The Business Model
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:
1. 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.
2. 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.
3. 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.
Speaking of closings, I want to share a crazy story with you…
My Story
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.
Conclusion
There you have it guys!
A full breakdown of the real estate wholesaling business right at your fingertips!
I hope today’s post has helped you begin to think how you can develop a team within your wholesaling business because let’s face, you don’t want to be drowned with handling multiple roles forever!
Next week, I’ll dive into how to get the phone ringing and motivated sellers calling you!
