Real Estate Investing and Wholesaling - How You Can Make $5-20K Per Month Working Part-Time
Perhaps you've heard of "wholesaling" before.
Wholesaling is the process of finding a great real estate deal, putting the property under contract, and then selling that deal to a buyer that purchases with either cash or private money/hard equity.
The very first step to wholesaling is to locate a great deal.
Sufficed to say, entire courses have been written on this very topic, but for our purposes here, I will provide you with a few ideas to get you pointed in the right direction.
My favorite method of finding deals to wholesale is sending direct mail to targeted lists.
This entails mailing a postcard or handwritten letter (doesn't have to be an actual person's handwriting on each one, it could be photocopied, or use a handwriting font) to a targeted list, such as out-of-state owners, landlords filing for eviction, estate-owned properties, or foreclosures.
While direct mail is great, it does cost a few bucks, so if you're on a shoe-string budget, you might want to instead consider putting out bandit signs.
We've all seen these before - the 12" x 24" signs staked into the ground or tacked up on utility poles.
Yes, they're ugly, but they work.
You might also try "driving for dollars", which means getting in the car and driving neighborhoods to find vacant and/or ugly houses.
You then contact the owner by mail or phone.
Once you've found a great deal, you'll need to put it under contract.
If you don't already have a Purchase and Sales contract, I recommend using the "As Is" realtor contract used in your state.
Any realtor should be able to provide this to you.
In the contract, be sure to give yourself an "out" or "weasel clause" that will allow you time to find a buyer.
This could as simple as an inspection period, or a clause that states "subject to partner approval".
The latter essentially eliminates any risk.
If you can't find a buyer, you simply exercise your "out" by informing the seller that your partner didn't approve the deal.
One word of advice, though: I don't recommend that you ever string a seller along if you can't find a buyer.
As soon as you know it's not a deal, unless you can negotiate a better price with the seller that will make the deal work, inform the seller so they can move along to find another buyer.
Now that you've got the deal under contract, you need to find a buyer for the deal.
Hopefully, you already have a Buyer's List - a list of potential cash or hard money buyers along with their phone numbers and/or email addresses.
If you don't, this should actually be your very first step before you start looking for deals.
Here are a couple of ways to locate buyers.
First, advertise the deal on the Internet.
I've had good results by posting to free on-line classified sites like Craigslist and Kijiji.
Be sure to include pictures of the property.
Second, market the property at your local REIA group.
Bring along flyers to the next meeting that describe the deal and hand them out to everyone.
Third, you can try posting an ad in the newspaper, though I think the effectiveness of this strategy has decreased in recent years.
Finally, you can mail to absentee owners that have purchased rental property in your area within the last 6-12 months.
If they've bought before, you know they're somewhat qualified and may be looking for more properties.
Next, once you've found a buyer, you need to use the proper paperwork to put the deal together.
My favorite way to monetize a wholesale deal is through an Assignment of Contract.
This document allows you to assign your contract with the seller to your buyer; essentially, the buyer steps into your shoes in the contract.
You will be paid an Assignment Fee at closing.
For example, if you have a deal under contract with the seller for $50,000, and your buyer is willing to pay $60,000, then your assignment fee will be $10,000! Be sure to collect at least as much earnest money from the buyer as you've put out on your deal with the seller.
Never take less than $1,000 as a deposit from a buyer.
I recommend you have them make the check out to the title company or attorney office that will be handling the closing.
Finally, proceed to closing and collect your check.
Voila! You've just made some quick cash with essentially no risk and no money out of your own pocket.
Now, go back and do it again (and again, and again, and again...
).
Wholesaling is the process of finding a great real estate deal, putting the property under contract, and then selling that deal to a buyer that purchases with either cash or private money/hard equity.
The very first step to wholesaling is to locate a great deal.
Sufficed to say, entire courses have been written on this very topic, but for our purposes here, I will provide you with a few ideas to get you pointed in the right direction.
My favorite method of finding deals to wholesale is sending direct mail to targeted lists.
This entails mailing a postcard or handwritten letter (doesn't have to be an actual person's handwriting on each one, it could be photocopied, or use a handwriting font) to a targeted list, such as out-of-state owners, landlords filing for eviction, estate-owned properties, or foreclosures.
While direct mail is great, it does cost a few bucks, so if you're on a shoe-string budget, you might want to instead consider putting out bandit signs.
We've all seen these before - the 12" x 24" signs staked into the ground or tacked up on utility poles.
Yes, they're ugly, but they work.
You might also try "driving for dollars", which means getting in the car and driving neighborhoods to find vacant and/or ugly houses.
You then contact the owner by mail or phone.
Once you've found a great deal, you'll need to put it under contract.
If you don't already have a Purchase and Sales contract, I recommend using the "As Is" realtor contract used in your state.
Any realtor should be able to provide this to you.
In the contract, be sure to give yourself an "out" or "weasel clause" that will allow you time to find a buyer.
This could as simple as an inspection period, or a clause that states "subject to partner approval".
The latter essentially eliminates any risk.
If you can't find a buyer, you simply exercise your "out" by informing the seller that your partner didn't approve the deal.
One word of advice, though: I don't recommend that you ever string a seller along if you can't find a buyer.
As soon as you know it's not a deal, unless you can negotiate a better price with the seller that will make the deal work, inform the seller so they can move along to find another buyer.
Now that you've got the deal under contract, you need to find a buyer for the deal.
Hopefully, you already have a Buyer's List - a list of potential cash or hard money buyers along with their phone numbers and/or email addresses.
If you don't, this should actually be your very first step before you start looking for deals.
Here are a couple of ways to locate buyers.
First, advertise the deal on the Internet.
I've had good results by posting to free on-line classified sites like Craigslist and Kijiji.
Be sure to include pictures of the property.
Second, market the property at your local REIA group.
Bring along flyers to the next meeting that describe the deal and hand them out to everyone.
Third, you can try posting an ad in the newspaper, though I think the effectiveness of this strategy has decreased in recent years.
Finally, you can mail to absentee owners that have purchased rental property in your area within the last 6-12 months.
If they've bought before, you know they're somewhat qualified and may be looking for more properties.
Next, once you've found a buyer, you need to use the proper paperwork to put the deal together.
My favorite way to monetize a wholesale deal is through an Assignment of Contract.
This document allows you to assign your contract with the seller to your buyer; essentially, the buyer steps into your shoes in the contract.
You will be paid an Assignment Fee at closing.
For example, if you have a deal under contract with the seller for $50,000, and your buyer is willing to pay $60,000, then your assignment fee will be $10,000! Be sure to collect at least as much earnest money from the buyer as you've put out on your deal with the seller.
Never take less than $1,000 as a deposit from a buyer.
I recommend you have them make the check out to the title company or attorney office that will be handling the closing.
Finally, proceed to closing and collect your check.
Voila! You've just made some quick cash with essentially no risk and no money out of your own pocket.
Now, go back and do it again (and again, and again, and again...
).