How to Wholesale for Quick Profits
How To Wholesale Your Property
This section is designed to teach you how to creatively market and sell a property as well as give you some basic knowledge on how you can help buyers.
As you begin working in this field, you will learn more and more creative ways to make money.
We also want to teach you other ways to begin working in this
industry with little or no capital.
What Is Wholeselling/Flipping
To “wholesale or flip” a property is to assign the contract to another
buyer who will close the transaction in your place.
First, you have to have a contract that is assignable;
next, add your fee to the contract amount;
and then you assign the contract to the person who will close in your place.
By tying up the property, assigning the contract, making the spread in the middle, never owning the property, you flipped or wholesaled the property.
Many investors only flip properties because it is a paper shuffle that requires the least investment.
In certain areas investors refer to the process as“wholeselling” and in other areas they refer to it as “flipping”.
Regardless of which term you use, the bottom line is the same…big
bucks from the property you don’t own!!!
Wholeselling is a personal favorite of many investors, it is an easy
hassle-free way to earn a very good living.
If you have zero cash, this is the best way to get started.
You don’t have to qualify for a mortgage; it is basically risk-free and there is no rehab money required. All you have to do is find a buyer, which is relatively easy.
How To Wholesale
Step One: Find a property with enough equity for you to make a
small profit and for a new owner/investor to walk-in with equity.
Start by making offers or placing an ad under the section in the
newspaper entitled “Real Estate Wanted”.
We will give you some sample ads that have worked for us.
Remember, if you receive a call from a distressed owner and there is not enough equity to flip the property, use one of the other methods we have discussed.
Do not let a potential seller go without trying to work out a solution. There are many ways to make money in this business.
Sample Ads:
“Need Help? Top dollar for distressed or handyman specials 555-5555”
“Distress Consultant, confidential, caring, cash 555-5555”
“Top dollar for distressed, creampuffs, upside-down, close today 555-5555”
“Tired of bill collectors? We have cash for your home, fast closing. 555-5555”
“Money to lend, top dollar for distressed properties or second mtgs 555-5555”
Step Two: Take the calls.
Since these calls are from homeowners with distressed properties, take a contractor or whoever is going to do your rehab work with you to look at these properties. It is important to be able to sign a contract on the spot.
Homeowners in distress will call every ad and they will usually sign a contract with the first person to show up and make them a reasonable offer.
Below is a sample script to use when taking these calls:
Name: _________________________
Phone#: _________________________
Where is your property located? _______________________
_______________________________________________.
What do you think your property is worth? $_______________
What will it appraise at? $_____________________
What is the balance owed? $_____________________
What is the condition of your property? _______________
_______________________________________________.
What sales price do you have in mind? _________________
Are the payments current? ____________________
End of Script.
******************************************************
Don’t be intimidated to ask these questions; remember, they called
you. Keep in mind that many investors run ads similar to these, so
you need to view the properties as soon as possible.
Homeowners in distress are not only calling you ad, they are calling all of them. Your competitor will want the same property if it is a good deal, so be quick!
Step Three: Negotiate a deal and put it in writing.
For example, let’s say the owners owe $35,000 on their property, and they need $2,000 to be able to move and pay deposits for their new place.
Make an offer of $37,000.
Note that distressed homeowners are generally willing to take very little compensation. The house is worth $65,000 in good condition, but needs approximately $7,000 to $10,000 in repairs.
There is approximately a $28,000 difference (spread) between your
purchase price and the estimated market value of the property.
Decide what you want to make as your assignment fee, for example,
$4,000.
You will add $4,000 to your contract price, which is $37,000, and ask $41,000 for the property.
The new buyer will be “in the property” with $24,000 in equity. Once the repairs are done, assuming rehab and cost of money was $10,000 (or less). Your buyer will make approximately $14,000. The original owner made his $2,000, you made $4,000, and the person who actually did all the work and took the risk made $14,000.
Everyone is happy. Win/win!
Your assignment fee is at your discretion.
There is no set amount that investors charge.
The key to putting together a good deal is for the seller to have some moving money, for you to get a small assignment fee, and the bulk of the profit going to the person taking the risk, your buyer.
If a buyer rehabs a house and only makes $5,000 when he thought he would make $10,000, he will feel bad about the deal and probably not buy any more houses from you. Believe us, it is better to make a small amount and flip a lot of houses than to make a larger amount and only flip a few.
Other investors will find out you “tack on” too much money and it will become difficult to flip your properties.
There is no need for greed; remember, you are supposed to be giving“wholesale” prices.
When preparing the contract, it is imperative to write in the words
“and/or Assigns” following your name.
This is what allows another buyer to close in your place. You have to leave a deposit when you sign the contract, as consideration is necessary to make a contract binding.
We typically leave a $100 deposit.
This way, if we are unable to flip the property, we are not out a lot of money.
Allow as many days as possible for closing (try to get at least 60 days), keeping in mind that the seller may have limited time to be out, and you will need time to find another buyer who may need time to arrange financing.
Have your attorney prepare an “Assignment of Contract” form to use when you find a buyer to assign this deal to.
You must let the owner know that you need access to the house.
This will allow you to be able to show it to potential buyers.
Step Four: Finding another buyer.
Place another ad in the newspaper under “Houses for Sale”.
Sample Ads:
“Handyman Special- CHEAP, CASH 555-5555”
“Investor delight, $1,000s below market, make offer 555-5555”
“3/2/1 handy! $20,000 below market, must sell 555-5555”
“Light handyman special, cosmetic only, great starter home, $1,000s below market 555-5555”
You will begin to receive many calls.
When you give details about the property, state an asking price a few thousand dollars higher than what you are willing to accept to allow room for negotiation. Let potential buyers drive by the property and make their own assumptions as to the cost of repairs, while making them aware that the repaired market value is $65,000. Explain how this will put them
“in the house” for a great deal.
Build a list from these callers to use in the future when flipping or
selling another property. Callers will range from investors to potential homeowners looking for a good deal. You will make more money selling to an end-user (homeowner) than to an investor; however, if the home is in very poor condition, it may not pass a lender’s inspections. If the buyers don’t have cash, you may not be able to put the deal together. Selling to an investor will ensure a quicker closing with less hassle.
Sample Investor List:
Name: ___________________________
Phone #: ___________________________
Are you confined to any area? ______________________
Can you close with cash immediately? _______________
Can I call you in the future with good deals? _______________
What is your price range? _____________________
Okay, (name) this particular property is located at ____________.
You should go right away and look at it. Based on the number of calls I have had so far, it won’t last long. It is 1st come, 1st served. If you don’t end up with this particular piece of property, I will call you with the next one. Okay, Great…
If you have a fax #, I will fax information on my next deal.
Fax #: __________________
End of Script
Step Five: Negotiate a deal with the new buyer and prepare the
Assignment of Contract.
Be aware that if this buyer does not close, you are expected to and will forfeit your deposit if you cannot close. If for any reason your buyer backs out, ask the seller for an extension. In order to receive the extension, be willing to compensate the seller for it by making a mortgage payment, etc. We find that if we get a $3,000 deposit from our buyer, it deters backing out. Not many people will
walk away from a deposit of that size.
As you get to know other investors, you will learn who follows through and who does not.
When you “assign a contract”, be aware that the assignee will see the contract for sale and purchase showing the actual sale price. If this makes you uncomfortable, the alternative is to prepare a contract for sale and purchase with your buyer and perform a double closing.
If a double closing is the route you choose to take, the contract for
sale and purchase should state your name as Seller and you buyer as
Buyer, with a closing date matching the closing date on the contract
between you and the owners.
It must also have a contingency included releasing you from the contract if you do not close on the first transaction.
Otherwise, you will be bound to a transaction in which you are never empowered to transfer ownership. An assignment of contract can be signed at the closing because at this point the sale will probably take place regardless of whether your buyer sees what you really paid.
If both contacts are to be performed on, a double closing will take
place.
This is when you and the seller sign the requisite documents (close), and then you and your buyer sign the requisite documents (close), and with the help of the closing agent, the money from your buyer will close the deal with your seller.
For example:
Assigning the contract nets you the most money. You assign the
contract your buyer shows up for closing, you sit in as a “spectator”
and watch the closing take place, then walk away with a $4,000 minus the closing costs incurred for becoming the owner for a brief
period.
Don’t allow the sellers to walk away with nothing as it will leave them feeling bad about the deal; remember, always try and create a
win/win situation.
If you are unable to find another investor or end-user to purchase the property, you have a couple of choices:
first, to walk away and lose your deposit; or secondly, to find the money and rehab the house yourself. Investors don’t usually put up a big deposit with the homeowners, so losing a deposit is not a big deal. It’s the fact that the distressed owners were counting on you and you have let them down, and now they are probably worse off than they were. If you are not certain you can flip a property, then don’t tie it up!!!
You can always look for a buyer first, then go back to the homeowners to see if the property is still for sale. Given the distressed situation, there is a good chance that it will be.
This section is designed to teach you how to creatively market and sell a property as well as give you some basic knowledge on how you can help buyers.
As you begin working in this field, you will learn more and more creative ways to make money.
We also want to teach you other ways to begin working in this
industry with little or no capital.
What Is Wholeselling/Flipping
To “wholesale or flip” a property is to assign the contract to another
buyer who will close the transaction in your place.
First, you have to have a contract that is assignable;
next, add your fee to the contract amount;
and then you assign the contract to the person who will close in your place.
By tying up the property, assigning the contract, making the spread in the middle, never owning the property, you flipped or wholesaled the property.
Many investors only flip properties because it is a paper shuffle that requires the least investment.
In certain areas investors refer to the process as“wholeselling” and in other areas they refer to it as “flipping”.
Regardless of which term you use, the bottom line is the same…big
bucks from the property you don’t own!!!
Wholeselling is a personal favorite of many investors, it is an easy
hassle-free way to earn a very good living.
If you have zero cash, this is the best way to get started.
You don’t have to qualify for a mortgage; it is basically risk-free and there is no rehab money required. All you have to do is find a buyer, which is relatively easy.
How To Wholesale
Step One: Find a property with enough equity for you to make a
small profit and for a new owner/investor to walk-in with equity.
Start by making offers or placing an ad under the section in the
newspaper entitled “Real Estate Wanted”.
We will give you some sample ads that have worked for us.
Remember, if you receive a call from a distressed owner and there is not enough equity to flip the property, use one of the other methods we have discussed.
Do not let a potential seller go without trying to work out a solution. There are many ways to make money in this business.
Sample Ads:
“Need Help? Top dollar for distressed or handyman specials 555-5555”
“Distress Consultant, confidential, caring, cash 555-5555”
“Top dollar for distressed, creampuffs, upside-down, close today 555-5555”
“Tired of bill collectors? We have cash for your home, fast closing. 555-5555”
“Money to lend, top dollar for distressed properties or second mtgs 555-5555”
Step Two: Take the calls.
Since these calls are from homeowners with distressed properties, take a contractor or whoever is going to do your rehab work with you to look at these properties. It is important to be able to sign a contract on the spot.
Homeowners in distress will call every ad and they will usually sign a contract with the first person to show up and make them a reasonable offer.
Below is a sample script to use when taking these calls:
Name: _________________________
Phone#: _________________________
Where is your property located? _______________________
_______________________________________________.
What do you think your property is worth? $_______________
What will it appraise at? $_____________________
What is the balance owed? $_____________________
What is the condition of your property? _______________
_______________________________________________.
What sales price do you have in mind? _________________
Are the payments current? ____________________
End of Script.
******************************************************
Don’t be intimidated to ask these questions; remember, they called
you. Keep in mind that many investors run ads similar to these, so
you need to view the properties as soon as possible.
Homeowners in distress are not only calling you ad, they are calling all of them. Your competitor will want the same property if it is a good deal, so be quick!
Step Three: Negotiate a deal and put it in writing.
For example, let’s say the owners owe $35,000 on their property, and they need $2,000 to be able to move and pay deposits for their new place.
Make an offer of $37,000.
Note that distressed homeowners are generally willing to take very little compensation. The house is worth $65,000 in good condition, but needs approximately $7,000 to $10,000 in repairs.
There is approximately a $28,000 difference (spread) between your
purchase price and the estimated market value of the property.
Decide what you want to make as your assignment fee, for example,
$4,000.
You will add $4,000 to your contract price, which is $37,000, and ask $41,000 for the property.
The new buyer will be “in the property” with $24,000 in equity. Once the repairs are done, assuming rehab and cost of money was $10,000 (or less). Your buyer will make approximately $14,000. The original owner made his $2,000, you made $4,000, and the person who actually did all the work and took the risk made $14,000.
Everyone is happy. Win/win!
Your assignment fee is at your discretion.
There is no set amount that investors charge.
The key to putting together a good deal is for the seller to have some moving money, for you to get a small assignment fee, and the bulk of the profit going to the person taking the risk, your buyer.
If a buyer rehabs a house and only makes $5,000 when he thought he would make $10,000, he will feel bad about the deal and probably not buy any more houses from you. Believe us, it is better to make a small amount and flip a lot of houses than to make a larger amount and only flip a few.
Other investors will find out you “tack on” too much money and it will become difficult to flip your properties.
There is no need for greed; remember, you are supposed to be giving“wholesale” prices.
When preparing the contract, it is imperative to write in the words
“and/or Assigns” following your name.
This is what allows another buyer to close in your place. You have to leave a deposit when you sign the contract, as consideration is necessary to make a contract binding.
We typically leave a $100 deposit.
This way, if we are unable to flip the property, we are not out a lot of money.
Allow as many days as possible for closing (try to get at least 60 days), keeping in mind that the seller may have limited time to be out, and you will need time to find another buyer who may need time to arrange financing.
Have your attorney prepare an “Assignment of Contract” form to use when you find a buyer to assign this deal to.
You must let the owner know that you need access to the house.
This will allow you to be able to show it to potential buyers.
Step Four: Finding another buyer.
Place another ad in the newspaper under “Houses for Sale”.
Sample Ads:
“Handyman Special- CHEAP, CASH 555-5555”
“Investor delight, $1,000s below market, make offer 555-5555”
“3/2/1 handy! $20,000 below market, must sell 555-5555”
“Light handyman special, cosmetic only, great starter home, $1,000s below market 555-5555”
You will begin to receive many calls.
When you give details about the property, state an asking price a few thousand dollars higher than what you are willing to accept to allow room for negotiation. Let potential buyers drive by the property and make their own assumptions as to the cost of repairs, while making them aware that the repaired market value is $65,000. Explain how this will put them
“in the house” for a great deal.
Build a list from these callers to use in the future when flipping or
selling another property. Callers will range from investors to potential homeowners looking for a good deal. You will make more money selling to an end-user (homeowner) than to an investor; however, if the home is in very poor condition, it may not pass a lender’s inspections. If the buyers don’t have cash, you may not be able to put the deal together. Selling to an investor will ensure a quicker closing with less hassle.
Sample Investor List:
Name: ___________________________
Phone #: ___________________________
Are you confined to any area? ______________________
Can you close with cash immediately? _______________
Can I call you in the future with good deals? _______________
What is your price range? _____________________
Okay, (name) this particular property is located at ____________.
You should go right away and look at it. Based on the number of calls I have had so far, it won’t last long. It is 1st come, 1st served. If you don’t end up with this particular piece of property, I will call you with the next one. Okay, Great…
If you have a fax #, I will fax information on my next deal.
Fax #: __________________
End of Script
Step Five: Negotiate a deal with the new buyer and prepare the
Assignment of Contract.
Be aware that if this buyer does not close, you are expected to and will forfeit your deposit if you cannot close. If for any reason your buyer backs out, ask the seller for an extension. In order to receive the extension, be willing to compensate the seller for it by making a mortgage payment, etc. We find that if we get a $3,000 deposit from our buyer, it deters backing out. Not many people will
walk away from a deposit of that size.
As you get to know other investors, you will learn who follows through and who does not.
When you “assign a contract”, be aware that the assignee will see the contract for sale and purchase showing the actual sale price. If this makes you uncomfortable, the alternative is to prepare a contract for sale and purchase with your buyer and perform a double closing.
If a double closing is the route you choose to take, the contract for
sale and purchase should state your name as Seller and you buyer as
Buyer, with a closing date matching the closing date on the contract
between you and the owners.
It must also have a contingency included releasing you from the contract if you do not close on the first transaction.
Otherwise, you will be bound to a transaction in which you are never empowered to transfer ownership. An assignment of contract can be signed at the closing because at this point the sale will probably take place regardless of whether your buyer sees what you really paid.
If both contacts are to be performed on, a double closing will take
place.
This is when you and the seller sign the requisite documents (close), and then you and your buyer sign the requisite documents (close), and with the help of the closing agent, the money from your buyer will close the deal with your seller.
For example:
Assigning the contract nets you the most money. You assign the
contract your buyer shows up for closing, you sit in as a “spectator”
and watch the closing take place, then walk away with a $4,000 minus the closing costs incurred for becoming the owner for a brief
period.
Don’t allow the sellers to walk away with nothing as it will leave them feeling bad about the deal; remember, always try and create a
win/win situation.
If you are unable to find another investor or end-user to purchase the property, you have a couple of choices:
first, to walk away and lose your deposit; or secondly, to find the money and rehab the house yourself. Investors don’t usually put up a big deposit with the homeowners, so losing a deposit is not a big deal. It’s the fact that the distressed owners were counting on you and you have let them down, and now they are probably worse off than they were. If you are not certain you can flip a property, then don’t tie it up!!!
You can always look for a buyer first, then go back to the homeowners to see if the property is still for sale. Given the distressed situation, there is a good chance that it will be.
posted by REISkills - Real Estate Investing Tips and Advice at
6:24 PM
0 Comments:
Post a Comment
<< Home