The popularity of real estate wholesaling is a tribute to its viability and potential profitability as a real estate investment strategy. While it is essential to understand how to complete a wholesale real estate deal, your knowledge of this investment is incomplete until you know how to find wholesale properties.
Distressed, outdated, or damaged properties are becoming more accessible, and the time has never been riper for investors to capitalize on them. But how does one pivot from ideas to action?
Wholesaling isn't just about transactions, It's the finesse of locating undervalued properties, the diamonds in the rough, that can be wholesaled. While traditional avenues like the MLS offer the best pathways, the true art is leveraging unconventional methods to identify those elusive wholesale deals.
In this guide, you'll learn exactly what wholesale properties are and how to find wholesale properties - whether you're a retail buyer, seasoned investor, or new wholesaler. Let's dive right in!
*Before we begin our guide on finding properties to wholesale, we invite you to view our video on How To Wholesale Real Estate Step by Step (IN 21 DAYS OR LESS)! Host and CEO of Real Estate Skills, Alex Martinez, provides a comprehensive, step-by-step guide for beginners to start wholesaling real estate!
At their core, wholesale properties are often distressed properties, making them invaluable assets for those diving into the wholesaling realm. It's crucial to note that the term "wholesaling" isn't a descriptor for the property itself but denotes the strategic approach investors adopt to profit from such properties.
Wholesale properties encompass a broad range—ranging from single-family dwellings and multi-unit residences to rental establishments and even commercial properties. What they have in common is the presence of highly motivated sellers seeking to expedite the selling process.
There are two prevalent strategies that property wholesalers typically employ to navigate wholesale property deals:
In both strategies, the aim remains the same: acquire properties at a lower cost and sell them for a profit. However, the pathways to achieve this end goal differ, with each offering its unique advantages.
Unlocking the potential of wholesaling in real estate hinges on one crucial aspect: finding the right properties to wholesale. Again, these often come in the form of distressed real estate—properties teetering on the brink of tax or mortgage pre-foreclosure or those that have already been repossessed.
While wholesales present a golden opportunity for investors to secure deals at favorable prices, they aren't as readily available as traditional listings on the MLS. To truly tap into the world of wholesale homes, one must venture beyond conventional methods and explore a diverse array of strategies. Let's delve into the various avenues you can pursue to unearth these hidden gems:
The Multiple Listing Service, or MLS, stands as a pivotal tool in the world of real estate. Established by cooperative real estate brokers, the MLS is a consolidated database, housing detailed information about properties up for sale. Its primary objective is to aid brokers in viewing one another's property listings, streamlining the process of matching prospective homebuyers with sellers.
A property that has been "listed" refers to one that's been added to this extensive database. It's crucial to note that the MLS isn't just accessible by anyone—it requires the expertise of a licensed real estate professional. This exclusivity comes from its restricted access, necessitating membership and associated fees. But what makes the MLS such a vital resource for wholesale property seekers?
The MLS provides unparalleled exposure. It's a hotbed for property listings, both regular and distressed. And because of its prominence, those who venture into the MLS realm are likely to face fierce competition, especially from seasoned veterans. Thus, collaborating with a real estate agent or licensee can give you a strategic edge, amalgamating your strengths.
However, not all that glitters on the MLS is gold. While it can be a treasure trove of undervalued or distressed properties, it's essential to have a discerning eye. Not every listing translates into a lucrative wholesale opportunity. Given the presence of real estate agents, the wholesaling process, when sourced from the MLS, might present a unique set of challenges. There might be additional steps and protocols to adhere to.
Yet, amidst these intricacies, with the right property in sight and a seller motivated to make a deal, the MLS can emerge as a potent source for wholesale leads.
While the MLS stands as the best way to find properties for wholesaling, it usually requires access from a licensed real estate professional. However, Real Estate Skills has proven methods to get access to the MLS even without a license! Find out how to get access in our video below.
A foreclosed property is the result of a borrower’s failure to keep up with their mortgage obligations. Each state’s foreclosure laws may differ, but most will commence a foreclosure filing when a mortgage goes 90 days delinquent. There are a number of free websites dedicated to listings of foreclosures and properties in various states of ownership:
Read Also: Foreclosure.com Review
Pre-foreclosure refers to the stage in the foreclosure process when proceedings are still pending. It's the critical period initiated by the lender, marked by the filing of a lis pendens (in a judicial foreclosure) or a notice-of-default (in nonjudicial foreclosure scenarios). But why are these properties particularly enticing for wholesale investors?
The essence of pre-foreclosure lies in the property's potential to become a short sale. The clock is ticking during this phase, leaving property owners in a race against time to salvage any residual equity. As the sand slips through the hourglass, these sellers become increasingly motivated, desperate to finalize a sale before foreclosure reaches its inevitable conclusion. This high motivation level creates a fertile ground for wholesale opportunities.
However, sourcing wholesale deals from pre-foreclosures isn't a straightforward endeavor. Unlike properties from private sellers, pre-foreclosures require the bank's stamp of approval to wrap up the transaction. While it might seem that banks would eagerly facilitate such deals, it's not always the case. Certain banks impose restrictions, prohibiting buyers from reselling or assigning the property within a set timeframe—often extending beyond what a typical real estate investor would find palatable.
The world of pre-foreclosure wholesaling demands meticulous attention to detail. Prospective wholesalers must invest time in comprehending each bank's contractual language related to short sales, ensuring the possibility of wholesaling remains on the table.
Moreover, it's crucial to grasp the nuances of a real estate wholesale contract. While the road might seem riddled with obstacles, the sheer complexity of pre-foreclosure deals could deter competitors, granting budding investors a clear pathway to potentially untapped wholesale leads. Popular platforms where one can access pre-foreclosure listings include PropertyRadar, Realtor.com, LoopNet, and Movoto.
Real estate auctions offer a unique and transparent platform for various sellers, be it homeowners, lenders, government agencies, or even homebuilders, to showcase their properties to the public. But what makes them so attractive to real estate wholesalers? The primary allure lies in the nature of these properties: they're usually distressed, competitively priced, and in need of some tender loving care.
The bidding process typically starts with an opening price, set to cover the outstanding loan balance of a property in default. However, owing to the competitive nature of auctions, it's not uncommon for the final sale price to surpass this initial mark significantly. As a potential buyer, it's crucial to come well-prepared. Equip yourself with thorough research, set clear boundaries for your bids, and always be ready with a cash payment, as most auction wins demand immediate cash settlements.
Diving into the world of auctions can seem intimidating, but resources like the Treasury Department can be an invaluable guide, offering insights and listings for potential wholesale properties. Moreover, numerous federal and quasi-federal agencies host auctions, such as the FDIC, USDA, and Public Land broadening the horizons for wholesalers in search of their next big deal.
Local real estate marketing can often be a great way to start and develop a database of properties to utilize for current or future wholesale real estate market deals. There are affordable marketing options to catch the attention of homeowners or sellers who are looking to unload a property off-market properties.
Marketing can take on many forms – from local T.V. advertising to simple bandit signs; there are many cost-effective ways to attract potential new business. Bulk order bandit signs of getting the best price per sign.
The reality is that a sign placed at the right intersection may be more effective than some of the more traditional ways to find wholesale properties. Other options include a magnetic car sign or door hangers, to name a few.
Visiting local attorneys who specialize in family or probate law is a smart way to find wholesale properties because these legal professionals are often facilitating the sale of a property that is due to a death, divorce, or separation. These property sales are often last minute and defined by a sense of urgency. There are online opportunities such as USprobateleads.com, Successorsdata.com, and Batch Leads.
Direct mail, a time-tested strategy leveraging the U.S. Post Office, has been an invaluable tool in the real estate realm for numerous years. Contrary to the belief that direct mail is a relic from the past, its efficacy remains undiminished.
So, why is direct mail a standout? For one, it resonates with recipients due to its tangible nature, fostering a sense of trust. Moreover, while it demands ingenuity to make your campaign stand out, it tends to face less competition compared to digital alternatives. Whether it's through postcards, brochures, or other formats, the modern landscape offers a plethora of innovative ways to present your proposal. Essential elements of a successful campaign include attractive promotions and an unmistakable call-to-action (CTA).
However, to unlock the true potential of direct mail, specificity is key. This means narrowing down your target audience and conducting trial campaigns before ramping up your efforts. Targeted lists can hone in on high-potential leads such as properties in probate, absentee owners, or those on the brink of pre-foreclosure. In essence, direct mail equips real estate wholesalers with the power to sow the idea of selling even before a potential seller has given it serious thought.
For-sale-by-owner properties, abbreviated as FSBOs, have perpetually been a goldmine for astute real estate investors. One of the cardinal reasons homeowners opt for the FSBO route is to sidestep the often substantial realtor commissions, rendering them more inclined to negotiate.
An innovative approach to leverage this opportunity is by curating workshops tailored to provide FSBOs with pragmatic and insightful advice. Such workshops can be organized at diverse venues ranging from hotels and community centers to even local eateries. By advertising these workshops either through local mediums or by zeroing in on potential homeowners who might gain from them, you enhance your chances of striking your next lucrative deal. It's entirely possible that your next seminar attendee is also your next deal.
Remember, while FSBO properties do hold immense potential, they must be competitively priced to be considered feasible for wholesaling. Often, FSBO sellers are motivated by the prospect of evading the typical realtor fees, which means they might expect a higher profit from the sale. However, they may also be avoiding these fees due to financial constraints, making them more open to offers. Always be transparent about potential savings, like the 3% buyer’s agent commission, when presenting your proposition. It's this strategic blend of offering value and identifying opportunities that can set you apart in the FSBO arena.
Driving for dollars retains effectiveness In a world that thrives on digital technology and online opportunities. This hands-on strategy has real estate wholesalers literally driving around neighborhoods, scouting for distressed properties that hint at eager sellers. When you drive around, your goal is to spot properties that visibly show signs of neglect. Some of these telltale indicators are:
As you spot these signs, the key is to log details meticulously. For instance, noting down: "4567 Maple Street — Damaged roof, overgrown bushes, uncollected trash in the yard" helps in future outreach.
While driving for dollars may seem rudimentary, it's a tactic that has proven its mettle time and again. It’s not just about finding properties but also about understanding neighborhoods, their dynamics, and the hidden opportunities they present. With a mix of diligence, keen observation, and the right tools, it remains a method every real estate wholesaler should consider.
Part of finding a local wholesale property means becoming a part of the fabric of the community and this gives you an advantage if you manage to build up your real estate network. In addition to meeting potential wholesalers and real estate professionals, there is a lot to learn from other more experienced wholesalers attending these events.
Check out local real estate meetups, social media events, local networking events, or investment clubs, among others. Proactively engage real estate licensees who may become future colleagues.
A smaller lender may be willing to share their foreclosure lists with trusted professionals. These properties offer great opportunities to grab a wholesale property before they hit the real estate market and strong competition from other investors.
Cold calling stands as a tried-and-true method for uncovering hidden opportunities. It's not everyone's favorite strategy, but for those with a knack for conversation and a keen sense of persistence, it can be incredibly fruitful.
Whether you're reaching out to potential sellers directly or connecting with experienced private money lenders, each call might just lead you to an unexpected wholesale deal. The key is to gather data, either from real estate websites or public records, to hone in on potential targets.
Couple this with a genuine approach, and you might be surprised at how receptive people can be, even over a cold call. So, take a deep breath, pick up the phone, and dive into the world of possibilities. Remember, every successful deal begins with a simple conversation.
Dive into real estate wholesaling with confidence. Download our FREE Wholesaling Cold Calling Script!
Some companies specialize in compiling and customizing lead generation lists. These lists can be used to locate a motivated owner who wants to sell their wholesale investment or rental property. Examples of these paid data resources include:
To maintain a consistent flow of wholesale property opportunities, a real estate wholesaler should have several deals working at various stages – from lead generation to assignment to closing. There are two primary ways to ensure a steady stream of leads –
The internet has various free marketing channels, like Craigslist, that may offer a golden opportunity for a wholesaler.
If you are creative and have the skills, put together a short video (there are free services like Animoto) explaining how you can help a seller with an urgent need to sell.
Real estate wholesaling is a low-risk strategy compared to other real estate investment techniques. This does not mean that wholesaling houses is a slam-dunk and done without effort. On the contrary, wholesalers with the ability to appropriately evaluate potential wholesale properties are the ones that tend to be most successful.
Before a wholesaler makes an offer, they must first understand the laws and regulations that govern the area in which they work. Then, a wholesaler must “crunch the numbers” to calculate potential profits and return on investment.
The profit a wholesale deal generates equals the difference between the original purchase price and the price of the home denoted in an assignment of contract - or the price delineated in a completely new real estate contract.
Wholesalers and flippers tend to follow industry-standard investment criteria – known as the 70% Rule.
For example, a wholesaler contracts a home priced at $300,000 with an after repair Value (ARV) (future market value) of $600,000.
Assigning or selling this rental investment property at a price above the $300,000 contracted purchase price would fall within the established investment criteria. House flipping experts look for distressed properties priced with a price tag that is no more than 70% of the ARV. So, in this example, the maximum price (@70% of ARV) would be $420,000.
As a result, a wholesaler would likely have the opportunity to assign their equitable interest to an alternative buyer at any price above the contracted $300,000 but below $420,000 – which provides impressive profit wiggle-room.
The above analysis is critical to understanding the maximum allowable offer (MAO) for any particular property. This analysis is not as simple as it sounds. While it is imperative to check similar properties in the neighborhood (called real estate comps), this is not the only applicable factor because specific properties –
*For in-depth training on finding wholesale real estate deals, Real Estate Skills offers extensive courses to get you ready to make your first investment! Attend our FREE training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!
Finding wholesale properties is a critical part of closing a successful deal. Once you find a property that meets your investment criteria, you must be ready to move quickly to avoid losing the deal to another wholesaler waiting in the wings.
Wholesaling offers these benefits:
Finally, be transparent and do your due diligence. Real estate wholesaling requires transparency, which builds professional trust.
Every month will be different. Some months may provide a viable investment with ten leads; other months may require twice the amount. But note, once a wholesale deal is located, the effort becomes completely worthwhile.
Before taking a leap of faith, new investors should take some time to attend our FREE training on wholesaling real estate!
By using our easy-to-follow guides, gaining expert mentorship, staying on top of market metrics, and developing a strong potential buyers list, you can begin to generate a steady stream of profit-making wholesale deals.
Join our mailing list to receive the latest news and updates from our team.
Don't worry, your information will not be shared.