Welcome!
My name is Brett Snodgrass, and I want to officially welcome you to the Simple Wholesaling Family and congratulate you on downloading our very first Simple Guide!
If you take the information we teach you in our Simple Guides and actually apply it to your business, you will be well on your way to a 6 figure income and a truly fulfilling life in no time!
In this Simple Guide, you will find everything you’ll need to get started successfully as a real estate wholesaler.
My Story
Before we move on, I first want to share my story and how wholesaling completely changed my life.
I’ve been a real estate investor for over ten years. When I first got started in real estate, I had just graduated college with an early childhood education degree and was substitute teaching. In my first year of substituting, I had only made $10,000.
I was broke!
I hated my job!
I had no purpose in my life whatsoever and quite frankly, I was miserable because I knew the path of a teacher wasn’t the right fit for me.
Since I was making such little money at the time, I had to live out of my parents basement, and in a failed attempt to make something of myself, I decided to start a side business selling bootleg DVD’s on the internet.
I had no idea how illegal it was, and I eventually received a cease and desist letter and was taken to court and sued for everything I had (which wasn’t much at all).
So, instead of taking the career route, I began looking for ways to become an entrepreneur and take control of my time (legally). I began flipping anything I could get my hands on from cars to stereo systems on eBay.
My search eventually led me to something called real estate investing, and boy, did it end up changing my life forever!
When I first started, I didn’t know anything at all about real estate investing. But I simply decided, “You know what, I’m just going to go ahead and buy a house and see what happens.”
I found this house in Youngstown, Ohio with an asking price of $9,000. At the time I only had $5,000 in my saving account but my father decided to match me, so I took all the savings I had, partnered with my Dad and bought this house for a total of $10,000 including closing costs.
That $10,000 was literally all the money we had to invest, so with no money left, we had no idea of what to do next. So I thought to myself, “What if try I to sell it for a little bit more than what we bought it?”
So we did just that and listed the property for $15,000 and made an incredible $5,000 profit between the two of us.
I was hooked!
I had just made half of my yearly salary in less than one week!
The moment that happened, I remember sitting back and saying, “If I could do this with one house, what if I did this with one hundred houses?”
So that’s where it all started.
I slowly began building up working capital and now 10 years later, I have a team and have scaled it to the point where now, we routinely average $150,000 to $200,000 in any given month.
I don’t tell you these numbers to boast; it’s all to the glory of God. I share these numbers so you can see that this is possible for you and your business as well.
Real estate wholesaling has literally been my ticket to creating the life of my dreams and my prayer is that this Simple Guide will help you get started and encourage you to use real estate wholesaling to do the same in your life.
So, without further ado, let’s get into it!
What is Wholesaling?
When we look up the definition of the word “wholesale,” dictionary.com defines “wholesale” as, “the sale of goods in quantity, as the retailers or jobbers, for resale (opposed to resale).”
So, when you are a person who sells products to businesses (retailers) and not individuals, you are selling them products they can turn around and use to make money, right?
Absolutely!
In short, real estate wholesalers are essentially matchmakers or the “middle-men” between the property and the investor buyer.
Wholesalers buy extremely cheap properties from motivated sellers, and then turn around and sell those properties for a slightly higher cost, but still at a significant discount leaving room for the investor buyer to turn a great profit.
You just get a cheap property and sell it. It’s that simple!
The Three Different Methods of Real Estate Wholesaling
Now that you understand what wholesaling is, let’s dive into the three most common strategies used to wholesale real estate.
1. Assignments
This method is probably the most popular wholesaling strategy because it doesn’t cost you any money out-of-pocket and there’s little to no risk involved.
This strategy consists of getting a property under a purchase agreement between you and a motivated seller, and before you close, you find an investor buyer to sell the contractual rights to for a fee.
Here’s an example. The motivated seller wants $10,000 for their property. You write a purchase agreement with the seller for $10,000. During your “due diligence” period, you turn to your buyer’s list and offer to assign that contract for a fee of $5,000.
The investor buyer purchases the property for $15,000 and boom, you just made $5,000 on a wholesale deal!
Sounds pretty simple, doesn’t it?
Now there are so many amazing benefits when taking advantage of the assignment strategy!
You have very little money into the transaction (if any at all), and you have very little risk because you can normally find a way to back out of the deal if needed.
However, here at Simple Wholesaling we don’t personally like this type of wholesaling for a couple of reasons:
Legal Gray Areas
Depending on your market, there seems to be a lot of grey area legally on whether you can wholesale through assignments without a real estate license, or at all for that matter.
Many argue that you’re essentially acting like a licensed agent because you’re overseeing a transaction between a buyer and a seller for a profit. If you’re marketing a house for sale that isn’t technically yours, you could run into being accused of fraud. If you have your real estate license, then it’s cleaner to do assignments but you still could run into some trouble depending on the laws of your state.
We’re not lawyers nor are we providing legal advice, but there may be a big legal risk here, so if you decide to assign contracts, I strongly suggest sitting down with a real estate attorney in your market and have them write up your purchase agreement and have them advise you on the best way to go about these type of real estate transactions.
It Could Be Considered Dishonest
If you tell a motivated seller by contractual agreement that you’re going to buy their house and someone else purchases the property instead, that can easily make a seller freak out and back out of the deal.
In the same token, if I tell an investor buyer that I have a deal and the motivated seller decides to stop the interaction between us, it’ll destroy my reputation with the buyer and I’d come across as a major flake.
It Can Get Very Complicated!
Our company is called Simple Wholesaling for a reason. We love to keep things as simple as possible.
You lose control because you’re dealing with multiple people and multiple prices.
Are you guys familiar with the daisy chain?
If not, here’s an example of a daisy chain, I get a property under contract. I assign it to Joe, then Joe assigns it to Tom and then Tom assigns the contract to Harry.
We call this a daisy chain because that’s what it is, a big chain that can get very messy, very fast! If something falls through, it breaks the entire chain and everyone involved gets frustrated and upset.
But don’t let this scare you.
Assignments are a fantastic way to wholesale real estate. There are thousands of wholesalers who use assignments as their primary method every single day. If you do it right, you shouldn’t have anything to worry about.
2. The Double Close
The double close method is used when you purchase a property and then sell it to an investor immediately — within minutes!
At closing, you first sign the documents with the motivated seller, and then later in the same day, you meet with the investor buyer and sign the closing documents with them.
The success of double closing ultimately depends on timing and the biggest risk using this method is that you have no control of the transaction!
You’re dependent on the motivated seller and the buyer, and if either pull a no show, things could get hectic and your reputation could suffer.
If done correctly, double closing can be an incredible way to wholesale real estate.
3. The Simple Close
The final way to wholesale real estate, is something we like to call the “Simple Close.”
This is actually what we do at Simple Wholesaling because in my opinion, it gives you the most control over the transaction and is legally the safest and easiest way to wholesale real estate!
In a Simple Close, you simply buy the property from the motivated seller, with your own funds, close on it, then once you fully own the property, you market it and sell it to an investor buyer.
It so simple!
I like this strategy mostly because I don’t have to worry about the motivated seller backing out, the investor messing up my loan arrangements if they back out, or the law because I’m simply selling properties that I own.
Now, the downside to this type of wholesaling is that it takes a lot of working capital to function but don’t let this discourage you.
I started with only $5,000 and within a year, I was operating as a full-time wholesaler, so it is definitely possible!
Each type of wholesaling has it’s pros and it’s cons and ultimately, you’ll need to decide which path is right for you.
We will dive deeper into strategies on how to properly assign contracts, the double close and The Simple Close in future Simple Guides.
The Business Model Breakdown
Regardless of which wholesaling strategy you choose, there are three essential components within a wholesaling business–acquisitions, dispositions and transactions.
When you boil it down to the lowest common denominator, this is the skeleton of all things real estate wholesaling and so let’s go into depth on how to successfully do each part!
Acquisitions
Acquisitions simply focus on “acquiring” the property. This is done by generating leads, qualifying leads, dealing directly with motivated sellers and converting leads into deals.
Here are three key skills that will make you successful in acquisitions:
- Analyzing Deals
You must know how to analyze deals!
One of the very first steps in becoming a successful real estate wholesaler, is learning how to run comps and analyze a lead correctly.
When the leads start flowing in, you must know how to calculate the numbers to determine what price you can actually offer the motivated seller while leaving room for your investor/buyer to make a profit as well.
We’ll dive deeper into how to analyze deals a bit later.
- Rapport Building
You must know how to genuinely build relationships with motivated sellers to establish trust and legitimately help people.
Our role as wholesalers is to help motivated sellers get out of their distressful situation. In order to get our motivated sellers to open up about their situation, we must genuinely build rapport because it will ultimately give you an idea of how “motivated” the seller actually is.
Which leads me to my next point…
- Sense of Motivation
Now, as you begin acquiring leads on properties, you’ll begin to notice that a lot of people interested in selling their properties aren’t truly motivated so it’s critical that you learn to sense how serious they are about selling their property.
Additionally, you must understand purchase agreements. We have a very simple 1-page purchase agreement with our motivated sellers and once it’s signed, we pass the purchase agreement to our transaction coordinator for processing. I would highly recommend consulting with a lawyer in the state of your market to help draft up a purchase agreement.
Dispositions
Dispositions focuses on “disposing” or getting rid of the property. Dispositions involve everything from selling the property, building relationships with buyers and marketing the property.
Here are three key skills that will make you successful in dispositions:
- Rapport Building
Real estate is all about relationships!
Like acquisitions, when you’re trying to sell your property, you must have a sense of the type of buyer you are working with. You must be able to grasp whether you’re working with an investor who is looking to make a one-time deal or a long-term repeat buying investor, and then build the relationship accordingly.
- Marketing
If you want to sell your property, you must market it to your buyers and potential buyers.
We post our properties on our website, our local real estate investing association’s property list and on Craigslist.
Here’s a little secret…
We post our listings on Craigslist three times a week, then we delete each post and then publish the listing again as a brand new post. By doing this, we noticed the response rate and the ranking seemed to be better when it’s a fresh post as opposed to a refreshed post on the back end of Craigslist.
We also send new properties and property updates to our buyers list which is processed through an email marketing software called Aweber.
In addition to that, we also place 2 to 3 signs in front of each of our properties. We like to keep our signs simple and straight to the point:
- Motivated Seller!
- Asking (insert asking price)
- Phone Number
It’s super simple and it works!
You’d be surprised how many deals we’ve closed from displaying signs out in the front yard.
- Understanding Closing Procedures
It’s critical that you understand the various wholesaling closing strategies out there (Assignments, Double Closing, The Simple Close) because you’ll need to communicate this in your purchase agreement with the investor buyer interested in buying the property.
If you’re looking for software to use, we use DocuSign which allows the buyer to sign the purchase agreement via email.
Once we receive the signed purchase agreement from the investor, we then load the document into our internal software and notify our transaction coordinator, who then processes it with our title company.
Here’s an example of our typical terms:
The buyer pays all closing costs, including title insurance as well as assumes responsibility for property taxes due May 2017 (this is weird in Indiana because we pay taxes in the rears). We try to limit the inspection period to 5 days or less to avoid back outs. We also encourage our potential buyers to do all due diligence before signing a purchase agreement and because we close quickly (shooting to close Tuesday or Friday of the following week). We typically waive the need for earnest money however we do require earnest money if the investor has backed out on a deal before or if the close date is two weeks out or more.
Transactions
Now this is where you get paid!
Transactions focuses on all things related to closing documents, purchase agreements and title companies and involves scheduling all closings between our company, the buyer, the seller and our title company.
Here are three key skills that will make you successful in transactions:
- Understanding Closing Procedures
You must understand the relationship between the title company and purchase agreements. They also understand how to coordinate schedules and how to write up closing documents.
We do all of our closings every Tuesday and Friday, so our transactions coordinator is responsible for going to the title company each week on those specific days.
Sometimes we conduct email closings in which the transactions coordinator handles all of the coordination for that as well.
- Strong Organizational Skills
Organization is key!
There will be times when you’re closing multiples deals at a time, so organization is critical because you’ll handle all of the paperwork for each and every transaction and if you want to close fast, you must maintain organization to ensure each deal is closed properly and in a timely fashion.
- Landlording
Now, many of us chose wholesaling because don’t want to deal with tenants and toils but if you are selling a property that is currently tenant occupied, you will have to handle collecting rent, processing evictions and other tenant related issues.
My Story
Speaking of closings, I want to share a crazy story with you…
Once, I bought a house and when I went to check it out it wasn’t there. We sometimes buy houses without ever seeing them in person. Of course we look at pictures though, which was the case with this particular house. I bought it on a Monday after only looking at pictures.
On the Wednesday after the purchase I drove down to check out the house. As I got closer and closer to the address, I realized what I bad area it was in and I began to smell something in the air. I arrived at what I thought was the address but didn’t see a house there so I kept driving around a little. Realizing that I had the correct address I drove back to where the house should have been and it dawned on me what the smell was… smoke.
As I got out of my car I saw what should have been the house that I purchased, instead there was a heap of burnt rubble. I called the agent and the fire department to get the details of what happened. It turns out, that basically I bought the house on Monday and it burned down on Tuesday, before I could insure the property, of course.
I tell you this story because even though I have had many successes in this business, I have had some failures as well. There was a silver lining to this story though, even though I lost all of my money on this house. There was a church across the street that had been looking to add more parking spaces, so I was able to donate the land to them for their parking lot. I guess God had a plan for this property all along.
If I could go back and coach myself on what to do starting off, this is what I would do first…
Get a Mentor
Finding a real estate mentor is the best thing you can do because it decreases the number of mistakes you’ll make as a newbie.
Having a seasoned investor to bounce comps with, ask advice, and grow with is something that I believe is the most crucial step in becoming a real estate investor and I’ve met very few successful, long-term real estate investors who have made it without one.
Now restate investors are extremely busy people, and if you want to grab their attention, there is a right way and wrong way to go about it. So here are a few tips…
How to Find A Seasoned Real Estate Investor
Sometimes people have difficulty finding a seasoned investor in their area. My suggestion would be to start with the BiggerPockets keyword alerts and reaching out to local investors that way.
I would also recommend attending your local Real Estate Investors Association (REIA) meetings because lot of investors hang out there.
If that doesn’t work, if you access to the Multiple Listing Service (MLS), you can do a search for cash-buyers who have bought in your area over the last six months and then reach out to them that way.
Beyond that, Meetup.com is also another way to get connected to other investors in your market by joining real estate investing real estate groups.
Once your potential mentor is found, invite them out for coffee or for lunch.
Don’t Ask to Be Mentored
Though I have a had a few people who started off this way with me turn out OK, the vast majority of people who ask me to mentor them within the first time of meeting typically were a waste of my time.
My first suggestion would be to take it slow. You need to make sure the both of you fit well together and will mutually benefit from the relationship.
In your first meeting, I would ask these questions:
- What are your core values?
- What are some things you’re passionate about in life?
- What kind of investing do you do, and how do you do it?
- What would be your suggestions for me, as a complete beginner?
- Do you partner on deals on a case-by-case basis?
Once you’re sitting down with the potential mentor, don’t play games. Tell them the absolute truth. Say, “I am a brand new aspiring real estate investor who doesn’t know much, but I am hungry and willing to learn. I just need a little guidance.”
Then let them know you’ve already taken action and found a few properties that you think might be good deals, and show them the numbers you ran. Then say that since you’re new, you want them to review the leads and help determine if they are, in fact, good deals or not.
Ask them if they’d be open to helping you analyze leads you bring them, and then if ever one is a good deal, if they’d help you close it for a 60/40 split (where they get 60% and you get 40% of the net profit).
Discover Their Needs
Next, I’d seek out to discover what their business is lacking. Your communication needs to come across as simply wanting to help and learn.
If they’re struggling with social media, suggest running social media for them. If they’re a one man show, help out with motivated seller calls. Offer to run errands, clean their office, write purchase agreements and perform any additional legwork needed close the deal.
Whatever it is for their specific situation, once you’ve found it through asking strategic questions, offer ways that you may be able to step in and help.
If you do this, the more value you bring and the more your mentor will help you out.
Bring Them Deals
As you help them in their business, be aggressive at finding deals because you’re now in a position where you can call on the advice of a seasoned investor.
Run you own comps and number and simply ask your potential mentor to check them for you and if the numbers look good, ask them if they would like to partner with you on that particular deal.
You can say, “What would you suggest I do? Would you like to go in on this one with me? You can take 50 percent if you finance it and walk me through all the steps involved.”
If the investor agrees, boom — you just found yourself a real estate mentor.
Without money and expertise, serving and adding value is really the only leverage you have starting out, so use it wisely!
Take Action!
The goal is to GET THE PHONE RINGING! And the only way to do that is by taking action!
A lot of people don’t take action. They read book after book. They read blog posts after blog posts. They listen to podcast after podcast, and they eventually end up overwhelmed with all of the information that is out there about real estate investing.
I promise, you will learn far more by taking action and making mistakes than you ever will by reading a book.
Don’t be afraid! Go after it! Make the mistakes, and sooner than later, you will actually do things right.
How to Get the Phones Ringing!
Now that you’ve found a mentor, put your foot to the pavement and start generating deals! Here are my top deal generators that will help you close your first deal!
Driving For Dollars
Honestly, the cheapest way to find motivated sellers is by driving for dollars. You can simply jump in your car, drive around the city and look for distressed properties.
As you’re driving, look for properties with tall grass, boarded up windows, peeling paint, etc. and then write down the addresses of those properties.
Once you have the address, head over to the tax assessor’s website, enter in the address and find the owner of the property.
Once you have the owner’s name, you can search for their contact information using a skip-trace software called TLO.
This strategy is free and literally costs you the gas in your car and your time!
Networking with “Mentors,” Investors or Agents
Real estate is all about relationship!
You know, a lot of times it’s not what you know, it’s who you know.
Attending networking events allows you to connect with people in your market who are really taking action and doing “the stuff”.
Just think about it, if you know the top fix and flippers, the top buy-and-hold investors, and the top wholesalers in your market, you are ultimately setting yourself up for success because many times, they’ll have inventory but not the time so they’ll sell it for super cheap just to get off their hands.
So, networking is essential, and is a great way to generate deals!
Bandit Signs
Place bandit signs in high traffic areas and busy intersections. Keep your signs simple and straight to the point. Our bandit signs simply say:
“We buy houses cash!”
Phone number
We spend $.50 to $1.00 per sign and we have our property manager place the signs out and makes a percentage if a deal comes from a bandit sign.
Direct Mail
Direct mail marketing is targeting a list of potential motivated sellers by using specific information from age, zip code, income level, etc., then you hire a company to send out letters or postcards to individuals on that list.
This is a very effective way to find motivated sellers but it comes with a high cost.
Right now we’re spending an upwards of $10,000 a month on direct mail campaigns as a company, but we’re averaging between 10 to 12 properties a month, so it justifies it.
Say you average $6,500 property, you can see why spending $10,000 a month makes sense for us but it doesn’t happen overnight.
We drop $10,000 a month in direct mail campaigns and have two full-time acquisition managers dedicated to screening calls servicing the leads that come in. So instead of us going after and chasing the motivated sellers, through our direct mail campaign, the motivated sellers come directly to us.
Guys, I know these numbers might seem a bit daunting but don’t let these numbers discourage you.
It will take some time to get to that level but don’t be afraid to pick up a side hustle because direct mail is your best bet for streamlining deal flow.
So you’ve put in some legwork, generated leads, the phones are ringing and you have motivated sellers interested in selling their properties–now what do you do?
Find an investor buyer!
Motivated Seller Signs
For starters, one of the simplest things you can do to start getting the phone ringing is to place a sign in front of the house you’re trying to sell.
You may think this would never work in a million years, but just two weeks ago, we actually sold 2 properties to a brand new buyer who simply called us off of a sign we had posted in the front yard. They called, and we told him about our property website, they saw another that they really liked, and boom -they bought two!
All we put on the sign is the following: “Motivated Seller! Asking $24,900 317.555.5244”
Craigslist
Another great (and free) way to generate leads for cash buyers is by posting all of your inventory on Craigslist at least 3 times a week (the more the better).
We’ve sold so many properties off of Craigslist, that it’s not even funny!
Now the key to working these leads, is to make sure you have a lockbox on your properties so that you can simply provide them a code, and they can go and check out the property themselves.
Then you write down their name and number and follow up with them every other day, until they either say they want to move forward on the property, or that they’re not interested.
If they’re not interested, you then ask them what their buying criteria is, and then send them properties to check out that match that specified criteria.
Local Real Estate Networking Organizations
If you join (and utilize) your local Real Estate Investors Association (REIA), it’s been our experience, that you’ll find a ton of buyers this way!
I think the key is having a great REIA; our’s in Indianapolis is proven to be one of the best!
We get involved in speaking events, through them as well as post our inventory on their website, and you wouldn’t believe the connections we’ve made.
Again just a few weeks ago, we had a brand new buyer call us up from the Central Indiana Real Estate Investor’s Association (CIREA) and bought 2 properties at once!
Pretty awesome if you ask me!
The next step is proceed with closing the property
In most states, you either have a title company or attorney complete the closings. Here in Indiana, we have title companies who do most of the work.
It’s extremely critical that you understand the relationship between the title company and purchase agreements and have organizational skills to coordinate schedules.We do all of our closings every Tuesday and Friday, and go to our the title companies each week on those specific days.
As soon as an individual agrees to purchase my property, they sign a 1-page purchase agreement which is basically a commitment that includes the cost and the terms and conditions.
Here’s an example of our typical terms:
The buyer pays all closing costs, including title insurance as well as assumes responsibility for property taxes due May 2018 (this is weird in Indiana because we pay taxes in the rears). We try to limit the inspection period to 5 days or less, so that we avoid back outs. We also encourage our potential buyers to do all due diligence before signing a purchase agreement and because we close quickly, shooting to close Tuesday or Friday of the following week, we typically waive the need for earnest money.
Now if the investor has backed out before with or if the close date is two weeks out, then we require earnest money which adds value to the purchase agreement and goes towards the purchase the price.
We use what’s called DocuSign which is allows the buyer to sign everything via email. Once we receive the signed 1-page purchase agreement from the investor, we then load the document into our internal software and notify our transaction coordinator, who then processes it with our title company.
Our title company then conducts a title search to ensure there aren’t any liens, no back taxes or judgments on the property.
I would also recommend acquiring “title insurance” which will protect you against any liens so if there is a lien on the property slipped through the cracks, you can file a claim with your title insurance company and they will take over and cover the lien.
If the title is free and clear, then you’re free to proceed with closing.
Now, as I mentioned earlier, there are three ways to close.
The first method is by assigning the contract where you take the purchase agreement and sell (or assign) it to someone else for a fee. The challenge with this method is that your buyer will see how much you made on the property.
The second method is the double close where you simultaneously buy and sell the property within in minutes. At closing, you first sign the documents with the motivated seller, and then a few minutes later, you meet with the investor buyer and sign the closing documents with them..
The great thing about this strategy is that your buyer doesn’t know how much you made from the property and if you find an investor friendly title company, you can use your investor buyer’s funds to fund your transaction.
Then there’s the Simple Close, where you use your money or someone else’s private money to purchase the property. You then own the property and free to do whatever you want with the property.
Once you have selected which strategy you are going to use to close the deal, all the money is sent to the title company. Once all of the paperwork is signed on both sides, the title company will pay the motivated seller their money and record of the documents and then it’s closed out.
Conclusion
Well there you have it guys! These simple steps will get you one step closer to closing your first deal.
Our heart in this community is dedicated to helping you master this incredible real estate investment strategy. If you ever have any questions, please reach out! We’d love to hear from you.
Resources
The following is a list of resources we’ve put together to help aspiring real estate wholesalers get their deal.
BiggerPockets – This is your one-stop-shop for everything real estate. If you need educational resources, networking opportunities, massive support — anything and everything is here.
Networking Opportunities
Software Tools
Direct Mail Resources
Dispositions and Closings
