithdrmatt.com to find out if you have the opportunity to invest with us.
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