Wholesaling Ebook Pdf


Published on

Published in: Business, Economy & Finance
  • We are colonizers and We have lonched new Project near by AJMER ROAD NATIONAL HIGHWAY. Good Project for INVESTMENT view

    Please get information from Here:


    Are you sure you want to  Yes  No
    Your message goes here
  • Great read!! Thank you for this valuable information...
    Are you sure you want to  Yes  No
    Your message goes here
No Downloads
Total Views
On Slideshare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Wholesaling Ebook Pdf

  1. 1. Getting Started with Wholesaling Written by REI Co-Founders Colin Andrews Egbert and Matthew Leitz
  2. 2. Getting Started with Wholesaling ~ RealEstateInvestor.com Table of ContentsWhat is Real Estate Wholesaling?........................................5Benefits of Wholesaling Real Estate.....................................7Is Real Estate Wholesaling Illegal?…………………………………………….…..9Costs of Starting a Wholesaling Business…………….………………………..11How Much Can You Make Wholesaling? …………….………………………….14How Does the Homeowner Benefit?………….…….…………………..….…..16Find Wholesaling Leads………………………………….……………………………..18Starting a Wholesaling Business by Bird Dogging…………………….…..20The Different Property Closing Methods……..………………………………..22How to Find a Buyer……………………………………...………………………………25The Wholesaling Deal: Step-by-Step………….………….……………………..28Assigning a Contract for Wholesale………….……………………………………30Salesman’s Tricks to Make a Sale…………..……………………………..…….32Potential Mistakes Every Wholesaler Makes………………………....…..34Dont Fall into Wholesaling Scams…………………………………………….….36Securing Your Leads Against Bad Buyers………………………..…….…….38Special Section on House Flipping!Flipping Houses with Hard Money Loans………………………….….…….…40Picking the Right Contractor for Your House Flip………………..……..42Cutting Costs and Increasing Profits on a House Flip…………..……..44House Flipping and the New FHA Seasoning Regulations..........…46Copyright © 2008 RealEstateInvestor.com 2
  3. 3. Getting Started with Wholesaling ~ RealEstateInvestor.com Legal Matters:ALL RIGHTS RESERVED. DISCLAIMER AND/OR LEGAL NOTICESThe information presented herein represents the views of the publisher andhis contributors as of the date of publication. Because of the rate withwhich conditions change, the publisher and his contributors reserve therights to alter and update their opinions based on the new conditions.This ebook is for informational purposes only and the publisher and hiscontributors do not accept any responsibilities for any liabilities resultingfrom the use of this information. While every attempt has been made toverify the information provided here, neither the publisher nor hiscontributors and partners assume any responsibility for errors, inaccuraciesor omissions. Any slights of people or organizations are unintentional.Copyright © 2008 RealEstateInvestor.com 3
  4. 4. Getting Started with Wholesaling ~ RealEstateInvestor.com IntroductionThey say the real estate market moves in cycles from a buyer’s market to aseller’s market and back again. You know there is only one kind of personthat can make a profit no matter what the market and that is the realestate investor. When you work as a wholesale investor you’ll be able to fillboth roles, buyer and seller, and make money in any market.Not a lot of people consider the benefits of real estate wholesaling so ifyou’ve stumbled upon this ebook then you are on of the lucky few.Wholesaling is a chosen money-making path that operates on a very simpleand basic business principle, buy low and sell high.In this ebook you’ll find out how to find those cheap real estate propertiesand get them under contract. Plus, since you can’t make money just buyingproperty, you’ll also learn where to find the perfect buyer for yourwholesale.Whether you want to work birddogging to seek out those perfect deals forother investors, work as a wholesaler finding cheap properties to buy andsell for a slightly higher price or to work as a house flipper buying cheaphouses and rehabbing them to sell at top dollar there is a place in the realestate market for your plans.Should you find the chapters in this wholesaling ebook informative feel freeto drop in at Real Estate Investor.com and sign up for a free membership tolife long learning and knowledge in real estate.Sincerely,Colin EgbertCEO Real Estate Investor.comCopyright © 2008 RealEstateInvestor.com 4
  5. 5. Getting Started with Wholesaling ~ RealEstateInvestor.com What is Real Estate Wholesaling?Real estate investing is an excellent way to earn profits or earn a living, butbefore you start wholesaling houses for a living you should take a little timeto learn what it’s all about.Wholesaling is in essence a business-to-business trade. You, as thewholesaler seek out a product for a certain ‘low cost’ price and then placethat product in the hands of your buyer who is often a hard money lender oranother investor.You seek out affordable properties and put them in the hands of otherinvestors or buyers. For your trouble you get paid a nice profit that is almostlike a finder’s fee. The process of wholesaling houses is one of the mostsimple and straightforward investing practices out there. The time from findto closing is also one of the shortest periods out of all the other niches inreal estate investing.Don’t Buyers Search Out Property Themselves?On the surface it may appear as if real estate wholesaling is a littleredundant. It seems like the buyer could easily search out cheap propertieson his or her own with no need for a middleman. These buyers do seek outproperties on their own, but they can’t find all of the great deals. The kindof buyer that seeks out wholesale deals is usually always on the lookout formore properties. These buyers are also very busy. Wholesaling buyers areconstantly working on properties, rehabbing them and selling them on thetraditional home market.Plus, who wouldn’t jump at a property that’s still offered to them at waybelow the market value?Wholesaling Versus House FlippingReal estate wholesaling and house flipping often confused in real estate, butthey are both slightly different practices.When you wholesale property you act as the middleman seeking out cheapproperties and connecting them with buyers for a slightly higher price or akind of finder’s fee, either way it depends on how you arrange the closing.Very little time is spent fixing up the houses or even placing them on thetraditional housing market.House flipping usually involves rehabbing a house with the homeowner orfixing it up enough to make it very ‘market ready’. There are also a lot ofopen houses and attempts to bring in a more traditional buyer who islooking to live in the home after purchase. House flipping can provide largerpay offs than wholesaling houses for a living as these cheap houses now sellfor full market value. It also involves a lot of extra work and it’s harder tosell a house at full value.Copyright © 2008 RealEstateInvestor.com 5
  6. 6. Getting Started with Wholesaling ~ RealEstateInvestor.comReal estate wholesaling is really a very simple business. You develop aprocess for bringing in wholesale leads, develop a buyer list and startassigning contracts to your buyers. It really is easy once you get the processstarted.Copyright © 2008 RealEstateInvestor.com 6
  7. 7. Getting Started with Wholesaling ~ RealEstateInvestor.com Benefits of Real Estate WholesalingThese days it’s incredibly tempting to start wholesaling when you arelooking for a long term investment or quick cash profit. Yet, it’s also a littlebit intimidating. Legal issues tend to muddy the waters for new investorsand there is even a sense of fear. No one wants to take a risk and lose theirmoney.Yet, that’s what people do with their money every single day. Invest in thestock market and you are taking a risk. Buy gold and you are taking a risk.Sometimes, especially with the stock market, that risk is even higher thanthe potential risks of starting a wholesaling business.Wholesaling BenefitsAs a wholesaling investor there are lots of benefits too. Wholesaling doesnot require a lot of money to get started; sometimes it requires very littlecash indeed for investors who are selling those properties almostimmediately to buyers. Plus, when you take advantage of real estatewholesaling you can learn as you go. No need for certificates or specialdegrees. Heck, even a real estate agent needs a license to sell houses, butyou won’t! There are even more great benefits and plusses to being a realestate investor.Basically, the benefits to starting a wholesaling business are: • Little to no start up money required (if done right). • No educational requirements, degrees or licenses needed. • Work when you want on houses that you want! • Pick the people that you want to work with and when. • Not time consuming. • Don’t need good credit. • Start earning now! • Small to large cash profits as soon as you sell. That’s cash in hand!What’s Your Place in Wholesaling?As a real estate wholesaling investor you are essentially the middleman. Youare the guy that finds the houses for sale and connects the buyers withthem. Once you start learning more about starting a wholesaling businessyou’ll find that there are plenty of buyers for wholesales as long as you lookin the right places. Plus, there are plenty of motivated sellers and it will beeasy to get them to come to you with the right marketing.When you find a property that the owners are motivated to sell you’ll lockthe owners into a purchase agreement and start looking for a buyer duringthe 30-60 day period before closure. If you’ve already gotten your buyer listbuilt up it may not take you very long at all to find a buyer. Then you justmark up the price a little on the sale. A wholesale deal done properly canearn you at least a few thousand dollars without putting down more than aCopyright © 2008 RealEstateInvestor.com 7
  8. 8. Getting Started with Wholesaling ~ RealEstateInvestor.comfew hundred in cash. This is because your buyer will pay the marked upprice of the property to your title company and the title company will justcut you a check for the difference. Barring that, you simply ask for afinder’s fee when you turn over the property to the buyer that you’vefound.Starting a wholesaling business has never been easier. If you are looking fora great career or a way to make some extra cash then real estatewholesaling is for you.Copyright © 2008 RealEstateInvestor.com 8
  9. 9. Getting Started with Wholesaling ~ RealEstateInvestor.com Is Real Estate Wholesaling Illegal?Real estate wholesaling is not illegal and it is not a scam. Know that nowand relax! You may be concerned that your potential new real estateopportunity is some sort of morally bankrupt scam. It is not.It is true that some real estate investors have taken advantage of thewholesaling process to scam the homeowners and their buyers. In additionthe new phenomenon called, house flipping, has given rise to manyinexperienced investors making lots of blunders and losing cash.The Bad ReputationMost of the bad reputation for real estate wholesaling has arisen frombuyers paying very over inflated prices for properties. In the past years ofthe inflated housing market it was incredibly easy for a buyer to get dupedor just get overly optimistic about purchasing real estate for way more thanit was worth. The buyer is then stuck with a property they can’t make aprofit on or a mortgage that they will have a hard time paying for.This happens when the real estate investor works with a crooked homeappraiser to value the property at more than it’s worth. Then the investorgets larger profits on a property and the buyer gets stuck with a loss ofprofits and even bad credit.Real Estate Wholesaling is Good!You and I both know that you’re not going to take advantage of the buyersor the sellers. In fact, wholesaling offers a win-win situation for everyoneinvolved in the deal.The homeowner gets to unload a property that’s costing them money, timeand energy in the wholesale deal. Plus, you can pay a little extra cash toany person referring the homeowner or the deal to you, creating an extrabenefit for the homeowner’s friend or family.The buyer gets a cheap property that they can still sell for a profit of theirown, live in or even fix up and rent out. This is because you’ll only bemarking up the price on that wholesale property a little bit.You, as the real estate wholesaler, will get to take home cash profits, forlittle work and without putting any money down on the property.Weasel ClausesA parting bit of house flipping advice is to be careful of weasel clauses.These are clauses that you can add to any ‘agreement to purchase’contract, but are written in such a manner that you can easily pull out ofthe property sale without worrying about the homeowner suing you for notclosing the deal.Copyright © 2008 RealEstateInvestor.com 9
  10. 10. Getting Started with Wholesaling ~ RealEstateInvestor.comThere are good reasons for inserting clauses in your purchase agreement.You may learn that the house needs major repairs that would screw up yourprofit margins. You may be looking for a specific kind of house for a buyerand learn that the property doesn’t fit.However, some clauses are more like ‘weasel clauses’ that allow theinvestor to pull out of a property sale for any reason on very little notice.Let the homeowner know when you set up the contract, that the purchase iscontingent on your being able to find a buyer. You’ll be surprised how manyhomeowners still want to sign that contract with you. The prospect ofselling their property is often enough for them to take the risk of theinvestor being unable to find a buyer.So, if you practice your real estate wholesaling business in an upright andhonest manner you have nothing to fear. Real estate wholesaling is only asgood or as bad as the investor making the deal.Copyright © 2008 RealEstateInvestor.com 10
  11. 11. Getting Started with Wholesaling ~ RealEstateInvestor.com Costs of Starting a Wholesaling BusinessThere are a lot of things to be responsible for when starting a wholesalingbusiness. You’ll be in charge of finding the leads, finding the buyers,bringing them together, finding a good title company and even drawing upappropriate contracts. Once you get the know-how of house flipping basics,these responsibilities become quick and easy. Yet, when you are startingoff, it’s a lot to take in.No one wants to further muck-up the process with worry about unpaid billsand trying to finance these wholesaling efforts. Yet, there are a few coststo be aware of when starting a wholesaling business.House Flipping Basics and Wholesaling BasicsWhen involved in wholesaling there are two levels of cost. The first is thecost associated with house flipping. The second is the cost associated withwholesaling. These are two separate, but closely related enterprises.You’ll have to decide as a real estate investor whether you’ll be flipping ahouse or just wholesaling it. This will determine your costs.Wholesaling CostsThe costs of starting a wholesaling business are really minimal. You’ll befocused on selling that house before the agreement to sell the housereaches its closing date.As soon as you get a client to sign the agreement to sell their house youshould be out the door or on the phone looking for potential buyers. Thesebuyers are usually other investors who like to buy houses cheaply and fixthem up for rental or the traditional real estate market. They may even behard money lenders who are looking to expand their business into newareas.You won’t be spending money to fix up the house, on insurance or evenplacing the property with a realtor if you can help it. Yet, you’ll alsousually be responsible for closing costs and even a referral bonus if someonereferred the property lead to you.Basic Wholesaling Property Costs: • Loan costs or closing feesYou may be responsible for one set of closing fees when you buy the houseand sell it to your buyer. This depends on how you set up the sale. Mostlikely the title company will just deduct the closing costs from your profitsbefore cutting you a check. • ReferralsCopyright © 2008 RealEstateInvestor.com 11
  12. 12. Getting Started with Wholesaling ~ RealEstateInvestor.comProperty wholesalers sometimes offer referral bonuses to people whoprovide them with property leads. This is usually about $500 to $1000. • AdvertisingYou’ve got to get your name out there. Advertising doesn’t need to costmuch, just as much as a ream of paper and some printing ink or as much asa radio spot and classified ads in the local paper. This is up to you. • Appraisal CostsDepending on where you are and how you close the deal you may need tohire an appraiser to look over the house and give you an estimate of itsmarket value. • Home inspectionWholesaling property buyers aren’t usually nervous about buying a homethat needs some work, but they may want to know what kind of work needsto be done before purchase. So, you’ll have to get a property inspector outthere to evaluate the damage so you can present the information to yourbuyer.House Flipping CostsWhen you decide to start house flipping as an investor your costs willinclude all of the above and more. House flippers often fix up the propertythey are trying to flip first and will even place it with a real estate agent totry and sell the property for top dollar.Basic House Flipping Costs: • Loan or MortgageHouse flippers can also buy the house they intend to flip. This can mean amortgage in your name or at least cash out of pocket that you’ll have tomake back on the sale of the property. • InsuranceSince the property will be in your name house flipping basics says you’ve gotto cover it! It can be difficult to get homeowner’s insurance for a wholesaleproperty. Your best bet may be to pick up Builder’s Risk Insurance. This isinsurance that’s intended for properties being built or in the process ofbeing remodeled. • Carrying CostsCopyright © 2008 RealEstateInvestor.com 12
  13. 13. Getting Started with Wholesaling ~ RealEstateInvestor.comThese are the basic costs of owning a home. You won’t have to worry aboutthem when starting a wholesaling business, but if you intend to be a houseflipper this is what you’ll be responsible for: o Utilities o Monthly Mortgage Payment o Property Taxes o Regular MaintenanceHouse flipping basics says; the longer you hold that property in your name,the more carrying costs you’ll have. The more cost you have, the more youhave to sell the property for just to break even. • Remodeling and RepairHouse Flippers will want to repair any damage to the cheap propertythey’ve just purchased. So you’ll be responsible for remodeling costs andrepair costs to the contractors you hire. • Realtor CommissionWhen the house actually sells on the market, you’ll probably have arealtor’s commission to pay. However, this usually comes out of the profitsfrom the sale of the real estate property. This is usually about 6% of theselling price.As you can see, house flipping costs are much higher than the basic costs forwholesaling a property. Yet, there are benefits to both options. Starting awholesaling business costs very little for the investor, and involveswholesaling a lot of houses for an average of $3,000 to $5,000. Houseflipping costs a lot of money initially, but promises a bigger payoff on onehouse. Some flippers claim to make anywhere from $50,000 profit per saleall the way up to a whopping half a million dollars (in rare cases when thehousing market was explosive!)Copyright © 2008 RealEstateInvestor.com 13
  14. 14. Getting Started with Wholesaling ~ RealEstateInvestor.comHow Much Can You Make Wholesaling Houses for a Living?Many real estate investors use wholesaling to supplement their income on aregular basis. However, if done right you can use wholesaling for yourentire income.You too can take advantage of wholesaling to supplement or complete yourincome, but just how much money can you bring in through wholesalinghouses for a living?Real estate wholesaling is different from flipping houses, so those who makemoney flipping houses should know that real estate wholesaling will bring inconsiderably less money. However, you’ll be able to make more deals as awholesaler so you’ll be bringing in that money more often.Real estate wholesalers can count on a glut of cheap homes being availableon the market. Even though you’ll only be bringing in a certain amount ofmoney per sale you’ll always have another sale around the corner. This cancertainly be called job security.Average Profit Per Wholesaling DealHow much money can you make wholesaling houses for a living as opposedto those who make money flipping houses?The average real estate wholesaling deal brings in between $3,000 and$10,000 in profits for the investor. This is a very small amount compared tothe profits of those who make money flipping houses. A house flipping dealcan bring in about $30,000 once the house sells to a buyer. Remember, thathouse flipping can take several months, up to a year to complete. Plus,you’ll be investing a lot of money and time in that one house flip.A wholesaling deal can close in just a few days, and I’ve heard of deals thatclosed on the same day as the investor found out about the property.That’s $3,000 in one day.Imagine closing 3 or 4 wholesale deals a month for just $3,000. 4 dealstimes $3,000 equals $12,000 a month wholesaling houses for a living. Now,take that $12,000 times 12 months in year and you get $144,000 a yearwholesaling house for a living!That’s an incredible profit compared to the measly $30,000 you’d makeflipping a house over the course of a year.The idea in wholesaling houses for a living is for your buyer to get themajority of the profit. You’ll be getting a kind of ‘finder’s fee’ for theproperty and the buyer gets to spend time fixing up the property andmarketing it for a larger profit of his or her own.Copyright © 2008 RealEstateInvestor.com 14
  15. 15. Getting Started with Wholesaling ~ RealEstateInvestor.comThis doesn’t mean that you have to let the properties go for a pittance.Don’t ever let that buyer talk you out of the fee you ask for assigning thecontract on a wholesale property or even talk you down to a drasticallyreduced fee. The lowest you should make on a real estate wholesale deal isabout $3,000. This is often on properties that you may only hold for a fewdays and don’t even spend a lot of time on looking for a buyer. Of course,all sales also depend on the house and its real market value.When Do I Get the Money?Any investor who wants to make money flipping houses will find that theydon’t actually get their profits until after the house is sold. After you find abuyer for a home it can take about 30-45 days for the mortgage company toget to the actual closing. You’ll have to wait until the title has clearedwith the title company. That means an investor can spend months investingtime and money into the house and not get paid until that property is sold.When you close a wholesale deal, it’s possible to get your profits within aslittle as a week. You’ll be lining up another real estate investor to buy thisproperty, so it’s likely that they’ll be able to pay cash for the house.A cash buyer is a great lead to have when wholesaling houses for a living.You can have the buyer transfer the funds to pay for the property right intoan escrow account with the title company. The title company processes thepaperwork and you can pick up a check with your profits in just a few days.When you are assigning a contract on a wholesale deal, there is potential foran even quicker payment. Just instruct the buyer to bring a cashier’s checkfor the amount of your fee to the closing deal. Once you assign thecontract, the buyer hands you the cashier’s check and you only have to waitas long as it takes for the check to clear with your bank.Compared to those who make money flipping houses, the concept ofwholesaling houses for a living is a great idea. You’ll close deals more oftenand get cash buyers for the wholesales, meaning that you’ll get more profitsfaster.Copyright © 2008 RealEstateInvestor.com 15
  16. 16. Getting Started with Wholesaling ~ RealEstateInvestor.com How Does the Homeowner Benefit?Real estate wholesaling has numerous benefits for the real estate investor.House flipping is a good way of earning large sums of money.However, there are also benefits for the seller in real estate wholesaling.The seller, being the homeowner who agrees to let you find a buyer fortheir property. In the case of house flipping, you may also purchase theproperty from the homeowner, but they still receive the same benefits.Sure, the seller is letting go of the property cheaply. Plus, you are alsogoing to make a profit just for matching the seller with the buyer. Thesepoints are actually benefits!Your Benefits are their Benefits!As a real estate wholesaling investor you’ll have to realize that the servicesyou provide the homeowner and the buyer are really benefits for both sides. • You are the one that does all the legwork, (of course, you don’t even have to do that if you market properly!) and you are the one with all the house flipping tips and secrets. This saves the homeowner lots of time! • Wholesalers usually end up buying unwanted or run down properties. Even though the homeowners are letting the property go for a low price, they have a good reason too. Most likely they were unable to sell the home on the traditional market and it’s become a money pit! You are helping them out by finding a willing buyer and making an offer they can live with. • You have access to the real estate wholesaling market and can serve as the all important link between that market and the homeowners. In other words, you bring the homeowners and the buyers together. Most of the time these homeowners wouldn’t know where to begin in order to sell their property for even a cheaper price, but you do! • No need to hire a realtor when you make a wholesale deal. So, you’ll even be saving the homeowners a real estate agent’s commission on the sale of the house. NOTE: Unless you’ve already hired a realtor such as when you are trying to flip a house on the traditional housing market.Providing Access to the Wholesaling Real Estate MarketPerhaps the most important benefit, your seller receives from this deal isthe chance to sell their property without a lot of effort. They provide youwith the necessary information. You decide how much everyone will needto make in order to be happy and work out the details with a buyer.Copyright © 2008 RealEstateInvestor.com 16
  17. 17. Getting Started with Wholesaling ~ RealEstateInvestor.comHomeowners willing to wholesale their property are folks that have oldrundown homes they can’t sell on the home market without first fixing upthe place. They are also landlords and bank attorneys with a lot of propertyand very little time. They are people who’ve just inherited a house andliterally have no desire for it or the carrying costs needed to keep the place.All of these people are homeowners looking for someone with a few houseflipping tips, contacts and some knowledge on wholesaling real estate tobuy their home cheap! They come away with a nice cash sum, you get aprofit, and your buyer still gets a cheap investment property.Copyright © 2008 RealEstateInvestor.com 17
  18. 18. Getting Started with Wholesaling ~ RealEstateInvestor.com Find Wholesaling LeadsMarketing is an important element for success in any real estate investment.In wholesaling property it’s essential for bringing in leads and sellingproperty. It’s very difficult to find enough homeowners looking to sellproperty without marketing. You can’t exactly go door-to-door askingpeople if they are selling. Plus, looking up properties in the countycourthouse will only let you know which homeowners are in debt and inforeclosure. Not which ones are looking to sell their homes.House Flipping Basics: MarketingSo, you need to draw the homeowners to you with marketing andadvertising. This isn’t as difficult as it sounds. Marketing your wholesalebusiness can be as simple as putting up a few handwritten signs in the areawhere you’re looking for wholesaling property. Or it can be as quick asplacing an ad in the local newspaper.Bandit SignsA lot of real estate investors use bandit signs to advertise houses for sale,but you can also use them to advertise your wholesaling business. Youshould ideally place these signs everywhere you can in your area.Signs are the easiest and most visible marketing tool you can use. Makesure that your signs are simple, with bold print or bold dark handwriting onthem.You can simply state, ‘I buy cheap real estate’ on your bandit signs, alongwith your phone number or even website. Or you can also write, ‘Will PayCash for Any House’ on your signs. These are great and simple ways ofdrawing in house flipping leads.FlyersIn addition, you can use your word processing program to create a simpleflyer with tear off strips at the bottom containing your contact information.Blanket your area with these flyers. Place them in laundry mats, ontelephone poles and even ask local businesses if you can place a pile ofthem on their check out counter. A great place to see if you can leave abunch of flyers is the local library. They’ll often have a bulletin board forthese kinds of items.Classified AdsAnother option is to place a simple classified ad in the local newspapers.Place your ad in the papers, the local shoppers and even in local real estatemagazines.The wording for these ads is the same as above. Tell them ‘I buy houses!’and provide your contact information.Copyright © 2008 RealEstateInvestor.com 18
  19. 19. Getting Started with Wholesaling ~ RealEstateInvestor.comNetworkingYou can also bring in wholesaling property leads by getting people to workfor you! A network is very easy to build up and usually starts by talking shopwith other local real estate types. You can contact all kinds of investorsand people involved with real estate to let them know you are buyinghomes.There is a long list of people you can contact to bring into your network: • Local Real Estate ClubsContact and join these local clubs. It’s a great way to meet like-mindedpeople, educate yourself and find both buyers and sellers. • RealtorsThere are plenty of realtors and they usually specialize in different kinds ofproperty, including foreclosures. Make contact with a few realtors and letthem know that you are looking to buy some cheaper houses that theywouldn’t normally be able to place on the market. You might be surprisedwhat they have on hand. • LandlordsLandlords are a great resource for both selling property and buyingproperty. Give them your card, tell them you’ve got properties on hand forcheap and that you are always looking to buy properties too. • Local AttorneysAttorneys are involved in all kinds of real estate from foreclosures toinherited properties. Let them know that you are looking to buy unwantedhomes. The attorneys may have clients who are looking to sell off someproperty on the cheap.Finding wholesaling leads is a cinch once you get started. All you need isthe proper advertising and a good network to bring the leads to you. It maytake you a little while to get the leads started coming in, but remainoptimistic and persistent and you’ll find more work than you can handle.Copyright © 2008 RealEstateInvestor.com 19
  20. 20. Getting Started with Wholesaling ~ RealEstateInvestor.com Birddogging: The New Wholesaling CareerFor those involved in real estate or who just want to make money flippinghouses there is a new real estate term in town. It’s called ‘bird dogging’and no, it’s not about breeding hounds.Birddogging is the practice of hunting down potential wholesaling leads forother real estate investors and getting paid a ‘finder’s fee’ for theassignment of contract or just the lead itself. This is a great way for thosejust starting a wholesaling business to learn the ropes.Many seasoned investors bring in a lot of their properties and wholesalingleads through the assistance of their ‘bird dogs’ who are new investors justlearning how to make money flipping houses.This practice of bringing in wholesaling leads benefits both the experiencedwholesaler by saving them a lot of time searching for leads and the newinvestor by giving them an easy way to learn wholesaling while at the sametime picking up some cash. Birddogging can even be considered somethingof a student/mentor relationship as the new investor picks up experienceand skills while starting their own wholesaling business.Finding a Seasoned Real Estate MentorAnyone who wants to make money flipping houses can start in birddoggingreal estate. When starting a wholesaling business like this though, you’llneed to find yourself a mentor or a real estate investor who is willing totake new investors under their wing in exchange for time and effort. Thesearen’t investors who charge a fee for mentoring. These are real estateinvestors who get you involved in the nitty gritty work of searching outwholesaling leads.You’ll be able to find such investors through the classifieds. Look out forads offering to ‘buy unwanted or foreclosed homes’. These are usuallyposted by the kind of investor who could use a birddog. Let the investorknow you are looking to get started in wholesaling by referring leads tothem. If they’re interested make sure you find out all of their particularssuch as; • What kinds of properties they prefer? • Where they are looking for property? • What they are willing to pay for the house? • What they’ll offer in finder’s fees?In exchange for working with a seasoned real estate investor to make moneyflipping houses you’ll have to be willing to do the legwork. That meansnetworking to find properties that homeowners are selling on the cheap,going out to look at the property and negotiating a potential price with thehomeowners. You may also work to get the homeowner under anCopyright © 2008 RealEstateInvestor.com 20
  21. 21. Getting Started with Wholesaling ~ RealEstateInvestor.comagreement to sell contract before approaching the real estate investor withyour lead.It only takes a few closings before you get the hang of the process, butyou’ll start out with a lot of false leads. This is one of the drawbacks ofstarting out as a bird dog. You may have to offer the real estate investoryou’re working with up to 20 leads before they’ll find one acceptableproperty.Learning about starting a wholesaling business takes a lot of time, but withevery lead that the investor turns down you’ll learn a little bit more aboutthe business. That investor will have to spend time with you to explain whya property isn’t acceptable. It may mean taking a lot of time out of theirday, but in exchange the real estate investor is getting someone else tosearch out properties for him or her. Hopefully, you’ll pick up the processquickly enough that you actually start to make money flipping houses andstick with the work.Over the course of your working education as a bird dog you’ll also pick up alot of other tips and real estate wholesaling knowledge. Just to get you tostart bringing in better wholesaling leads the investor will have to teach youabout: • Locating deals • Placing your own ads in the paper • Putting out bandit signs • Direct mailers • Negotiating deals • Assigning contracts and more.If you have little to no money to invest in starting a wholesaling businessbirddogging can be a good alternative option. Instead of paying a ‘guru’ forthe chance to ride along with him or her on all of his deals, you get aworking education with profits once you bring in an acceptable offer. Mostbird dogs bring in about $500 to $2,000 per wholesaling deal once it closes,so it’s still a good way to making money flipping houses at the start of yourreal estate business. As you gain more experience you’ll be able to branchoff to other investors and negotiat higher ‘finder’s fees’ for the wholesalingleads you bring in.Copyright © 2008 RealEstateInvestor.com 21
  22. 22. Getting Started with Wholesaling ~ RealEstateInvestor.com The Different Property Closing MethodsInvestors can easily tell you that there are plenty of distressed andunwanted homes available on the market. These homes generally getoverlooked by the buying public because they have some damage or are run-down and just because they aren’t being marketed to the traditional homebuyer market.When you do begin to flip properties you’ll find that there are three basicmethods to house flipping property. They are all useful and proven in theirown way. As a real estate wholesaler you may close deals using all threemethods or you may find that you prefer to stick to just one method.Retailing HousesThose starting a wholesaling business will know this kind of deal from thepopular television shows that have been on recently. The investor buys arun down property and fixes it up. This house is then placed on thetraditional real estate market and marketed to buyers looking to live in thehome.Investors involved in this type of house flipping will usually invest a lot ofmoney in the property to fix it up and remodel it. However, they can alsopurchase the house from the buyer or place it under contract.Basic steps for retailing a property include: 1. Finding a homeowner with property for sale,. 2. Hire a home inspector to evaluate the damage and rehabbing costs. 3. Making an offer on the property. 4. Buying the house from the homeowners. 5. Fixing up the property with partners or contractors. 6. Placing the property on the traditional real estate market. 7. Finding a buyer and selling that home!Hopefully, you walk away from the deal with a large chunk of profits afterpaying for the purchase of the home, the contractors, carrying costs and therealtor. The process of retailing houses can take anywhere between a fewmonths up to a year. It’s a very time consuming investment and ties up alot of money too. Retailing house flips is a practice best left to those withsome experience in real estate investment and enough money to invest.You can also pay cash for a house and flip it to another investor withoutbothering to fix it up first. This method really only requires that you havethe cash or credit to buy the house.Wholesaling with Simultaneous ClosingCopyright © 2008 RealEstateInvestor.com 22
  23. 23. Getting Started with Wholesaling ~ RealEstateInvestor.comThe simultaneous closing method on properties is an alternative method forhouse flippers. You don’t make a lot of profits but, a few thousand here anda few thousand there quickly adds up to large profits.Wholesalers will find a cheap house for sale and sell it to another investorfor a profit during a simultaneous closing.The steps involved in a wholesale with simultaneous closing are: 1. Finding a homeowner with property for sale. 2. Get them under contract with a an agreement to purchase. 3. Find a buyer through your network. 4. Get the buyer under an agreement to purchase from you. 5. Have them send funds to escrow account with your title company. 6. Bring the buyer to the closing with the homeowner. 7. You sign the purchase agreement with the homeowner. 8. In a separate room, you sign the purchase agreement with your buyer. 9. Submit both contracts to the title company. 10. Title company sees your buyer has already funded the escrow account. 11. They use those funds to complete both transactions. 12. You receive a check for the difference. Profits!The simultaneous closing is becoming very difficult to complete. It carries abad reputation with mortgage companies and title companies alike, becauseit’s one of the preferred methods for some involved in real estate fraud. Aninvestor will be hard pressed to find a title company willing to complete asimultaneous closing.Assigning the ContractThis method of starting a wholesaling business is also used by investors inother kinds of real estate deals, such as closing a short sale deal.You’ll assign the purchase contract to your buyer when closing the sale. It’sas easy as signing your name and/or assigns on the purchase agreement withthe homeowner’s. Later on, when you bring your buyer to the closing you’llwrite in the buyer’s name on the original contract.Basic steps of assigning a contract: 1. Find a homeowner with property for sale 2. Get them under contract with a an agreement to purchase. 3. Begin title work with title company. 4. Find a buyer for the real estate. 5. Get the buyer to sign an assignment contract giving you a ‘finder’s fee’. 6. Bring the buyer to the closing. 7. Turn over the purchase agreement to the buyer. 8. Collect your fee from the buyer.Copyright © 2008 RealEstateInvestor.com 23
  24. 24. Getting Started with Wholesaling ~ RealEstateInvestor.com 9. Provide the purchase agreement and a copy of the assignment contract to the title company.Assigning contracts is getting a little tricky these days. Mortgage companiesand title companies can insist that the only name on the purchaseagreement be that of the final buyer.Anyway you slice it, there are tons of different ways to close on a house flipproperty. You just need to find the right method that works for your needs.The rewards for your work and time involved in real estate investment aretruly consistent with the number sales and lots of profits.Copyright © 2008 RealEstateInvestor.com 24
  25. 25. Getting Started with Wholesaling ~ RealEstateInvestor.com How to Find a BuyerMarketing is very important in wholesaling property. Almost every kind ofreal estate investment relies on marketing to make successful deals. It’sthe advertising you use that draws in real estate leads and the networkingyou do that draws in the buyers for your property, especially when flippingreal estate contracts.Getting the Buyer’s Contact InformationThere are many kinds of advertising and networking you can use to find abuyer for your wholesaling property. These methods are best used incombination to ensure you hit the most potential buyers. Even if you sellthat property to the first buyer that contacts you, it never hurts to have abunch of other buyers waiting in the wings.When interested buyers do start contacting you about the properties, askthem if you can keep their information on hand in case you get other similarproperties in. Many real estate investors will gladly give you their name,phone number or email so you can contact them about other properties.Take the information you get and place it into a spreadsheet program ordatabase. This is an easy way to build up your buyer’s list so you won’thave to do as much advertising in the future.Advertising Ideas for Flipping Real Estate Contracts:Brochure BoxesIt’s always a good idea to place a brochure box on the lawn of the propertyyou currently have under contract. You can fill the box with very simplebrochures about wholesaling property that you’ve made at home. Mostword processing programs have brochure templates that you just fill in withthe proper information about the property.Don’t give out all of the information about the property though. You wantinterested buyers to contact you for more information on the property.However, you can state in the brochure that you are looking for buyersinterested in purchasing cheaper properties at 50% to 70% of the fair marketvalue.Bandit SignsReal estate investors can also make use of bandit signs when flippingwholesale property. Whether you are house flipping or just flipping realestate contracts you can place these signs in your local area with yourinformation on them.Your bandit sign information will change depending on what wholesalingmethod you’ll be using. Those flipping houses will state, ‘House for Sale’and the street address or even ‘House for Sale by Owner’. Bandit signs forCopyright © 2008 RealEstateInvestor.com 25
  26. 26. Getting Started with Wholesaling ~ RealEstateInvestor.comthose flipping real estate contracts will simply state, ‘Houses for Sale’ or ‘Isell cheap houses’ implying multiple properties available to investors. Youcan pull in a few handyman types with these signs who are looking for afixer upper kind of property.FlyersYou can sell a lot of houses with flyers, especially if you are flipping houses.Making flyers is as easy as making brochures. Many word processingprograms have templates for flyers that you can fill in the information on.On the top of the flyer in bold, print ‘cheap house for sale’ and provide alittle bit of information on one of your available wholesale properties.When interested buyers call in you can let them know that house hasalready sold, but you’ve got plenty of other properties on hand if they areinterested. Or you can take their contact information for later.Networking Ideas for finding a buyer:Local Real Estate Investment GroupsIt never hurts to be a member of the neighborhood real estate investmentgroup in your area. You’ll learn more about real estate and you’ll makecontacts with other investors. When you are flipping real estate contracts,be sure to see if any of the other investors in your group are interested inbuying that property.Rental Agencies and LandlordsCheck your local phone book for local landlords and rental agencies thatrent out homes. A quick phone call will help you break the ice with thepeople working at the company and you can also let them know that you arein the business of wholesaling property should they be interested in pickingup a few more rentals.If they aren’t currently interested in what you have to offer, remember toask if it’s okay to keep their information on hand so you can call or emailthem with other properties you get in the future. Also ask them if theyhave a certain time period when the do invest in new properties.Contractors and Local HandymenKeep the information for your local contractors, carpenters, electricians andhandymen. They have been known to pick up a few wholesaling propertiesto fix up and sell on the traditional real estate market for extra cash.You can also call local contractors in your area to see if they are interestedin picking up some real estate investment properties for cheap.It’s not difficult to find a wholesaling buyer with the right networking andadvertising strategies and these ideas are only a few of the many marketingmethods available to find buyers. You just need to keep your eye out forCopyright © 2008 RealEstateInvestor.com 26
  27. 27. Getting Started with Wholesaling ~ RealEstateInvestor.compotential sales and always remember to take down contact information toadd to your buyer’s list for the future.Copyright © 2008 RealEstateInvestor.com 27
  28. 28. Getting Started with Wholesaling ~ RealEstateInvestor.com The Wholesaling Deal: Step-by-StepThe process of real estate wholesaling can go very quickly if you know whatsteps to follow. It’s only when you are new to a type of real estateinvestment or a few pitfalls crop up that the process slows down.Investors that take the time to read house flipping guides and speak withother investors about the process will find themselves well prepared tocomplete a wholesaling deal step by step. In fact, writing down the stepsyou need in order to get that real estate wholesaling deal closed is a goodidea.The 8 Step Wholesale 1. Find the PropertyThere are lots of ways to generate real estate wholesaling leads. You canput up bandit signs, you can place ads in the newspaper, you can even calllocal bank and retirement attorneys to see if their clients have unwantedproperties they need to unload.Once you get a wholesale lead, you’ll have to speak with the homeownerover the phone. Collect enough information to decide if the property is agood wholesaling deal and set up a meeting with the homeowner. 2. Get the Homeowner under contractWhen you attend that first meeting with the homeowner, you need to gethim or her to sign a purchase agreement with you. This puts them undercontract to sell the home to you in 30, 45, 60 or even 90 days, depending onhow you’ve written the contract. That time period gives you the time youneed to contact other investors and get yourself a buyer for the property.Be sure to explain that you’ll be looking for a buyer during the closingperiod and intend to assign the contract to that buyer. 3. Take the contract to a title companyAfter the meeting with the homeowners, take a copy of the purchaseagreement to your chosen title company. Let the company know that you’llbe bringing in an assignment document and another copy of the purchaseagreement at the time of closing. Taking that document now, lets the titlecompany begin the closing process by doing a title search and ordering ahome survey. 4. Call potential buyersCopyright © 2008 RealEstateInvestor.com 28
  29. 29. Getting Started with Wholesaling ~ RealEstateInvestor.comHopefully, you used your time while waiting for wholesaling lead to build upa buyer’s list. Buyers interested real estate wholesaling deals are going tobe other investors. Become a member of your local real estate investorsgroup. Call local landlords and see if they need another house or two. Evencheck with your contractors and builders to see if they are interested in afixer upper. My other house flipping guides will have plenty about findingthose buyers. You may have to show the house to the buyers to get theirinterest. 5. Sign an assignment contract with the buyerWhen you get a buyer for your real estate wholesaling deal you’ll have himor her sign the assignment of contract document. This is a simple documentthat states you are giving up your rights to purchase the property you haveunder contract to the buyer. In exchange the buyer pays you a fee you’veboth agreed on before hand. 6. Collect your ‘finder’s fee’Have the buyer bring a check or cash to the meeting when he or she signsthe assignment document. After signing you can collect your fee from thebuyer and shake hands. It’s a good idea to also set up the closing dealbetween the homeowner and the buyer and attend the closing too. Thisway the homeowner feels more comfortable with a different person signingthe closing papers. 7. Have buyer sign the purchase agreement with homeownerAttend that closing deal with the buyer and make sure all the Is are dottedand the T’s are crossed. In other words make sure that the closing goessmoothly and the homeowner is paid or that the buyer has transferred fundsto buy the property into an escrow account with your title company. 8. Take a copy of both documents to the title companyAfter the meetings are over, take a copy of the assignment document to thetitle company so they know a different name will go on the title. You mayalso take over closing documents, but the buyer may prefer to drop thosedocuments off themselves.Most house flipping guides make too much of the process of real estatewholesaling, but as you can see the steps are easy. You only really need toknow what order to complete each step in and where to go for your nextpiece of information. Wholesaling is an excellent way to earn a livingwithout spending a lot of time on each real estate property.Copyright © 2008 RealEstateInvestor.com 29
  30. 30. Getting Started with Wholesaling ~ RealEstateInvestor.com Assigning a Contract for WholesaleThe Gurus always talk about how easy it is to start real estate wholesalingwithout using your own money. Yet, it always seems that they gloss overthe necessaries of actually doing so in real life. Flipping real estatecontracts seems like an easy move, but for the investor new to wholesalingthe idea is confusing. After all, how can you assign a contract when youdon’t even know what to do to accomplish it?Flipping Real Estate Contracts is SimplePerhaps the reason that so many real estate gurus gloss over the topic ofassigning a contract, is because it’s so simple. They just forget about it inthe larger scheme of real estate wholesaling.You’ll be surprised at how easy it really is to assign a contract to a buyerand what it all really means behind the legalese.Assigning a contract is the ‘turning over’ of your rights to purchase a pieceof real estate to another investor, your buyer. The contract that you assignis the original purchase agreement that you get the homeowner to sign.Don’t worry that you’ll have a hard time getting your hands on thedocuments and contracts required in real estate wholesaling. There areplenty of places to get purchase agreements and the other necessarydocuments for a real estate transaction online. These documents areperfectly legal. Just be sure to read over them to make sure youunderstand what they say. A real estate contract doesn’t have to use hardto understand wording to make a legally binding document.The Mechanics of Assigning a ContractOnce you have your contract, you’ll make a few adjustments to it. Begin byadding the phrase, ‘and/or ASSIGNS’ after all the spaces where you, thebuyer, sign your name on the contract. As well as including a small sectionin the contract stating you are allowed to assign your rights to this purchaseagreement to another buyer. Of course, you can also find contracts thatalready include the ‘and/or ASSIGNS’ sections if you look around.Getting set up to start flipping real estate contracts is as easy as that. Aslong as you let everyone know beforehand that you’ll be looking for a buyerto whom you can assign your contract.There is another document you’ll need to complete your real estatewholesaling deal. It is the assignment contract. This document is anessential for flipping real estate contracts.The assignment contract is the legal document between you and the buyerstating that you’ve agreed to give up your rights to the homeowner’spurchase agreement in exchange for a fee.Copyright © 2008 RealEstateInvestor.com 30
  31. 31. Getting Started with Wholesaling ~ RealEstateInvestor.comYou should also be able to find this document on the web. It’s not difficultto write up if you can’t. You’ll simply state in the document that you agreeto give up rights to the purchase agreement for the property at a certainaddress. Be sure to state: • your full names, • the name of the homeowner, • the selling price of the property and • the address of the property in your assignment document.In addition you’ll want to state the amount of the fee you’ll be receivingfrom the buyer in exchange for your rights to the contract. Don’t forget thedates, your signatures and a space for the notary to sign and validate yourassignment document.Mechanics of Flipping Real Estate Contracts After Signing…At this point you’ll write in the buyer’s name on the original purchaseagreement with the homeowner after the ‘and/or ASSIGNS’ sections. Thebuyer will sign his or her name on the purchase agreement.From here it’s your responsibility to make sure that a copy of theassignment contract makes it to the title company. So, they know thatyou’ve assigned the contract willingly and can complete title change.It’s not difficult to start flipping real estate contracts. You just need tolearn the process once, and from there will be able to repeat it. Investorscan assign a contract in real estate wholesaling, short sales and even thepurchase of a home at full market value. The possibilities are endless.Copyright © 2008 RealEstateInvestor.com 31
  32. 32. Getting Started with Wholesaling ~ RealEstateInvestor.com Salesman’s Tricks to Make a Sale!There are plenty of pluses in your favor as a wholesaling investor. Theeconomy is slow, houses have glutted the market and people need to sell.You’ll be able to take advantage of all of these potential sales with a goodbuyers list, some legwork and a few house flipping basics.Beyond your time and effort there are a few little salesman tips you can useto ensure that the homeowner sells with you or that the buyer wants yourdeal.Closing with the Buyer or the HomeownerAs with any real estate investment, you’ll need to close the deal. This canmean convincing the homeowner’s to sign with you or convincing the buyerof what a really great property you’ve got. Here are a few quick houseflipping tips and sales methods you can use to help close that deal.Empathy Closing:This is a great closing method to practice with homeowners. You discussthe homeowner’s situation with them and try to develop some empathy.Perhaps this house they are selling cheap is an inheritance from a relativethat recently died. Almost everyone has lost a relative and you’ll be able tounderstand what they are going through and develop that neededconnection with the homeowner.Order Form Closing:Sometimes the buyer or homeowner you are talking with may be hesitant tostart filling out paper work. You can turn over the form to the homeowneror buyer and just have them fill in a few spaces, like their name or address.You can say that you’ll fill out the rest of the information for them. Thenduring the course of the conversation just ask them those pertinent bits ofinformation and fill in the form as you go.Not For You Closing:This is a great closing method to use on buyers. You’ll create competitivefeelings by letting the buyer know that you’ve got a few other buyers linedup who would be interested in the property. You can also begin tocommiserate with the buyer if they start coming up with reasons that theycan’t buy right now. Say something like, ‘Oh you’re right, you probablywouldn’t want to invest in this area of the state. It is out of the way, but Ijust had such a fantastic offer on the property it’s going to go fast,’ or ‘Iunderstand you’ve got too many houses at the moment, this deal may suitanother buyer.’Staging the HouseApart from getting the contracts and documents signed, you’ll have stagethe house for a house flip. This isn’t necessary for those wholesalinghouses, but those looking to house flip will need to show the property toCopyright © 2008 RealEstateInvestor.com 32
  33. 33. Getting Started with Wholesaling ~ RealEstateInvestor.combuyers who are more interested in living in the house, than using it as aninvestment. • Purchase Surplus and Discount Appliances for the HouseYou’ll make the house more attractive to buyers if it already comes with itsown appliances. They don’t have to be brand new, they just have to work.House Flipping Tip: Most homeowners prefer electric appliances these daysto cut down on gas costs. • Use interesting but neutral colorsBuyers won’t want to move into a home with the same old white washedwalls and brown carpeting that they’ve seen every where else. Plus, it’smore work for them to have to repaint walls they can’t stand looking at.Pick out different colors for your walls, but keep them neutral so they alsowon’t crowd the senses of people looking at your home.House Flipping Tip: Pale tans warm a room making it cozy; while pastelblues and greens cool a room, making it seem larger. • Less is more when flipping housesA big mistake real estate investors make when staging a house is goingoverboard with decoration and furniture. An already vacant property needsjust a little staging because the buyer wants to visualize how the home willlook when they move their stuff into it. A table here, a chair there, someflowers and some curtains is all you really need.House Flipping Tip: Limit the amount of time you take staging an emptyhouse.Some wholesaling deals will be so easy it just seems to fall into your lap.However, most deals require a little work and access to a few great secrets.That’s why it’s a great idea to learn some of these little Salesmanship tricksfor really hooking those buyers and sellers.Copyright © 2008 RealEstateInvestor.com 33
  34. 34. Getting Started with Wholesaling ~ RealEstateInvestor.com Potential Mistakes Every Wholesaler MakesReal estate wholesaling is all about closing the deal. You may spend a lot oftime looking for a house to flip or you may spend very little. You may keepa house flipping guide by your side at all times, but when it comes down toclosing the deal, you need to be a good seller.There are plenty of way to close a wholesale deal or flip a house, but whatcatches the real estate investor off guard are the little mistakes orsometimes big mistakes that make people nervous about a sale. Beware offalling into these traps!Bragging Rights:They say a first impression is very important and that is especially true ofthe first meeting with your homeowners. The goal of this meeting is to getthem under contract with you to sell the house. During that meeting youwant to be polite and professional. That doesn’t mean bragging about thehundreds of deals you may or may not have completed already.House Flipping Tip: Coming off too slick when meeting with a buyer or thehomeowners before any contracts are signed can cause you to lose thatcontract.Greed:This is an especially problematic trait for house flippers. There is atendency to want to bring in just one big sell through house flipping aproperty. This desire for a large cash payoff can cause the investor to losethe chance to make any sale on the property. An asking price that is toohigh will be out of reach or unattractive for potential homebuyers.House Flipping Tip: Take the first good offer that is made on your realestate wholesale or house flip.Impulsiveness:Your best chances for making a profit in real estate wholesaling is to createa process and perform due diligence before signing anything. Someinvestors just want to jump right in on a house flip or wholesale. So, theysign that contract before figuring out if they can really make a profit ontheir investment of time and money. Take a little time to calculate themarket value of the property you are interested in compared to the pricethe homeowners are asking. Then, you’ll know what you can offer thehomeowners and what you can ask in finder’s fees from the buyer on awholesale.House Flipping Tip: Perform Due Diligence and develop a plan for yourhouse flip before signing.Real Estate PitfallsCopyright © 2008 RealEstateInvestor.com 34
  35. 35. Getting Started with Wholesaling ~ RealEstateInvestor.comYou can also fail to close a wholesaling deal through some common pitfallsthat crop up. The failure to make a closing can be very damaging to thehouse flipper, who has to cover the investment in the property and carryingcosts until it sells.Over budget:It’s easy to get over budget when fixing up a property for the house flip andthat can ruin your bottom line even when you sell the property. Keep atight rein on your remodeling budget during a house flip. That means payingclose attention to your contractors, being sparing with what you purchasefor the home and being vigilant about turning off utilities or remembering toturn off things like the lights when you leave the home.House Flipping Tip: Set a budget and stick to it.Lazy Contractors:It’s the proverbial contractor who is always claiming to be done in ‘twoweeks’ but he or she tends to run into the months late time period. Thereare a lot of great contractors out there, but also a few poor contractors.When you are remodeling a house to flip, you’ll have to do your researchbefore hiring a contractor. You’ll also have to be willing to fire thatcontractor if he or she isn’t up to snuff.House Flipping Tip: Research a contractor before hiring and don’t forget toask for references.No Inspection:Don’t just take the homeowner’s word for it. Pay to get an inspector tolook over the property before you enter the purchase agreement. This wayyou’ll have the information you need to fix up a property and won’t becaught off guard by any major structural problems. It’s also a good idea tohave the inspector’s report on hand for the buyer.House Flipping Tip: Pay the few hundred dollars up front to have theproperty inspected.Any of the above reasons can be the cause of your inability to close awholesaling deal. Stick close to this house flipping guide and you’ll findthat you are more likely to flip those houses successfully.Copyright © 2008 RealEstateInvestor.com 35
  36. 36. Getting Started with Wholesaling ~ RealEstateInvestor.com Don’t Fall into Wholesaling Scams!House flipping is a tempting prospect for new real estate investors. It offersthe lure of quick, large profits for anyone with the time and investment.Yet, the world of real estate wholesaling is also a temptation for fraudsterslooking to make an even quicker buck.As a new real estate investor it could be very easy to fall into one of thesewholesaling scams without realizing it. In real estate, just about anyonecan be scammed too. The mortgage companies, the homeowners, theinvestor, and even the buyer have all been caught in a fraudulent realestate wholesaling deal on occasion.Common Real Estate Wholesaling ScamsYou owe it to yourself to learn about potential scams so you don’tinadvertently enter one when investing in your own house flip. There arequite a few common real estate scams.Crooked AppraisalsOne in particular involves hiring a crooked real estate appraiser to appraisethe market value of a piece of property at way above or below the realvalue of the home. This kind of scam is used by homeowners, investors andeven crooked mortgage companies to make a higher profit on the sale of aproperty. The person who loses out here is the buyer, who ends up with apiece of property that they paid way too much for. Or the mortgagecompany accepting say a short sale price that’s vastly undervalued for aproperty.Don’t ever higher someone you know to appraise the property for a certainprice that you want. Or let them convince you that they can ‘appraise’ theproperty in your favor for a few extra bucks. It’s a slippery slope that realestate investors can easily fall down.Simultaneous Closing ScamsThe simultaneous closing is a great way for an investor without a lot ofcapital to get involved with real estate wholesaling. However, there issome potential for fraudulent sales here. Many of you many have alreadyread that title companies are refusing to take a simultaneous closing dealbecause of recent real estate scams in the news.It’s better to avoid the use of a simultaneous closing these days wheninvesting in real estate. You’ll still be able to make profits without a lot ofinvestment using other real estate wholesaling methods.Deals Too Good to Be True!This is a deal that gets a lot of new investors who like to attend freeseminars for the house flipping tips and advice. Often you’ll get a call outof the blue from a company that claims to be hosting a free real estateCopyright © 2008 RealEstateInvestor.com 36
  37. 37. Getting Started with Wholesaling ~ RealEstateInvestor.comseminar with lunch or food. Now a free seminar is a very common practicein real estate and normally a great idea to attend.However, the scammers running this free seminar will ask you to registerwith your name, address, phone and social security number. You shouldnever need to provide your social security number to register for a freeseminar.Giving this company your social security number allows them to look up yourcredit report and see whether or not you make a good potential mark. Thehigher your credit score the better, because it means you are able to get avery large loan.At the seminar these marks are approached by members of the ‘investmentcompany’ with a potential deal on a million dollar house that they claim isworth $2 million dollars.The investor that agrees to enter the deal is coerced into getting amortgage loan for $1.5 million dollars and the ‘investment’ company will doall the work. They claim that they can negotiate the selling price of this $2million dollar home to just $1.5 million. Then, you’ll be able to sell thehome for its full $2 million dollar value and make a nice profit.What the real estate investment company isn’t telling you is that the homethey’ve agreed to buy for you is only worth $1 million at full market valueand that’s what it really sells for. The investment company takes your loanand buys the house for $1 million then gets away with the excess $500,000.The mark is left with a home they paid $500,000 too much for!Tips to Avoid ScamsYou can become a successful investor in real estate wholesaling withoutfalling prey to a couple of real estate scams. All it takes is some duediligence and following these house flipping tips to avoid scams. • Don’t give your social security number to just anyone. You may need it to give to the bank and to place on paperwork for a title company, but that’s about it. • If you get a mortgage for real estate wholesaling, make sure you get your own separate mortgage to purchase the property. Don’t let anyone get the mortgages for you. • Perform due diligence on any property you invest in. This helps you find any anomalies and come to your own appraisal value.As a wholesaling investor you’ll serve yourself well to avoid scams and otherkinds of questionable deals. These listed scams are just a few of the manylessons to learn about real estate investment.Copyright © 2008 RealEstateInvestor.com 37
  38. 38. Getting Started with Wholesaling ~ RealEstateInvestor.com Securing Your Leads against Buyers!Another potential problem to beware of in real estate is the greedy buyer.You’ve been flipping real estate contracts for a few months now, making apretty good profit wholesaling houses for a living. As a real estate investor,you are still fairly new to the process but feel secure in your own personalniche. You’ve got a couple of regular buyers and have a good wholesalinglead coming in every couple of weeks.One day another more experienced investor approaches you to invest insome of your wholesales. You provide this investor with information on afew great homes, including their addresses, that you’ve signed contracts onand haggle a bit about the assignment of contract fee. Then you shakehands and part ways, with you expecting a check in the mail or a call backwith confirmation on one of the properties.What you don’t expect is for that interested investor to approach all of thehomeowners you had under contract behind your back and offer them aslightly better price to sell the property directly to him! All of thehomeowners agree and you’ve just lost a month’s worth of income, at least!What happened?Scam Artists Preying on New WholesalersThose thinking about wholesaling houses for a living will have to beprepared for the above possibility. As more and more ‘newbie’ wholesaleinvestors are entering the market, the scam artists in real estate investmenthave found a way to take advantage of them. If not taking your bestwholesaling lead from you and gypping you out of a finder’s fee at the veryleast, the experience can leave you wanting to get out of real estatewholesaling altogether.Flipping real estate contracts can be a great way to earn and income andnot all real estate investors are looking to cheat new and even practicedwholesalers out of their finder’s fee. It’s usually too much effort to trackdown a homeowner anyway, even with their address. There’s also the timeinvolved in giving the homeowner another sales pitch and convincing themthat it’s ‘okay’ to sell to someone else under your nose. It’s just not worththe finder’s fee of only a few thousand for most real estate investors.There are just a few bad apples that you need to guard against when youstart wholesaling houses for a living.There are a couple of different ways you can lose a wholesaling lead to adeceitful buyer. During an initial conversation you may let slip or justreveal without knowing better, the names of the homeowner you haveunder contract and their address. Armed with this knowledge the buyer isable to track down the homeowners and offer them a better deal to selldirectly to him or her.Copyright © 2008 RealEstateInvestor.com 38
  39. 39. Getting Started with Wholesaling ~ RealEstateInvestor.comAnother way to lose that finder’s fee is by simply neglecting to use anassignment of contract document when you close that deal. If you don’t putyour agreement down on paper how can anyone know it really happened?Should you decide to sue for your fee after that sale goes through and youdon’t receive any money, the courts won’t be able to award you the funds.The only thing the courts know is that you signed in the buyer’s name onthat purchase agreement with the homeowner.When flipping real estate contracts you’ll have to guard yourself againstthese little mistakes. A few simple steps to follow with every wholesalinglead can protect you from the occasional scam artist trying to trick you outof that finder’s fee.Protect Yourself When Wholesaling Houses for a Living • Create or find a good Assignment of Contract Document and use it for every deal you close with the buyer. • Start using Non Compete Non Disclosure (NCND) agreements if you find a lot of buyers are just going behind your back to negotiate with the homeowner. • Bring copies of both documents to every meeting, even the first one. • Safeguard the homeowner’s name and address during initial conversations or until the NCND agreement is signed. • Drop off a copy the assignment of contract document with the county clerk as soon as it’s signed. This ensures it comes up during a title search. • Also ask the buyer to reference your services on their HUD 1 form during closing. The closing agent/lawyer can simply reference you as a consultant. • Request the buyer make payment in the form of a cashier’s check when you both sign the assignment of contract document, instead of giving you your finder’s fee after closing. • Be above board and honest with all parties when flipping real estate contracts.Flipping real estate contracts need not be a scary practice and youshouldn’t be afraid of every new buyer that comes along. Wholesalinghouses for a living is a business-to-business trade and in this business youare bound to lose a few deals. However, with a few simple safeguards youcan ensure that you don’t needlessly lose wholesaling leads to the bad orgreedy buyer.Copyright © 2008 RealEstateInvestor.com 39
  40. 40. Getting Started with Wholesaling ~ RealEstateInvestor.com Flipping Homes with Hard Money LoansReal estate investors planning to flip houses will often need to take out aloan to purchase the property they are flipping. Some have enough moneyon hand to pay cash for a property or to use a line of credit, but it can takeseveral years before an investor is able to build up this kind of financialbacking. In the meantime you’ll have to make use of a loan or mortgage.Hard money loans are some of the best funding methods to use in houseflipping.Hard money lenders (HML) are often private investors or companies thatlend people money based on the property or business deal that money isgoing to secure. It’s a much faster way to get cash for a real estateinvestment than going through the red tape at the bank. Plus, the lenderswill usually look at the kind of deal you have or the property’s potentialresale value when giving a loan instead of your credit score.In exchange for the chance to get a quick loan, within just a few days, theHMLs will charge a higher interest rate on that loan and high originationfees.However, many flippers looking to make money flipping houses prefer thehard money loans because they’ll often fund up to 100% of the purchaseprice for the property.Common Questions about Hard Money Loans:What is the average interest rate on a hard money loan?Hard money loans can charge anywhere from 12% to 18% interest on theamount of the loan. For a loan with 18% interest that can be a 5%origination fee, plus 12% annually.Are there any other costs?Yes, most HMLs will require there to be a Title Policy, some insurance onthe property and a property appraisal. You’ll also need to put some moneydown on the loan. So, you should expect to pay the origination points, anydiscount points and other closing costs before getting the loan. You knowwhat they say, it takes money to make money flipping houses!Do I make Monthly Payments on the loan?Most of these loans are only going to be out for 3 months to a year. Duringthat time you’ll make interest payments on the loan. That is, only payingthe interest on the loan. At the time you sell the property you’ll repay theHML the full amount of the loan plus any remaining interest on the loan.Sometimes you can defer the interest to the end of the loan if you know theHML and have completed previous deals with them.Copyright © 2008 RealEstateInvestor.com 40
  41. 41. Getting Started with Wholesaling ~ RealEstateInvestor.comHow long is the hard money loan for?Hard money loans can vary in their length of time. When you take out aloan with the HML you’ll usually write a note for any where between 3 and12 months. It really depends on the lender and how much time you need tomake money flipping houses with these loans.Will they look at my credit?HMLs do check your credit, but they aren’t looking at your credit score.Instead they are looking at your history for evidence of bankruptcy,foreclosures, charge offs and listings from collection agencies. They justwant to know if you have a history of skipping out on paying back loans andbad debt.It’s possible to have a low credit score, but not have any bad marks on yourcredit history. So, hard money loans are a good option for young real estateinvestors and those who don’t typically carry a lot of credit.How soon can I get the funds?You can get access to a hard money loan within 3 days from them receivingthe final documentation for a loan application. This allows investors tomove quickly on a property deal that they find.What’s the most I can get on a hard money loan?HMLs will usually only give hard money loans up to 70% of the after repairedvalue (ARV) of a property. That’s about 30% less than the selling price ofthe property once you get it rehabbed and placed on the housing market.This practice helps ensure that an investor will be able to pay back the loanand still make money flipping houses.Hard money loans are a great idea for short term property investments.They are not a good idea for a long term real estate practices such as landlording because of the high interest rate. However, those investors lookingto make money flipping houses can easily use the hard money loan to theirbenefit.Copyright © 2008 RealEstateInvestor.com 41
  42. 42. Getting Started with Wholesaling ~ RealEstateInvestor.com Picking the Right Contractor for Your House FlipOne of the biggest concerns in house flipping is finding yourself a reliableand competent contractor for those remodeling jobs. Yet, many new andeven seasoned investors neglect this basic house flipping essential beforejumping into the real estate business.Lack of planning can lead to a loss of income, or profits, especially in thecase of wholesaling. You can save yourself a lot of hassle, money and timeby following these house flipping basics to finding yourself a greatcontractor for those real estate wholesaling jobs. 1. Don’t Take the Low Ball OfferSure, you are running a business and have to keep an eye on the budget, butdon’t automatically pick the contractor with the lowest offer. If most ofyour estimates fall within a close range and then there’s one contractoroffering a drastically reduced price, you’ve got to assume that there is areason for this. He or she isn’t just offering a great price out of thekindness of their heart. In fact, this contractor may have something of areputation in the area for bad work and is having a hard time getting jobsbecause of it. Or the contractor may be inexperienced and really has noidea how involved the work will be on your house flip.Real estate wholesaling, especially in house flipping, is about taking oldcheaper houses and selling them after fixing them up. Sometimes you fixthem up just a little or you invest a lot in them. No matter how involvedthe work, it should be completed properly. So don’t automatically pick thelowest bid. 2. Don’t Be Rushed When LookingHopefully, you’ll start looking at contractors before you actually have a lotof homes to start flipping. It’s not a good idea to be rushed when lookingfor a contractor. Call around when you decide to invest in real estatewholesaling. Speak with a few contractors to get an idea of theirexperience, prices and what services they offer.That way, when you get a real emergency on hand like termite damage, youcan just flip through your contacts to a couple of contractors you’ve alreadypicked out for the job and give them a call. 3. Don’t Get Pressured into Hiring a Certain ContractorHouse flipping basics says you should never feel pressured into hiring acontractor. If a contractor or salesperson starts trying to pressure you intosigning with them for the job ask them to back off. Remodeling orCopyright © 2008 RealEstateInvestor.com 42
  43. 43. Getting Started with Wholesaling ~ RealEstateInvestor.comrehabbing a house takes a lot of effort and you want to feel comfortablewith the contractor you’ve hired.It’s time to ask the contractor to leave if they don’t ease up on the highpressure sales routine. You should also be prepared to end the meeting ifthe contractor tries to get you locked in by saying that this is a ‘today only’offer or special. This is a common high pressure tactic designed to gethomeowners to hire that contractor now instead of looking around for otherdeals. 4. Don’t Pay HourlyEven when remodeling in real estate wholesaling it’s best to avoid paying bythe hour. You may think you are getting a great deal because thecontractor says a project can be done in so many hours, but that’s reallyjust an estimate. You’d be surprised how quickly those man hours add upwhen the project gets started.If there is anything you take to heart from these house flipping basics, itshould be the practice of paying a flat rate for the entire project with thecontractor. This also works well in getting a project done quickly. Thecontractor knows he or she will be getting the same price for completing thejob no matter how much time is put into it. So, why should they take theirtime dawdling on the job and stretching out their hours? 5. Don’t Hire Unlicensed Contractors!It’s illegal in most states for contractors to work without a license. You’llcertainly avoid a big mess in your real estate wholesaling project by askingthe contractor if he or she is properly licensed to do the job.Don’t just take their word for it either. Be sure you get a look at theirgeneral contracting license before hiring them, either a photo copy or thereal deal. You’ll be able to confirm that the contractor is currently licensedwith your state’s Secretary of State website or office.These five tips will take you far in your decision to pick a good contractor.No matter the size of your current real estate wholesaling project, large orsmall, you’ll save yourself a lot of time and money with the right guy.Copyright © 2008 RealEstateInvestor.com 43
  44. 44. Getting Started with Wholesaling ~ RealEstateInvestor.comCutting Costs and Increasing Profits on a House FlipAnyone wholesaling property will want to keep their costs down and profitshigh. In the house flipping game it’s all about how you set your budget andthe final selling price of the home. So, with the aims of keeping you, thereal estate investor, within budget here are several tips towards success. • Hold out for the Right HouseIt’s possible to be so eager to get into wholesaling property that you buy thefirst cheap house you can find. House flipping is about more than buying acheap house. It’s about finding the right cheap house. You want a propertythat is structurally sound, but needs a lot of cosmetic repairs. This way itwon’t cost you a lot of money to invest in that property, fix it up and you’llstill be able to sell it at close to current market value.Another house flipping tip to keep in mind here is to make sure you get ahome inspector to look over the property you’ll be signing papers on. Ahome inspection can ensure that the property is structurally sound beforeyou buy. • Look for Homes Needing Cosmetic RepairsThis was touched on by the first of the house flipping tips, but warrantsfurther explanation. You’ll want to seek out wholesaling property that is inneed of yard work and a good coat of paint. These are the kinds of repairsthat a homeowner doesn’t want to do themselves, when moving out ormoving in. Yet, they can greatly increase or decrease the value of aproperty.Plus, new paint on the exterior, fresh paint on the interior and some yardwork are all investments that can be done quickly and less expensively thanmajor home remodeling or rehabbing. • Avoid Mold!Mold is a deal breaker. Recent news has made the average homeownerterrified of possible black mold in a home. Plus, it’s really hard to get outof a home once it shows up, meaning more time and expense.When you see mold in a home you’re considering you may want toreconsider it. At the very least it’s bound to lower the price of the home. • Figure your Cost and Double itCopyright © 2008 RealEstateInvestor.com 44
  45. 45. Getting Started with Wholesaling ~ RealEstateInvestor.comBasic house flipping tips say that you should always double your estimate forfixing up a property. Keep that in mind when figuring how much you thinkyou can offer to buy a property and still come away with a profit.No matter how accurately your contractors estimate the cost of repairs,something inevitably happens to increase the final price. So, doubling yourrepair budget automatically creates a buffer zone for wholesaling property.If you come in under that amount at the end, then its just more profits foryou. • Contractors take timeThis isn’t so much a cutting costs tip as a warning. Most contractors havemultiple jobs going on at once or backlogged. If you decide to just pick acontractor out of the yellow pages one day he or she may not be able to getto work on your house for a few days or weeks, maybe even months. So,keep this in mind if you have a property that will need major repairs or arerunning short on funds for carrying costs. It may be better once you get lowon funds to just cut your losses on a property that still needs repairs byselling it as is. • Realistic ImprovementsA lot of investors wholesaling property make the mistake of going overboardin their improvements. They don’t take into account what homes in thesurrounding area are actually selling for and so invest a more money thanneeded in a property. This can be in time, effort and especially money.For instance, if no other homes in the surrounding neighborhood haveminiature water features in the backyard, there is no need for you to add aminiature water feature to your home’s backyard. It increases the price alot, but also requires a lot of care on the part of the buyer and really onlyappeals to a certain select group of homeowners.There are plenty of other house flipping tips you can follow to keep thosecosts down when wholesaling property. In fact you’ll probably come acrossa few of your own private tips and ideas as you start flipping more houses.Hopefully, the above tips are a good start for your burgeoning real estateinvestor’s tool box.Copyright © 2008 RealEstateInvestor.com 45
  46. 46. Getting Started with Wholesaling ~ RealEstateInvestor.com House Flipping and the New FHA Seasoning RegulationsThe popularity of wholesaling is evident in the number of house flippingshows we see on cable tv. Many new and seasoned investors see houseflipping as the perfect way to grow one’s investment and even earn a living.However, it’s also being misused by fraudsters.This is a practice that is casting a pall on anyone investing in flips and evengiving out house flipping advice to other investors. The number of first timehomeowners losing their homes because they paid too much for flippedhouses is such that there are now some FHA rules in effect to protect themarket.You can bet that these new rules are wreaking havoc on those honest realestate wholesaling investors like us.How Did These Rules Come Into Effect?The US Department of Housing and Urban Development (HUD) noticed thatthere were quite a few homes going into foreclosure in past years. A lot ofthese homes were owned by first time low income homeowners. Most ofthese homeowners obtained government backed loans such as from the FHA,VA or Fannie Mae. These are all loans that are protected by PrincipalMortgage Insurance (PMI) that is provided by HUD.So when the homeowners ended up losing their homes because theycouldn’t afford the over inflated prices or deal with major repairs, you canimagine who ended up covering the cost of that mortgage? HUD!This is why HUD has passed these FHA rules which are really clamping downon real estate wholesaling. The rules in their entirety are published in adocument called, ‘Prohibition of Property Flipping in HUDs Single FamilyMortgage Insurance Programs; Final Rule; 24 CFR Part 203, Doc. No. FR-4615-F-02.’ You can usually obtain the entire document from thegovernment’s Federal Register Site.However, the main points of the new FHA rules are basically: • Real estate wholesaling properties resold within 90 days of their last purchase won’t be able to get financing with FHA mortgages covered with HUD insurance. • Anyone reselling a property between 91 and 180 days of purchase has to document the resale value if it’s a certain percentage higher than the last purchase price. • If the property is being resold between 91 days and 12 months of its last purchase, HUD may require that the mortgage lender get additional documentation of the property’s value. This is if its resaleCopyright © 2008 RealEstateInvestor.com 46
  47. 47. Getting Started with Wholesaling ~ RealEstateInvestor.com value is 5% or greater than the lowest sales price of the property in the last year.As you can plainly see, these FHA rules make it difficult for real estateinvestors to ‘flip’ a property by selling it to anyone with a lender using HUDcovered insurance. These rules are also commonly referred to as ‘seasoningissues’. You’d have to hold the property for at least three months beforeyou could sell it to a buyer with financing of this type.There are only three standard exceptions to these rules. They are: 1. The resale of HUD real estate owned property. 2. The resale of a property purchased by an employer for the relocation of an employee. 3. The sale of a newly built home by the builder.These exceptions don’t apply to real estate wholesaling. However, thereare plenty of other buyers in the real estate sea and you’ll find that you canstill make big profits in real estate wholesaling or the still popular practiceof house flipping.House Flipping Advice for dealing with Seasoning: • Document all costs and profits with each real estate wholesaling deal. This means keeping all of your receipts and creating a personal record of whom you paid for what and what kinds of improvements were made to each property. • Sell only to other investors. A lot of real estate wholesaling investors simply avoid the FHA rules by selling their properties cheaply to other investors who tend to pay cash for the property rather than looking for a homeowner who will seek a mortgage. • Sell to Homeowners with Non-Conforming Loans. Even though lenders with HUD covered insurance are unable to provide mortgages on your house flips, there are still a lot of other mortgages out there that don’t require or use PMI. These are often more traditional loans made to homeowners who can make large down payments and are more likely to purchase a very nice remodelled house anyway. So, if you are into buying cheap houses and investing a lot to really fix them up, keep this bit of house flipping advice in mind. • Lease-to-own your house flips. The FHA rules only apply to recently purchased homes. If you opt to let your new or first time buyer lease- to-own the property instead of going after immediate profits you’ll avoid seasoning issues entirely. Since, the homeowner won’t need to worry about getting a mortgage to pay off the property for a few years; you don’t have to worry about them being denied because the property was recently purchased.Copyright © 2008 RealEstateInvestor.com 47
  48. 48. Getting Started with Wholesaling ~ RealEstateInvestor.comEven though the FHA rules are stiff, there are still plenty of ways to flip ahouse. You could say that the rules help both real estate wholesalinginvestors and HUD by keeping those fraudulent deals out of the market.Copyright © 2008 RealEstateInvestor.com 48