Residential Real Estate | Real Estate Investing | Foreclosure
Wholesaling real estate is a powerful and profitable real estate investing strategy. Use this guide to learn how to keep your pipeline full of properties and create & nurture your cash buyer list.
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Are you ready to grow your wholesale real estate business? Need to improve the quality of your buyer list? Wholesale real estate investing, when done right, can be fun (you know, the thrill of the chase) and of course, very profitable.
So if you’re looking to grow your wholesaling business, there are some ‘what to do’s’ and ‘what not to do’s’ in this post along with some great tips & tricks to help you take your business to the next level.
After you've read through this guide, we recommend taking a Wholesale Real Estate Course. Real Estate Skills does a great job breaking them down and helping you figure out which is the best for you.
What you’ll learn in this post:
- What Is Wholesale Real Estate Investing?
- Who IS and Who IS NOT a Wholesaler?
- How To Find The Wholesalers In Your Market
- Who Uses Wholesalers and Why
- How to Keep Your Wholesaling Pipeline Full of Properties
- Creating & Nurturing Your List of Cash Buyers
- Licensing, Disclosures, and Fees for Wholesalers
What Is Wholesale Real Estate Investing?
Wholesaling real estate refers to the practice of matching property sellers with buyers in exchange for a finder's fee. You earn money from the transaction while bypassing the need to spend time, money, and effort on expensive repairs. Instead, you pass those aspects of the deal to another investor who might have contracting resources but lack the time or expertise to seek target properties and opportunities.
Unlike other forms of real estate investment, wholesaling doesn't always require capital, good credit, or even experience. And depending on your geographic location and business model, you may not even need a real estate license. It’s for these reasons that the term “wholesaling” can come with a stigma.
Who IS and who IS NOT a Wholesaler?
Before talking about your wholesaling services to everyone in your personal and professional network, let’s cover what a wholesaler is not.
Understand that “wholesaling” in some circles is a dirty word. Go to a real estate investor club meeting and introduce yourself to other investors as a wholesaler. Don’t be surprised if you get an eye roll and the conversation abruptly ends.
Unfortunately, “wholesaler” in the real estate investor community has become synonymous with beginners with no money or skills that have been watching too much Flip or Flop on HGTV. These newbies are typically very demanding of the time and talents of experienced professionals and with little interest in doing the actual work needed to succeed.
Wholesalers have an even worse reputation among Realtors who see little value in what investors, let alone wholesalers, bring to the real estate game. Some agents firmly believe that unless a property is listed on the MLS with a local Realtor, the owner is robbed of maximum exposure and equity. Unfortunately, they fail to appreciate the benefits of the all-cash, as-is offer.
Understanding the baggage and stigma around the term “wholesaler” though allows you to use terms like “bird dog” or “deal finder”. These titles signify that you’re strategically looking for what your buyers want instead of taking a spray-and-pray approach.
How To Find The Wholesalers In Your Market
Wholesalers take several forms. A wholesaler can be a local Mom-and-Pop investor, a national investor brand (HomeVestors, 1-800-Sell-Now, New Western Acquisitions), a TV personality, or even ibuyers (Sundae.com, Opendoor, Offerpad).
And yes, even Wall Street is in on the wholesaling game. In fact, PropertyRadar helped Bloomberg News break the story that ibuyers were wholesaling properties to Wall Street entities like American Homes 4 Rent, Tricon, and Progress Homes in May of 2021! This was well before Zillow shut down its buying business and sold 2,000 properties to the Institution buyer, Pretium.
If you’re interested in seeing who your local wholesalers are, do a simple web search for "sell my home fast" and "sell my home for cash". The results will be a mix of local flippers, wholesalers, and ibuyers that are actively competing in your market.
PRO TIP: Take notes of who you find. These are your competitors as well as potential buyers. Start following what they buy, where they buy, price points, size, and property age. Understanding what your competition is doing will help you focus and dial in your strategic efforts.
Who Uses Wholesalers and Why?
Deal sources can change drastically depending on the real estate cycle. In markets dominated by distressed inventory like short sales and REOs, acquiring properties is very different. In cycles like the Great Recession, investors work with entities like banks, auction companies, and agents that control distressed inventory. Deals are sourced mainly through websites and it’s a very transactional approach.
In today’s market, most deals come from contacting sellers with equity. Marketing to equity sellers and sourcing off-market real estate deals is a very different process and a completely different skill set. Contacting off-market prospects is made by direct mail, door knocking, paid digital ads, and other channels that drive interest in selling.
While marketing to sellers can happen in any market cycle, wholesalers really shine in the current environment when distressed inventory is hard to come by.
In fact, local flippers and landlords often work with wholesalers as a source for new deals. It mitigates the need to launch their own marketing campaigns.
Here’s what Aaron Norris, VP of Market Insights for PropertyRadar, says about why he works with wholesalers, “Running direct mail campaigns, answering live phone calls, and building relationships with potential property sellers takes work.”
“My last wholesale purchase was a deal where the owners lost their son tragically. The house needed too much work, the owners were in poor health, and the last thing the couple wanted was strangers in their home,” For the sellers, the cash offer meant a new home, bills paid off, and a fresh start in a new city.
“My wholesale purchase was largely made possible because of the relationship I built with the sellers. That takes time, and I’m happy to pay a wholesaler that makes that their business.”
However, it’s not just local investors working with wholesalers. Even Wall Street has been getting in on the act, purchasing deals from wholesalers. But don’t let the entrance of these tech-enabled, deep-pocketed investors scare you. Very few ibuyers and institutional Wall Street players focus on inventory with heavy repairs, older properties, tenant-occupied properties, or deals where complex people issues are at play (death, disease, divorce, drugs, etc.).
If a wholesaler can solve the issues on properties within the investor’s preferred buying criteria, also known as the investor’s “buy box,” there’s a great chance they can become their buyer.
The great news is these Wall Street players are spending millions popularizing the concept of fast, cash, as-is offers. As a local wholesaler, you benefit when you leverage these players and target inventory they are not chasing or deals they can't close because of property or people issues.
Understanding the playing field is essential, but now it's time to create your deal flow.
Don’t miss out on the chance to see firsthand how PropertyRadar can supercharge your real estate investment strategy. Start your free trial today!
How to Keep Your Pipeline Full of Properties
While wholesaling does not require a great deal of capital, understand that wholesalers and investors in your market are likely spending thousands every month on robust marketing campaigns that include targeted digital ads, social media campaigns, billboards, local radio, text marketing, and direct mail.
Trying to compete in all these channels is extremely expensive. There are less costly and more hyperlocal strategies that your Wall Street competitors won’t touch. The goal is always to do less, better.
Networking
Networking is a great place to start and can be free. However, your time is valuable, so target your networking with appropriate professionals and groups. Potential professionals and networks to consider include:
- Attorneys: Those that practice divorce, probate, personal injury, wrongful death, estate planning, and other law specialties that involve real estate. You’ll also find niche professional associations for these specialists.
- Contractors and service companies: Includes handypersons, home inspectors, termite and pest control, lawn care, and pool maintenance pros. They see owners that can't afford repairs, choose not to execute repairs from insurance claims or can spot houses in disrepair on their routes.
- Cleaning companies: Specialists in fire, mold, and flood remediation may have unique leads on owners that may opt to sell instead of taking on expensive and extensive repairs.
- Local investor meetings: Great place to meet investor-friendly agents, contractors, property managers, lenders, and vendors. Local and regional groups can also have different focuses, including flipping, property management, and 1031 exchanges.
- Bail bondsman: May have access to properties that need a quick sale.
- Realtors: Agents have leads for handyman specials or properties with known physical or people issues that don’t fit in the standard listing model.
- Boards and commissions: Most jurisdictions have volunteer opportunities to serve on housing-related boards and commissions like the planning commission. Following minutes and building relationships with leaders gives you insights into upcoming significant projects, city improvements, and even code and zoning changes, even if you don't volunteer.
As you get to know people in these fields, create a referral network so you can drive business to others. When you can use their services or help drive more business their way, the more likely you are to receive referrals. Networking and referrals are a great source hyperlocal and relationship-driven leads, something Wall Street and outside investors will have a hard time replicating.
Bandit signs
You've probably seen "I Buy Homes" signs on telephone poles, roadsides, and lawns in your area. Wholesalers use these signs to encourage fresh leads by targeting those who need to sell homes that need work for cash in targeted neighborhoods.
While cost-effective, bandit signs are often quickly damaged, covered, or discarded. Even worse, if you live in a jurisdiction with codes against them, you could end up with a hefty daily fine.
This method, nonetheless, continues to provide valuable exposure, brand awareness, and conversions. If you go this route, get creative with eye-catching signs and a memorable name or logo. Carefully target areas with properties that fit your criteria and place signs whereas many people can easily read them as possible. Preferably in a location where drivers can safely write down or take a picture of how to contact you.
Again, review local ordinances about this type of advertising to avoid costly fines and loss of your signs. If budget allows, consider contacting your local billboard companies to see if they have any last-minute advertising specials on key routes. It might be cheaper than expensive fines on bandit signs.
Classified Ads
While classified ads may seem a bit old school, today's classified ads can be in print and digital forms. You can post ads seeking properties on Craigslist, HOA newsletters, church bulletins, traditional newspapers, and even some social media sites. Browsing the ads on some of these channels may also provide a rich source of buyers. Search sites like Craiglist using relevant keywords such as motivated seller, must sell, rent to own, creative financing, handyman special, all offers, and flexible terms. Locals know these channels can still be a goldmine and often ignored by larger entities.
Driving for Dollars
Driving for dollars is a staple of many serious wholesalers. Driving for dollars allows you to create a list you can’t buy because it’s curated by you, or your surrogates, in your target market on ideal properties.
The method is simple enough. It involves driving targeted neighborhoods looking for signs of distress such as fire damage, boarded windows, multiple papers on the driveway, and overgrown lawns. In addition, hopefully, your networking activity has landed referral partners able to send you similar leads as they go about their daily business.
The goal is a highly targeted list of properties that fit your criteria, and that can be further refined with the help of public records.
Public records
Local public records turn your driving-for-dollars list into something far more powerful. Using public records is the step that separates the professionals from the average wholesaler.
In most cases, public records are free if you’re not asking for printed documents. They can be found in different county departments like the County Recorder’s Office or the County Treasurer.
While access to records varies by municipality, most cities have online search functions so you can seek information on properties and owners. However, public records can often be messy, and trying to find what you need can take time, patience, and sometimes money.
What questions can public records answer that will help you refine your list?
- Property Details: Property age, number of beds and baths, zoning, property vacancy status, property taxes delinquent
- Mortgage Details: current open loans, default status, default sale information
- Owner and Transfer Details: tenant occupied, owner-occupied, transfer details, the location where owners receive mail
Alternatively, while it’s not free, if you’re trying to grow your business, using a tool like PropertyRadar can save you a ton of time, frustration, and money by pulling all this information, and a lot more, into an easy-to-use interface. The data is enriched with demographics and life events, and with the ability to mix & match data to customize lists and the flexibility to stack lists, you end up with powerful, actionable lists.
Further refining your shortlist of prospects ensures the marketing campaigns and activities you launch are hyperlocal, hyper-targeted, and far more effective.
Why do serious wholesalers often use public records to refine their drive-for-dollars list? Consider these scenarios:
- The owner-occupant purchased the property 60 days ago and simply hasn’t had time to take on needed repairs.
- The landlord owns a target property and, upon further review, 10 other properties are free and clear in town. All properties were purchased over 20 years ago and the landlord is over 70 years old.
- A rental is owned by a couple that recently got a divorce.
- The owner-occupant is an 80-year-old woman that took out a reverse mortgage after her husband died. Taxes and the loan are both delinquent, but she has 50% equity in the property.
- An owner-occupant couple with a new baby have only owned for three years and fire recently destroyed their home.
Hopefully, you’re seeing how layering demographic and life event data into your lists gives you the insight you need to tailor your marketing message & sales pitch to be more personal and approachable. It can even change your negotiating approach.
Take the example of the 70-year-old landlord with 11 free-and-clear properties in poor condition. Going into the conversation knowing details on all the properties, what it would take to fix them, and details on how long he’s owned them allow you to have a far different conversation about his portfolio, not just a single property. Perhaps he would rather consider carrying paper to keep income but lose the headaches of property management.
Public records data allows you to consider creative strategies that Wall Street won’t touch.
Think of it like this. You are the detective. The drive-for-dollars list contains your suspects, and public records are the clues that help you identify solid prospects. You’ll close more deals by sending the right message at the right time to the right people.
Direct Mail
Much like classified ads, some see direct mail as a dated strategy. Yet, direct mail remains one of the top deal drivers in the real estate, mortgage, investor, and service industries. Even Wall Street spends millions on direct mail because it works.
Direct mail is an incredible follow-up marketing channel for your driving-for-dollars list. It’s relatively inexpensive when you’re hyper-targeting and only mailing to true prospects – people most likely to be receptive to your services.
When you use public records to refine the mailers to make them more personal, it has the power to make them more memorable.
Need some inspiration? Check out these recent mailers from Wall Street and ibuyer brands on rental properties.
Sundae.com is a Wall Street player that buys in multiple states from landlords and owner-occupants. The company uses direct mail, billboards, and digital paid ads to drive traffic. Unique to their model is they don’t buy, fix, and repair all their projects. They wholesale a fair amount to local real estate investors hence the 12+ average offers message in this direct mail piece. Public records were used to personalize the letter, feature property details, and feature similar transactions Sundae completed. It was sent to the landlord’s preferred mailing address.
Opendoor is currently the largest ibuyer in the US. They target landlords and owner-occupants, but the focus currently is on properties that need minimal work. Public records used in this mailer were only used to personalize the letter and send it to the landlord’s preferred mailing address. Funny enough, Aaron sold his Orlando property a year earlier, so the Opendoor Orlando team may be using outdated data.
Swifthomes is a single-family rental fund that buys properties from landlords and owner-occupants. This direct mail piece included a detachable business card with detail on how to get your cash offer. The top of the mailer looks like a check featuring the offer amount. Public records were used to personalize the offer with the name on the check and greeting as well as send to the landlord’s mailing address.
These mailers prove Wall Street believes in the power of direct mail and the use of public records to personalize marketing. These great examples also show branding, layout design, key selling points, and the method in which the companies want sellers to respond (call or web).
These mailers should inspire you. There’s no reason you can’t be a direct mail expert and beat Wall Street at their own game. They don’t know your market as intimately as you do. You can include personal touches they can’t and more often than not, sellers will want to work with someone local, not some big corporate entity based out of New York City.
While networking, classified ads, driving for dollars, and direct mail are not the only marketing channels that will drive deal flow, we’ve found these are the most popular amongst successful wholesalers. Your imagination and wallet will dictate other channels that drive appropriate leads your way.
Creating & Nurturing Your List of Cash Buyers
A wholesaler does not earn their finder’s or assignment fee until a deal closes, so building a qualified cash buyers list is critical. The list doesn’t need to be huge, but it does need to be a solid list of qualified buyers ready to close. Ideally, qualities of prospective buyers include:
- Experienced in either flipping or rentals
- Understanding speed is critical
- Has access to cash to close
- Good communicator
- Can handle multiple projects
Top 4 Most Promising Sources of Potential Buyers for Wholesalers:
- Real estate investor associations and clubs: You'll find a mix of experienced and inexperienced prospective buyers here. Seek out the club organizer and ask to be pointed in the direction of experienced buyers.
- Trustee sales: Courthouse step investors have cash, close quickly, and are accustomed to closing on properties where they have not been able to get inside the property. Stop by your local courthouse sale to meet them or their surrogates.
- Public records: You can search for recent cash buyers who purchased properties in your target area. You can even do research before you contact them on the kind of properties and rehabs they typically do.
- Referrals: Hopefully you’ve discovered other professionals interested in real estate or may be able to refer flippers or landlords while networking.
There are other creative ways to find cash buyers but these are tailored to wholesalers. You want to avoid buyers who could hurt your reputation and create liability by backing out of a lucrative transaction at the last minute.
There's no set formula on how to qualify your buyers. But it’s critical to ensure that you can trust your buyers can and will come through for you when you lock up a deal.
6 Questions to Ask Qualify Buyers Before Adding Them to Your List:
- What were the last three flip projects to verify experience
- Ask to see current bank statements to verify cash on hand
- Current letter of credit with a reputable hard money lender
- Pre-approval letter from your preferred hard money lender
- Entity documents for clarity on how they plan to take title
- What’s their preferred method of communication
Two components of a strong investor offer are cash and speed. You need buyers that are qualified, financially prepared, experienced, and communicate so you can get the deal locked up and closed in a quick, no B.S. manner.
While you want to build a list of qualified buyers, buyers will also want to know they are working with a pro.
To keep the deals flowing, it’s critical you avoid earning yourself a poor reputation by burning your buyers.
6 Things You Must Avoid Doing That Will Burn Your Buyers:
- Not delivering deals that match buyer’s criteria
- Sending out deals with little detail or pictures
- Sharing unrealistic rehab estimates
- Pushing unrealistic valuations
- Including outdated comps
- Never being able to deliver a deal
While the wholesaler has no control of the rehab decisions and can never guarantee a flipper will make money once a deal is closed, there needs to be enough room in the deal for the flipper to pay a finder’s fee, purchase the property, do the repairs, and still make a decent profit. Burning a buyer sours that relationship and can ultimately poison the well – preventing you from growing your business. Investors talk.
Licensing, Disclosures, and Fees for Wholesalers
In most states, a wholesaler does not need a real estate license. However, it’s important to check with your local state consistently as this may be changing. With tight inventory and housing affordability a concern across the US, many states are acutely focused on housing and protecting consumers.
Your local state may have rules around licensing, fees, marketing, and required disclosures during transactions. Failing to follow state rules could expose your business to unnecessary risk. Ultimately, you may decide having a real estate license opens up the potential for other revenue sources as well as lowers overall business risk by keeping you abreast of important law changes.
Take Your Wholesaling Business To The Next Level Today!
We’ve covered insider tips of the business of wholesaling, how to start finding deals, refining leads with public records, and how to build a strong buyers list. It's go time.
With solid planning and focus, you can take your wholesaling business to the next level. And with PropertyRadar on your side, you can take it there a whole lot faster.
