Monday, July 23, 2012

Buying Wholesale Real Estate

How can you buy wholesale real estate from a wholesaler? First, I have to assume that you know the basics of investing in real estate and you understand cash flow formulas and ROI calculations. Without knowledge of these, you might as well close this page and read a comic book instead. Since conventional financing for investors has all but dried up, I also have to assume you have cash. Without cash, you cannot buy from wholesalers. Let me explain how wholesalers work.

Hey, why should you read this and listen to me? Well, I am a wholesaler who has had my share of flaky "investors" who promise it all and deliver little! My idea is to under-promise and over-deliver. When I have a wholes "deal" it REALLY IS a "deal" for the end buyer(investor) with cash.
A wholesaler is like a bird dog. He or she scouts around their target area do "deals". When the deal is found, it is put under contract in one of several ways. One way is using a short one or two page agreement that is "assignable". No matter the agreement, it must be assignable. The end result is that the wholesaler will be assigning their contract with their seller to you. You would fulfill the buyer's role and pay an assignment fee to the wholesaler. Now there are many variations to what I just described, but suffice to say these are the basics of every wholesale deal.

Your first step is to find one or more wholesalers out there and give them the details of the properties you intent to purchase. Details like specific target neighborhoods, overall condition of the property, BR, BA, etc. Of course a price range would be helpful; you can't just say "as low as possible". How do you find a wholesaler? Well, it's easier than you think. There are probable more wholesalers in your backyard than you realize. Do you ever see those, "We Buy Houses" yellow signs on poles or in someone's yard? The sign placer is most likely a wholesaler. Ever see google ads for "We sell houses cheap". The ad placer is most likely a wholesaler. Craigslist house wanted ads are most likely wholesalers. Craigslist house for sale by owner can be wholesalers with deals ready to buy. Use your imagination and find someone you can work with.

When you find a wholesaler, you need to be sure that you can work together to reach your mutual long-term goals. Find out what the wholesaler's goals are for his business and the plans he has to move from wholesaling, if any. A good wholesaler is in it for the long haul and wants to build a successful business out of wholesaling.

Like you, a wholesaler is out to build long-term relationships with his buyers. You should be looking for a wholesaler to build a long-term relationship with also. One time purchasers are not the wholesalers' ideal buyers. The first couple of deals you work together with a wholesaler and use the Ronald Regan method to determine the depth of the ongoing relationship; that is "trust and verify". You need to trust your wholesaler to tell you truthfully everything you want to know that he knows. You also need to verify any information you receive from a wholesaler for accuracy, oversights and judgment errors. You don't want a wholesaler who tells you that they know this neighborhood and the house is worth 0k using Zillow's inflated or old estimates when in reality the area only supports 0k properties. Use your own reliable internet resources and if needed, boots on the ground to verify what you are buying. If you by a dud, don't blame you wholesaler; he most likely is a brand new "investor" himself just looking to get started. It is your responsibility to know what you are getting in to. Trust builds on itself and it's a two-way street. You need to also be trustworthy and buy the property when you say your going to and pay what you agreed to pay for it.

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