Real Estate Investing & Wholesale: How You Can Earn $5-20K Per Month Working Part Time
Posted On June 30, 2022
Perhaps you have heard of “wholesale” before. Wholesaling is the process of finding a great deal on real estate, putting the property under contract, and then selling that deal to a buyer who buys with cash or private money/tangible capital.
The first step to wholesale is finding a great deal. Suffice to say, entire courses have been written on this very topic, but for our purposes here, I’ll provide you with a few ideas to point you in the right direction.
My favorite method of finding wholesale deals is to send direct mail to specific lists. This involves sending a postcard or handwritten letter (does not have to be in a real person’s handwriting on each, you can photocopy or use a handwriting font) to a specific list, such as out-of-state homeowners, filing for eviction, real estate, or foreclosure.
While direct mail is great, it does cost a few bucks, so if you’re on a tight budget, you might want to consider putting up bandit posters. We’ve all seen them before: the 12″ x 24″ signs nailed to the ground or nailed to utility poles. Yes, they are ugly, but they work. You can also try “driving for dollars,” which means getting in the car and driving around neighborhoods to find unoccupied and/or ugly houses. He then contacts the owner by mail or phone.
Once you’ve found a great deal, you’ll need to put it under contract. If you do not already have a purchase and sale agreement, I recommend that you use the “as is” real estate agent agreement used in your state. Any real estate agent should be able to provide you with this. In the contract, be sure to include an “exit clause” or “weasel clause” that will give you time to find a buyer. This could be as simple as an inspection period or a clause that says “subject to partner approval.” The latter essentially eliminates any risk. If you can’t find a buyer, simply exercise your “exit” by informing the seller that your partner didn’t approve of the deal. One piece of advice though: I don’t recommend you cheat a seller if you can’t find a buyer. As soon as you know it’s not a deal, unless you can negotiate a better price with the seller that will make the deal work, let the seller know so they can find another buyer.
Now that you have the deal under contract, you need to find a buyer for the deal. Hopefully, you already have a buyer list: a list of potential cash or hard money buyers along with their phone numbers and/or email addresses. If you don’t, this should be your first step before you start looking for deals. Here are a couple of ways to locate buyers.
First, advertise the offer on the Internet. I’ve had good results posting to free online classifieds sites like Craigslist and Kijiji. Be sure to include photos of the property. Second, market the property to your local REIA group. Bring flyers to the next meeting that describe the deal and hand them out to everyone. Third, you can try placing an ad in the newspaper, although I think the effectiveness of this strategy has diminished in recent years. Finally, you can mail absentee landlords who have purchased a rental property in your area in the last 6-12 months. If they have bought before, you know they are somewhat qualified and may be looking for more properties.
Then, once you’ve found a buyer, you need to use the proper documentation to put the deal together. My favorite way to monetize a wholesale offering is through a Contract Transfer. This document allows you to assign your contract with the seller to your buyer; essentially, the buyer puts himself in his place in the contract. You will be paid an assignment fee at closing. For example, if you have a contract deal with the seller for $50,000 and your buyer is willing to pay $60,000, then your assignment fee will be $10,000! Be sure to collect at least as much earnest money from the buyer as you paid in your deal with the seller. Never take less than $1,000 as a deposit from a buyer. I recommend that you make the check payable to the title company or attorney’s office that will handle the closing.
Finally, proceed to closing and collect your check. Clever! You just made some quick cash with essentially no risk and no money out of your own pocket. Now, he goes back and do it again (and again, and again, and again…).