How to Wholesale Real Estate

This article will show a beginning Real Estate Investor how to become a
Wholesaler. This is commonly the easiest way to break into the Real
Estate Investing industry, and should teach you the basics to becoming
a professional Real Estate Investor!

Instructions:
1. First I am going to assume you already know the basics of real estate
investing and have a good relationship with a Title / Escrow company
(or Attorney if you are in a state that requires Attorneys to be involved
in real estate transactions). If you need some help understanding the
basics I suggest you check out www.StartClosingDeals.com for free
video training or Jack Millers website CashFlowConcepts.com and
purchase some of his booklets. They're super cheap and packed full of
good content. I have never been a fan of any so-called "Guru's" training
materials but Jack was the real deal! Also you should read as many real
estate / sales books as you can get your hands on. A few suggestions of
good books are "Answering the What If's In Real Estate" by Paul V.
Xavier, "Trump Style Negotiation" by George Ross, and "Zig Ziglar's
Secrets of Closing the Sale" by Zig Ziglar. All of these can be found on
Amazon.com.

In the beginning you might want to pair up with a more experienced

investor and offer to help them find discounted properties for them for
free if they teach you the basics of contracts, escrow, and creative
financing! The ultimate goal of a real estate wholesaler is to "flip"
properties with no money down, none of your own credit, in a
relatively short period of time! The goal is to find someone that has the
things you want and then ask them to teach you how they got them. So
if you know someone that is wholesaling that has a nice car, nice home,
and a hot wife / husband...then you will want to mimic those people’s
processes that got them those great things. So know that we got some
of the BS out of the way, let's dive into the good stuff.

2. A typical wholesale transaction looks like this:

You hunt down a motivated seller that allows you to put their property
under contract at a discounted price. You then market the property for
sale for more than your contracted amount and when you sell it you
keep the spread you’re created. The goal is to wholesale "a contract" in
the beginning until you have enough money to go out and purchase the
home with your cash or your investors cash. A person can wholesale
any type of property (single family, multi-family etc.) and any type of
deal (regular sale, pre-foreclosure, foreclosure / auction property, bank
owned home, and short sale). Once you learn the paperwork, and who
the key players involved are, then you can pretty much start printing
your money because it is very easy to wholesale your way towards
financial freedom! We will review the details of how this breaks down
in the rest of their training.

SIDE NOTE: While wholesaling has made me over a million dollars over
the last 6 years I still want to stress the importance of investing. You
see, wholesaling is not really real estate investing. You are simply
hustling with your creative mind to make some quick cash. While a solid
business system is key to being a good and profitable wholesaler you
must reinvest your money into "cash flowing" properties that will earn
your real money over time. Having your money earn money is the only
way to becoming truly rich and it is the secret that only wealthy people
understand. You will be on the same page as me if you can answer this
question: Can I stop working as a wholesaler today and still earn
enough money to live my lifestyle? If the answer is yes then you have
invested your money wisely. If the answer is no then you must continue
wholesaling until you earn enough money to purchase solid cash
flowing rentals and debt (mortgage notes and deeds of trust) that
produce enough yields so you can sit back and watch your money grow!

3. Building out your buyers list is absolutely the most important step
you will take in your wholesaling career and is counter intuitive from
where most where most people start. Some want to start with finding
properties...this does not make any sense to me. Always find your
investor first then fulfill their needs and find them a property. Over the
last 6 years I have built my buyers list up to almost 45,000 names, email
addresses (most important info), and phone numbers. At first this
might sound impressive, but you really only need a handful of
experienced investors that don't have the time to spend hunting down
great deals! These will be your pool of buyers.

Here are a couple of ideas to help build your buyers list:

1) Network at your local real estate investor club meetings. Almost

every major city has one or you can join the National Real Estate
Investor Association (www.nationalreia.com)

2) Put out an Ad on CraigsList.com or BackPage.com that say's

"Investors wanted...Local Property Wholesaler Selling Homes at Huge
Discounts! Reply with Name, Phone Number, and Email Address to be
added to our investor list". Over time I have graduated to using a
mixture between HTML ads (http://www.craigslistaddesign.com/) and
text only ads posted during "high traffic" times.

3) Go down to your local foreclosure / trustee auctions and network

with those bidding as well as those standing around observing. This is a
HUGE untapped resource for finding tons of investors. Make sure you
bring some marketing materials with you and have your 30 second
commercial ready so you can make a good first impression.

4) Use social networking websites like Twitter.com, LinkedIn.com,

CleverInvestor.com and Facebook.com to network online. Create a fan
page and insert your email programs intake form so viewers of your
page can join your list. My fan page is located at
http://www.facebook.com/KleverInvestor?ref=ts&__a=32 so you can
see an example. You will need to understand how to insert the HTML
code of your email program (I use icontact.com) into the side bar of
your Facebook page which can be a little tricky the first time.

5) Join other wholesaler’s lists and wait for them to accidentally send
out their list. I can't tell you how many times over the years this has
happened to other wholesalers that accidentally sent me their entire
buyers list. Plus it helps you see what your competition is selling and
how they deliver their emails.

4. Now it is time to find properties to wholesale. I currently get my

inventory from the auctions. This is a cash heavy business and is not
easy to get into or do properly. I do not recommend you try this
method until you have deep pockets and a clear understanding of how
the auction business works in your area. But I do utilize many local
wholesalers to help me sell my inventory once I buy it so a good place
to start is networking with these professional buyers. Let them know
you have a strong buyers list and that you will call them every day to
see what properties they purchased. You then can begin marketing
them to your list via email or calling buyers directly. We even allowed
some of them to hold open houses on the weekends, which not only
marketed our properties but also helped them find more cash buyers.

Another good acquisition source is REO's (bank owned homes) and

Short Sales. Partner up with a good real estate agent and begin making
offers on REO's and Short Sales. If one gets accepted then you can
begin marketing it during your inspection period. Just know that ALL
banks will not allow a double (simultaneous) closing so you must
completely purchase the REO or short sale first and then resell it for
your profit. Ask your local title company (or attorney) how this can be
done legally so you are prepared when you get your first one under an
accepted contract.

NOTE: I have successfully double closed a few REO deals by utilizing

multiple title companies but this can be difficult and time consuming to
put together. For short sale and REO flips I suggest you create a
relationship with a "Transitional Funding" source. If you Google "short
sale funding" a few sources will come up. Make sure you are prepared
for the costs associated with borrowing this type of money. Many times
I thought I was making more money than I actually walked away with
because it all went to the escrow company and to the transactional
funding source! But even though the closing costs in this type of
transaction can be expensive it is the only way to do short sale and REO
flips legally and is all worth it in the end because there is less risk to you
the wholesaler.
Lastly, targeting motivated sellers online with a good optimized
website. Once set up begin a Google Pay Per Click campaign to drive
traffic to your site. Now getting leads this way takes time and money
but there are ways to do this cheaply. Try setting up a property
acquisition blog on Blogger.

5. Knowing how to construct a wholesale flip is your next major

objective. To break it down in its simple form there are really only three
ways to wholesale a property. Either by "Assignment", "Double Close"
also known as "Simultaneous Closing", or a "Traditional Close" If you
"Assign" a contract everyone in the transaction will know what you are
making. This would be done if you are comfortable with everyone
knowing your profit. If you "Double Close" the transaction no one will
know what you are making but getting a title company to do this
nowadays is a chore due to all the heat they took once the real estate
market collapsed in 2007. Double closing is also more expensive and
takes away from your profit because the closing costs are so high. Since
"Double Closing" a deal is becoming difficult to get approved you could
end up completing a "Traditional Closing" using "Transactional Funding"
to pay for the deal long enough for your title company to approve and
close the transaction. So let's review what a typical wholesale
transaction looks like using each type of closing method:

Assignment:

When you put a property under contract, in the buyer section you put
your name (or your companies name) and/or Assignee. This gives you
the right to assign the contract to another buyer for a fee. When you
open title for the sale you will give the title officer (or Attorney) the
purchase contract as well as a one-page assignment form showing you
assigned your interest in the property to a new buyer. That assignment
form will display whom the new buyer is, the amount of the assignment
fee, as well as how payout should occur. I typically use this technique
when we are making a profit of $5,000 or less.

Double Close:

If you are making a spread of $5,000 and don't want anyone to know
what you are making then you will want to find a title company /
Attorney that will allow a Double Close. This means you are going to
use the back-end buyer’s funds to pass through you and pay off the
original seller!

Traditional Close with Transactional Funding:

If you can't find a title company that will allow a double close then use
the same Transactional Funding you would for a short sale or REO flip
or find a good hard money lender in your area and close on the deal.
This way you simply complete the transaction with the original seller
knowing you already have a contract and non-refundable earnest
money (typically at least $1500) from the final end buyer.

6. Holding everyone's hand through the closing and getting paid is your
final objective. This is really hard to teach because each deal is dynamic
but the basic concept is the same. First, make sure that your final end-
buyers non-refundable earnest money is in escrow along with all the
signed contracts / assignment forms. Next make sure your title / escrow
officer (or attorney) has opened the file and ordered the proper payoffs
and title commitments. Sometimes they are busy so a little bit of
pressure from you will ensure that things don't get delayed. I have had
escrow officers forget to order HOA payoff statements, which caused
the deal to delay long enough for the buyer to get cold feet and walk
away!

SIDE NOTE: Finding a good Title company or real estate Attorney to

close your transactions is HUGE. They are the most important team
members you will have and can make or break your wholesaling career.
My title lady will jump through hoops and even work on a Sunday to get
things completed and completed fast. The goal is to drive your deals
home in the fastest time frame possible, which reduces your risk from
the number one deal killer...TIME!

Now all you need to do is make sure the original seller and final end-
buyer are staying excited about the deal. Keep them separated at all
times and never make the mistake of thinking that you can introduce
them or leave them alone in a room together. I have lost many good
deals because I was lazy and didn't want to drive over to the property
to let someone in for inspections / appraisals so I would just have him
or her meet the original seller there. Every time I did that the deal blew
up once they got talking.