I love to wholesale houses. You can make quick cash with no risk, no credit, and either no money down or very little money down. I have bought a number of houses with nothing down. But typically, I make a deposit of somewhere between $10.00 and $100.00 on each contemporary houses. It is actually easier to justify to the seller not putting anything down than it is just giving him $10.00. But I have been told by my attorney, that you really should make an earnest money deposit to have a valid contract. It is also a lot easier to walk away from $10.00 if you can’t find a buyer for the deal than a larger amount of money.
One thing I would like to point out is that I never give that money to the seller. Always make the check payable to the closing attorney. That way, if something happens and the house doesn’t close, you will be sure to get your money back. When you are wholesaling houses you don’t have to deal with tenants, pay utilities, insurance and other costs associated with buying a property to rehab or to hold for a rental. Rehabbers also need access to substantial amounts of cash that you will not need as a wholesaler.
The one thing you will need to succeed in wholesaling houses is a steady stream of leads. It will be your job to find motivated sellers that will sell their house to you at a deep discount. It has been my experience that you need to talk to somewhere between 10 and 20 folks to find just one really motivated seller. Why the big difference in the numbers? I believe that the more targeted your letter is the better your response will be from motivated sellers. Also, you will get more calls after sending multiple letters over a period of time than you will off of your first letter or two. It is not at all unusual for me to buy a house from someone I have been marketing to for 9 months or a year; sometimes even longer. The seller that is not motivated today may be very motivated a year from now when his circumstances have changed. That is the importance of an ongoing direct mail program.
There are many ways to find motivated sellers when you are wholesaling houses. You can use “Bandit” signs in areas where you would like to buy property. You can put “We Buy Houses” ads in local papers and on Craigslist. The MLS can be another source of leads. The owner of a house that has been sitting on the MLS (Multiple Listing Service) for an extended period of time can become a very motivated seller if he is paying two mortgages. Probate attorneys, divorce attorneys and bankruptcy attorneys can also be a source of leads. But I can tell you after doing this for a few years. I find the bulk of my motivated sellers through direct mail campaigns. You get great results over time with direct mail.
This is probably the scariest part for an investor that wants to wholesale houses. When you are new, you can be terrified that you won’t find a buyer for the house before you have to close on it. If you are not already a member of your local REIA group (Real Estate Investors Association), this is the place to start. Join your local association and become active in it. These groups are a great source for buying and selling houses. This is the first place to start building your “buyers list”. You are looking for landlords and folks that rehab houses for your list.
Craigslist is another place I have had good luck finding rehabbers, landlords and other investors to put on my buyers list. When I have a house to sell, I always put it on Craigslist. I have sold a few houses this way but even more importantly, I have found a number of investors to put on my buyers list that have bought multiple properties from me. Be sure to include pictures of the houses when you place an ad on Craigslist.
When you have a house to sell, you can also find investors for your buyers list by running ads in local papers and by putting up Bandit signs in the area where the house is located. These are just a few of the many ways you can build your buyers’ list.