- How does wholesale real estate work?
- 3 steps to being a real estate wholesaler
- Real estate wholesaler daily habits
Many would-be real estate investors find wholesaling to be a great entry point into the field of investing. With its process of finding under-valued properties and either selling them outright or assigning the contract to a buyer — without doing any repairs on the property — wholesaling is a great way to learn the craft of real estate investing, while making money in the process.
But what does it really entail to be a real estate wholesaler? What do you need to do (on a daily basis) to achieve your real estate wholesaling goals? And what does a typical day for a real estate wholesale investor actually look like?
Here’s a quick look at a typical eight-hour day for a full-time real estate wholesaler.
How Does Wholesale Real Estate Work?
Wholesaling real estate is a process that consists of finding a property with potential, putting that property under contract, and “selling the rights” to that property — so to speak —to another investor for a finders fee. Often compared to day trading stocks, real estate wholesaling is a great way for beginners to get their businesses up and running if they have little liquid capital to start.
There are two ways to successfully close a wholesale real estate deal. Firstly, the double close, which is when buyer A actually purchases a property, closes on the deal and the re-sells the property to buyer B. Secondly is the “assignment of contract”, which is when buyer A puts a property under contract but adds an “assignment clause” to the contract that allows them to pass the rights to another buyer (i.e. buyer B). Buyer A is then paid by buyer B a percentage of the cost of the property.
To learn more about the comprehensive process of wholesaling real estate, check out our beginner’s guide to wholesaling. If you think you have what it takes, keep reading for an action plan that will lead you to success.
[ Rental property investor, rehabber or wholesaler? Get to know which investing strategy is the best fit for YOUR personality by attending a FREE real estate class offered in your local area. ]
3 Steps To Being A Real Estate Wholesaler
Most investors choose to become a real estate wholesaler before anything else. At the very least, wholesaling has become synonymous with the first step of investing in real estate; it can be the fastest, easiest and most risk-averse exit strategy when executed flawlessly. That said, carrying out the perfect wholesale isn’t something that will happen overnight. A truly great real estate wholesaler isn’t born, they are created. More specifically, becoming a real estate wholesaler will require a lot of hard work, a mind for due diligence, and a good system to follow. Having said that, here’s a brief outline of the steps it will take to become a successful real estate wholesaler:
- Find The Buyers Traditionally, real estate investors will need to have a deal lined up before they can do anything, but wholesaling is the exception. In fact, even prior to finding a deal, it’s good practice for wholesalers to have what the industry calls a buyers list. As its name suggests, a buyers list is a list of potential buyers for future deals. In a perfect world, wholesalers will already have buyers for the deals they are going to have in the future. That way, they can assign he contract and close the deal as soon as possible. That’s an important distinction to make: lining up buyers first will make wholesaling that much easier. This is where having a trustworthy network comes into play. Subsequent investors on a quality buyers list will be ready and willing to take the deals you send their way, all while providing you with a little extra money.
- Find The Sellers: It should go without saying, but there is no wholesale deal without a seller. Therefore, the next thing investors should do after lining up buyers is find a property worth wholesaling. There’s no difference between finding wholesale properties and rehabbing properties, only that wholesalers need to be fully transparent and clearly define their role in the transaction. After all, the property is probably going to be wholesaled to an end buyer who will end up rehabbing it.
- Connect The Interested Parties: Once a real estate wholesaler has two interested parties, it’s time to execute one of two strategies: the double close or the assignment of contract (each of which we will go into detail about later).
How To Be A Successful Real Estate Wholesaler
Becoming a successful real estate wholesaler is the first step of mastering the real estate investing industry. As a result, it will require investors to retain a great deal of knowledge about the industry. After all, it’s most likely the first exit strategy they will implement.
The first thing investors will need to do is develop an intimate familiarity with the industry as a whole. That means getting to know the terms, the processes, systems and the ins-and-outs of everything. Perhaps even more importantly, however, real estate wholesalers will need to build a trustworthy network. Remember the buyers list we talked about earlier? It’ll play a very important role when assigning contracts and conducting double closings. Remember, real estate is a people business; the people you align yourself with can make or break your success as a wholesaler. For a more detailed idea of the traits successful wholesalers possess, let’s take a look at what a day in the life of a wholesaler looks like.
Daily Habits Of A Successful Real Estate Wholesaler
- Step 1: Partake in a curated morning routine.
- Step 2: Research the happenings of your local market.
- Step 3: Work on your brand.
- Step 4: Evaluate your current deals.
- Step 5: Attend a networking event.
- Step 6: Make an offer.
- Step 7: Turn to your buyers list.
- Step 8: Close a deal.
While it may not be possible to work on every aspect of your business every single day, doing so can be a good goal to keep in the back of your mind. Regardless of your experience, starting the day off with an effective morning routine is crucial for those who want to be successful real estate wholesalers. Follow the action plan below for a day that encompasses what it takes to wholesale real estate effectively.
7am – 9am (Pre-Work Morning Routine)
Successful entrepreneurs know the importance of having a productive (and consistent) morning routine that primes them for success throughout the day. Even something as simple as making the bed, according to a survey by Hunch.com, can make you happier and more effective in your work day.
You want to tailor your morning routine around actions that empower you and get you energized and ready for the rest of your working day. These include daily actions like:
- Writing in a journal
- Planning your monthly, quarterly and yearly goals
- Eating a healthy breakfast
- Meditation and/or visualization
- Any activity that helps you feel focused, confident and ready to do your best
9am-10am (Local Market Research)
There’s no substitute for knowing your local market inside and out. Not only will it help you better judge the profit potential of future deals but will help you find innovative ways to acquire leads. Local market research includes:
- Knowing the price points of specific neighborhoods
- Studying the competition
- Tracking market inventory (number of houses officially listed for sale)
- Understanding zoning laws
- Building a Rolodex of key real estate professionals (Realtors, lenders, brokers, contractors, etc.)
10am – 11am (Branding and Marketing)
It’s nearly impossible to be a successful real estate wholesaler without also being a successful marketer. And this means taking a two-pronged approach. One is creating branding assets that give your wholesaling real estate business credibility. This includes things like:
- Business cards
- Seller credibility packet
- Buyer credibility packet
- Investor credibility packet
- A website and/or blog
- Active social media platforms (such as a Facebook page and a LinkedIn profile)
- Business name and logo
Though these assets don’t bring in a huge amount of leads on their own, they do give your business much-needed authority in a crowded real estate marketplace.
As for the marketing side, you’ll want to have numerous lead-generation strategies going, at once, to see which one works best for you. Popular wholesale marketing options include:
- Direct mail campaigns
- Bandit signs
- Driving for dollars
- Online advertising
- The MLS (Yes, you can find leads here)
11am – 12pm (Deal Evaluation)
Once you’ve got leads coming in, it’s time to sift through your options and narrow down which properties you’ll make offers on. (And which you’ll avoid like the plague.)
Though this process can be frustrating — especially when you rule out properties that don’t meet your criteria — proper deal evaluation can save you a whole lot of money in the end.
Evaluating properties to see how they align with your wholesale exit strategy includes actions like:
- Gathering information about the seller (their motivation, current debt, bottom-line price)
- Gathering information about the property (condition, listing status, square footage)
- Determining MLS market comps for the property
- Determining Off-market comps for the property
- Coming up with an estimated resale price
12pm – 1pm (Lunch: Building Your Network)
Everybody’s gotta eat, right? So, why not transform your daily calorie upload into an opportunity to broaden your real estate network? You could sample some local cuisine with:
- Private investors
- Hard money lenders
- Fellow wholesalers
- Real estate agents
- Title agents
- Mortgage brokers
- Probate attorneys
- Anyone you can think of that will help boost your real estate network
1pm – 2pm (Making Offers)
If there’s one thing holding back the novice real estate wholesaler, it’s that they simply don’t make enough offers. You’ll never know (in advance) which offers will be accepted, and which won’t, so it’s imperative you spend a good portion of your time, making more/better offers than you are currently. This means:
- Learning how to assess what a seller really wants (emotionally and financially)
- Researching the seller and/or agent you might be working with
- Constantly developing your skills as a negotiator
- Setting up your financing (if needed)
- Knowing what to look for when you “walk through a property”
- Crunching your numbers so you know what to offer (when the time comes)
2pm – 3pm (Creating a Buyers List)
Too often many dabbling into real estate wholesaling for the first time will wait until a deal on a property has closed before they create a wholesale buyers list. This is not the right approach. Instead, try to create a buyers list as early as possible, so you’re ready to move swiftly to sell a property upon closing of a deal. This includes looking for buyers with sources such as:
- Facebook real estate groups
- Local REIA meetings
- Networking events
- Trade shows
- Referrals from your real estate network (See, that networking lunch does pay off)
3pm-4pm (Closing Deals)
Here’s the fun part; where you get to close deals and (hopefully) start to see profits. No matter what kind of wholesale closing you do — whether assigning the contract over to a cash buyer or buying outright and doing a “double close” — here are some strategies to help you reach closing faster than you thought possible:
- Create a detailed, accurate cost of repairs on the property
- Instill urgency in potential buyers with a deadline
- Confirm financing by examining a proof-of-funds letter
- Signing or (assigning) all proper sales agreements and legal documents
- Have an escrow team ready to get into closing as soon as possible
4pm- 5pm (Building Your Team)
Once you’ve got your real estate wholesale strategy down, it’s time to build out your team — and take time-consuming tasks off your real estate wholesaler to-do list. This usually means performing a task yourself first, and then document your process. (So you can eventually hand it off to someone else.)
Time-consuming, though valuable tasks, include business functions like:
- Putting up bandit signs
- Implementing direct mail campaigns
- Craigslist posting
- Inbound and outbound phone calls
- All things social media
- General office duties (reports, email, etc.)
The last thing you want to outsource is negotiations. This is where your biggest profits lie and the foundation of your long-term business lives.
Not every day is going to to according to plan. Not every item on your real estate wholesaler to-do list will be checked off in the course of a 24-hour period.
But the more you can strategically plan your days around high-impact activities, that directly move your real estate wholesaling career forward, then you’ll find not just your investing career improves — so does your ability to be productive. No matter what the day throws your way.