“Great, another bragging real estate guy, just what I needed! “
That would be the first words out of my mouth reading that title. I mean, how many times have you seen a speaker at the front of the room tell you how poor he was, how he scraped together all his money to buy a course on wholesaling houses “to invest in his future”, how filthy rich he got, and “all you have to do is buy my course and you will make millions just like me.”
Don’t Fall for the “$997”
I know for me on the road to where I am today I have heard tons of those speeches, even invested in a few, some better than others, but ultimately I always ended up with half the information I needed. To top it off at the end of the course I was shamelessly being presented with a huge up-sell at an even greater cost promising the key to getting rich is this “Mastermind/Coaching/Mentorship”. Needless to say most of them were absolute jokes. Now don’t get me wrong, the right mentor/coach/mastermind is priceless, and I am daily seeking out quality relationships with key people who are in my industry and have made it to where I want to go. Although, what I am saying, is that the probability would lean towards if the gurus pitch starts out with “all these products added together are worth over $10,000 dollars, and for today, and today only, the first 10 people to sign up will get this amazing deal for only $997”, you’re probably getting suckered.
If not the guru, why you?
Good question, but I guarantee within reason, that by the time you are done reading through this series of articles you will have a much stronger, detailed, and executable understanding of a wholesale transaction than any one of those “$997” courses. This article will bring in aspects of my journey to where I am today, will be as close to a how to as I can get it without putting you to sleep, and it will be broken down into several key sections. My intent is that by the time you are done reading this post you will have a full understanding of the wholesale cycle and the steps needed to get you started wholesaling houses. With that being said though, wholesaling houses is the hardest easy thing to do for most new investors, which means I will provide a general overview, and then follow up on each specific step with an article specifically covering just that section. Essentially, I am showing you the big picture, then giving you a microscope to inspect all the fine details 🙂
Did I mention that Wholesaling houses is the Hardest Easy Thing for Many New Investors?
As I will highlight below, there isn’t many steps to making these transactions happen, but many people just can’t push through that “what if” fear and complete the first deal. I know for a fact it can be VERY intimidating to get out there and do something like this, especially when talking about hundreds of thousands of dollars negotiating to buy somebody’s home. There are thousands of “what ifs”, but ask yourself this one, what if I do this and it works? Imagine how your lifestyle could change just completing your first deal. Putting $20k into your kid’s college fund, paying down your debt, going on your dream vacation? Ya know what one of the nicest things about wholesaling houses is? It rarely involves any of your own money, and you can make $20k in just a few hours of work. I am by no means going to say that wholesaling doesn’t require work – just saying that to make a transaction happen it’s not difficult. I was talking to a good friend of mine Nancy today, she’s from California, and she made over $50k on her first one! That’s a years’ worth of work for most people, and done with no money out of her pocket.
The Glossary for Wholesaling Houses
Generally you find the glossary at the end of the book, but there are many terms wrapped around wholesaling and it wouldn’t benefit you to read this without at least the beginners understanding of the jargon. By no means is this glossary complete, but it will get you through this tutorial without hopping over to Google 15 times. Some of the definitions may not stick right away – don’t worry, as you follow along just flip back to this part and over time these terms will be first hand.
- Wholesale Assignment – This strategy is when you offer to purchase a property, get it under contract, and then sell your rights to the contract. This is also sometimes referred to as an A/C transaction.
- Wholesale Double Close – This strategy is when you offer to purchase a property, get it under contract, purchase the property, and within just a few hours resell the property to a new buyer. This is called several different things of which a few include simultaneous close and an A/BB/C transaction.
- Wet Closing – When you are bringing the money to buy from the seller, and then the Final Buyer brings their money to buy from you. (You don’t have to have the money yourself, there are “transactional lenders” who will fund these types of deals)
- Dry Closing – When you use your Final Buyer’s money to fund a transaction. Basically your Final Buyer pays you for the property, and then you use their money to turn around and pay for the property from the seller. (This is not nearly as common after 2008, but some title companies will still allow this with the proper disclosures)
- Wholetail – This is when you purchase a property at a discount, and then resell the property for a profit to a retail “non-investor” buyer.
- EMD – Earnest money deposit – The money you deposit with the title company, and is often refundable per the terms of your contract. This is a “good faith” deposit on the purchase of the property, but most contracts clearly state the terms under which you may receive the deposit back. Be sure to read and understand your contract
- Option – An option is basically you reserving the right, for a nominal fee, to back out of the contract, for any reason, during a specified amount of time. This is sometime also referred to as an “inspection period”.
- Open of escrow – Once you receive the contract it is submitted to a title company along with your EMD, and the title company then performs their duties to resolve any and all necessary tasks to prepare the title of the home for sale.
- Encumbrance – anything that could prevent a clean transfer of title, often items such as liens, past due taxes, law suits/judgments, etc. These items must be resolved, or accepted by the buyer, before the transfer of title.
Have I bored ya yet? This is by no means an all-inclusive Glossary and definitely isn’t the end all be all of explanations, but it will get ya rolling down the road with me. I mentioned in the Glossary a reference to wholesale assignment and wholesale double close being called an A/C and AB/BC transaction. Now I don’t want to create confusion but I do want to make sure you understand this because many people get caught up on that term. When using this term, the letter “A” is always used to reference a seller, “B” represents you, and “C” represents the final buyer. Remember when wholesaling you are not the final buyer; you are just the “middle man”. Ok so let’s look at A/C and replace the letters with the words – Seller/Final Buyer. What that means is that the Seller sold directly to the Final Buyer and you as the middle man never took possession of the property, you just “assigned” your rights to a Final Buyer. On an AB/BC transaction it goes – Seller –> You – You –> Final Buyer meaning you actually purchased the home, and then resold it to the Final Buyer for a profit – hence the AB/BC.
Whew! Now Let’s Get the Timeline Laid Out
Like I had mentioned earlier, I plan on giving you the 50,000 ft. view of a typical wholesale transaction in the first part of this series of articles, and then follow up and break down each key component into an executable detailed piece. The general steps of a wholesale transaction that I want to highlight are:
2. Qualifying Leads
|3. Negotiating the Contract||4. Open of Escrow|
|5. Marketing for a Final Buyer||6. Qualifying a Buyer||7. Executing an Assignment||8. The Closing Process|
Wholesale Double Close
|2. Qualifying Leads||3. Negotiating the Contract||4. Open of Escrow|
|5. Marketing for a Final Buyer||6. Qualifying a Buyer||7. Executing a Purchase Agreement||8. The Closing Process|
Did that look difficult?
Now there is obviously little intricacies that are involved in each one of those steps, and you will know what they are as I detail them throughout this series of articles, but ultimately wholesaling is pretty damn simple! After being through many real estate education circles one of the number one things I seem to find time and time again is people always fail to perform step one. Everybody seems to think they can just jump to step 8. No no no no no. NO. You have to market. Whether you market by networking, direct mail, bandit signs etc., people need to know you want to buy houses.
Harvard Grads Need Not Apply
Are you not good at marketing? Don’t worry – you don’t need to be a Marketing Major from Harvard to succeed at this. Real estate marketing can be very simple. Have you ever seen a little 18×24 yellow sign at a stop light that says we buy houses? THEY WORK. Are you scared to talk on the phone to sellers? Partner with somebody who loves talking on the phone! Can’t find somebody? Search for homes for sale on Craigslist and call them up to talk about buying their home, get comfortable, and just keep calling until you are. Ultimately you don’t have to be good at every aspect of it, but work on the areas you are needing help in or partner with somebody who compliments your weakness, and move forward.
Does this really work?
I am turning 31 this year, I quit my job at 28, and have been living a life of financial freedom ever since. I want to share that success with you and hopefully my confidence can inspire some of you to take the first steps towards a future full of your dreams. I do not have a “$997” course for sale, I will not get rich if you read this article – I am sharing this because I want others to have the opportunities in life that I have found. If I am able to inspire somebody to take that next step then it was well worth my time.
This is part one of a 9 part series of articles that is meant to introduce you into the art of wholesaling houses, and give you the necessary actionable items to take the next steps. I would recommend that you read them in order, as that is generally how the transactions go. I intend on doing several of these articles on topics ranging from short sales, probates, foreclosures and REOs, subject-to, wraps, and owner financing as well as touching base on Multi-family and many other topics. Do you have any questions, comments, things that are working for you, or a specific topic you would like me to write about next? Please let me know in the comments below!