How To Wholesale Real Estate In Arkansas: Step By Step (2023)Dec 27, 2022
Wholesaling is a popular real estate investing strategy that allows anyone to earn considerable fees, even if you don't have stellar credit or money saved for a down payment. With over 1.38 million housing units in Arkansas and a median property value of approximately $133,000, there is ample opportunity for wholesaling houses.
Whether you live in the Little Rock area or anywhere else in the state, you can make money finding real estate deals as a wholesaler if you're willing to put in the legwork. But you need to know the basics before you begin, so you don't waste time. Here is a detailed guide to help you get started in how to wholesale real estate in Arkansas.
- What Is Wholesaling Real Estate?
- How To Wholesale Real Estate In Arkansas (9 Steps)
- Is Wholesaling Legal In Arkansas?
- How Much Do Real Estate Wholesalers Make In Arkansas?
- Do You Need A License To Wholesale Real Estate In Arkansas?
- Is Wholesaling In Arkansas Easy?
- Final Thoughts On Wholesaling In Arkansas
What Is Wholesaling Real Estate?
Wholesaling real estate is a practice that involves scouting a deal on behalf of a real estate investor and earning a fee by selling them the contract.
House flippers and rental property investors are always looking for homes they can buy at a discount and rehab to sell at market value or rent out to tenants. But finding deals and negotiating prices is often time-consuming, and if they have too many projects on their plate already, they may decide to work with a wholesaler who can help find properties for them to flip.
A wholesaler's job is to go out and find distressed properties, contact the owner and get the home under contract at a rock bottom price. Distressed properties are typically in foreclosure, or the owner is underwater with taxes and maintenance and can no longer keep up with the bills.
If you drive around Little Rock or any other city in Arkansas, you'll likely spot a few houses that look abandoned or need repair. As a wholesaler, you'll contact the owner of those properties and then make them an offer that makes sense for your bottom line.
Once you find a homeowner who is ready to sell, you'll have them sign a real estate contract agreeing on a price. You'll then turn around and sell that contract to an investor at a markup, then collect the difference as an assignment fee. Wholesaling takes time and people skills to master. But it's a great way to earn sizeable checks without ever purchasing a property or risking your own credit. Here are the exact steps you'll take to get started with wholesaling.
How To Wholesale Real Estate In Arkansas
Here's our simple step by step process for wholesaling real estate in Arkansas:
- Partner With A Wholesale Mentor
- Learn Arkansas Real Estate Wholesaling Laws & Contracts
- Understand The Arkansas Real Estate Market & Lingo
- Build A Cash Buyers List
- Find Motivated Sellers & Distressed Properties
- Put Distressed Properties Under Contract
- Assign The Contract To Cash Buyer
- Close Deal And Collect Assignment Fee
- Double Close When Necessary
Step 1: Partner With A Wholesale Mentor:
You can go it alone if you feel confident in your ability to find and close deals, but most beginners are wise to find a wholesale mentor.
Wholesaling does not require formal education, but it takes time and patience to master. You'll have to go through plenty of trial and error until you find a reliable system that works for you. So it helps to find a mentor who can show you the ropes and help you avoid the mistakes they made when they started.
Your wholesale mentor could be another more experienced wholesaler or a real estate investor who has experience scouting their own properties. A wholesaler mentor will not only give you advice but can also introduce you to people in their network who may be able to help with your business.
Step 2: Learn Arkansas Real Estate Wholesaling Laws And Contracts
Before you start looking for deals, it's essential to do your research and study the local laws, so you avoid getting into trouble. It's also vital to understand what contracts are necessary for wholesale in Arkansas to prepare once you find a motivated seller.
Wholesaling real estate is perfectly legal in Arkansas. However, specific behavior is prohibited. For instance, you are not allowed to perform any of the services of a real estate broker if you are not licensed. The duties of a real estate broker in Arkansas include buying, selling, listing, auctioning, or negotiating a real estate transaction on behalf of a buyer or seller for a real estate commission. A wholesaler's job is to act as a middleman, not to represent either party in the transaction. You should further research the local license law to understand what is and isn't allowed.
It's also good to note that Arkansas is not an attorney-close state, which means a lawyer is not required to close a real estate sale. Although you may consult an attorney for legal advice on signing a wholesale real estate contract, you won't need to hire your own lawyer to close the sale (although the buyer and seller may want representation).
There are two contracts you should familiarize yourself with for wholesaling properties in Arkansas:
- Purchase Agreement
- The Assignment Contract
The purchase agreement is a standard document you will use to officiate the purchase of any real estate, whether you're wholesaling or not. The assignment of contract is the document that will allow you to transfer the ownership responsibilities over to the end buyer once the deal closes. Study these documents carefully to understand what they do and their relevance to the deal.
Step 3: Understand The Arkansas Real Estate Market And Lingo
You must also familiarize yourself with the local real estate market, and the lingo real estate professionals use if you want to be successful. Every real estate market is different, and studying the area's price points and conditions affecting property values is crucial.
For instance, the market in downtown Little Rock will likely vary significantly from a rural area in the Ozarks. So, study housing trends, median property values, demographic information, zoning codes, school districts, employment data, and anything else you think may be relevant. You can find this information on sites like Zillow and Realtor.com or check the public records or census data.
If you need help understanding the local market and picking up any jargon you may not understand, you should consider joining a local real estate organization and attending networking events. The Arkansas REALTORS® Association is an excellent place to start. They have various resources and guides to help you navigate the local Arkansas real estate market, including help finding a real estate agent and understanding local landlord-tenant laws.
The Arkansas Real Estate Investors Association (ARKREIA) is another excellent organization to join. They host frequent networking events and educational seminars where you can learn more about the real estate business. If it's unfeasible to attend one of these larger organizations, look for local real estate investing clubs or meetups in your area or even start your own podcast.
You'd be surprised by the number of people in your community who are likely to be into real estate investing, so don't be discouraged if you don't live in a big city.
Step 4: Build A Cash Buyer's List
Once you're well versed in the local trends and jargon, you should begin looking into cash buyers and start building a cash buyers list. Working with investors who can pay cash for a property is always preferable. Wholesale deals often move fast. So, if you wait for the buyer to obtain financing, you can quickly miss a good deal.
Investors with access to private and hard money loans will also work because they tend to close quickly. But, make sure they have all their ducks in a row before you rely on them to buy your wholesale property.
To build a cash buyers list, look for anyone interested in buying an investment property and who has the means to do so. There are many different ways you can find cash buyers.
Common methods include:
- Attending local real estate events
- Use Social Media
- Post Ads on Craigslist
- Post Bandit signs
- Work with an Investor Friendly Real Estate Agent
- Leverage Your Network
You can use many different strategies to connect with buyers, so you'll have to determine a method that works for you. As you connect with buyers, ask them a few basic questions and record the information for future reference.
Information you should obtain from cash buyers includes:
- Name and contact info
- Types of properties they buy
- Markets and locations they prefer
- How soon they're looking to buy
- How they are financing the purchase
- Any other relevant info
Compile this information into a spreadsheet, CRM, or any other system that works for you, and keep it organized for future access.
Also, check out this video on how to find cash buyers!
Step 5: Find Motivated Sellers And Distressed Properties
Next, you should begin scouting for distressed properties and contacting motivated sellers. You can use a variety of different methods when scouting wholesale properties. There is a method called driving for dollars where you simply drive around your neighborhood or target market looking for run-down or abandoned homes, then contact the homeowners.
You can also post bandit signs or ads on Craigslist or Facebook Marketplace that say "We Buy Houses" or something similar. You can also check public records for foreclosures, bankruptcy filings, divorce proceedings, or probate court actions. Be gentle when dealing with motivated sellers because they may be going through a difficult time in their lives.
Familiarize yourself with the Arkansas public record system to find owners and do a title search to look for unpaid taxes and other liens that may impact the viability of a deal.
Step 6: Get Distressed Property Under Contract
Once you find a property that will make a solid wholesale deal, you should approach the homeowner and make an offer. But before you do, it's important to crunch the numbers and be sure that you make an offer low enough to turn a profit for yourself and the end buyer. Familiarize yourself with a few key metrics to learn how to set your offers.
After Repair Value
The first is called the after-repair value or ARV, which refers to the amount the home should get when renovated to market standards. That's why you need to study the local market conditions in Arkansas before you begin wholesaling, so you have a general idea of a home's potential price.
You can get a rough idea of the ARV by pulling real estate comps from other homes in the area that have recently sold. For example, if the home has three bedrooms and one bathroom, look at Zillow for other recently sold three-bedroom bathroom homes. Divide the sales price by the square footage of each home, then take an average of each of your comps. Then use the following formula to calculate ARV.
Average Square Footage of Comps x Square Footage of the Home = ARV
This will give you a rough estimate of how much the home will sell for in good condition.
Maximum Allowable Offer
Next, you should determine your maximum acceptable offer or MAO to set the highest price you can pay and still make a profit.
Use this MAO formula to calculate:
ARV - Fixed Costs - Rehab Costs - Desired Profit or Equity = MAO
Fixed costs include the set costs of holding onto the property, including taxes, insurance, utilities, financing, etc. Rehab costs include the costs of renovating the property to market standards. The desired profit or equity is the amount the buyer will want to make on the deal.
You can easily find information on taxes, insurance, and average utility bills online to get a rough estimate of the fixed costs. You can also use a rehab calculator or hire a contractor to help you in estimating rehab costs. Desired profit and equity will depend on the investor, but most want to see at least an 8-12% profit on the sale.
If you're in a hurry, you can use the 70% rule to determine your MOA. Most investors won't pay more than 70% of the ARV to give them a comfortable margin. But the more accurate you are with your calculations, the higher your chances of success.
Step 7: Assign The Contract To A Buyer
Once the property is under contract at an acceptable price, you'll need to assign that contract to the buyer. Just make sure to include a disclaimer that you are not the end buyer, so the seller isn't confused about the assignment process. The beauty of wholesaling is that you get the buyer to pay all the closing costs and other fees associated with the sale because they are the ones who are assuming ownership of the property. But you must be diligent with your contracts to avoid getting yourself in trouble.
Start calling up your buyers list until you find someone interested in your deal. You'll then assign the purchase contract to the new buyer or use an assignment of contract to transfer ownership responsibilities.
Step 8: Close Deal And Collect Assignment Fee
Once the deal is closed, you'll be able to collect your assignment fee and move on to your next deal. The seller will be able to take their check and move on with their life, and the new buyer will take ownership of their new investment property.
Your fee will equal the difference between what you convinced the seller to accept and what the buyer ultimately paid. So, if you got the property under contract for $120,000 and sold it to the buyer for $130,000, you'd collect a $10,000 assignment fee for acting as a middleman. Most real estate investors will be happy to let you collect this fee to save them the time of having to scout properties themselves.
Step 9: Double Close When Necessary
Keep in mind there are multiple ways to close a wholesale deal. The easiest is to wholesale the contract, which means you never actually take ownership of the property. You can do this by including a clause in the purchase contract allowing you to assign ownership to a new buyer or use an assignment of contract.
The other option is to do a double closing. As the name suggests, a double close involves closing twice, once with the buyer and once with the seller. For this option, you will be included in the chain of title because you are briefly taking ownership. But you typically won't have to put up any money or assume any responsibilities because you're immediately closing on it again. A double closing typically occurs only if lenders restrict financing with a wholesale contract or if the wholesaler cannot assign the contract before it expires.
Read Also: Wholesaling Real Estate For Beginners
Is Wholesaling Legal In Arkansas?
Yes, wholesaling real estate is perfectly legal in Arkansas. But as a wholesaler, you must be sure that you stay within the scope of activities that do not require licensure.
Here are a few critical legal codes you should familiarize yourself with to understand Arkansas real estate laws.
§ 17-42-107 of the Arkansas Real Estate License Law: This section states what activities require licensure.
§ 17-42-301 License Required -- Violations: This section states common practices prohibited without a real estate license.
So, as long as you familiarize yourself with these laws and be careful not to perform any activities requiring a broker's license as a wholesaler, you won't be breaking the law.
How Much Do Real Estate Wholesalers Make In Arkansas?
How much you make per deal depends on your ability to negotiate and secure profitable deals. But most Arkansas wholesalers can make anywhere from $1,000 - $5,000 per deal, with more experienced wholesalers earning $10,000 - $40,000 per deal. Closing just one deal per month can result in multiple six-figures in annual income!
One of the great things about wholesaling is there is no cap on the amount of money you can make. However, the amount an investor will be willing to pay a middleman ultimately depends on how much money they are looking to make when they flip or hold the property. But it's entirely possible to earn five and six-figure checks as a wholesaler and close in as little as 30 days.
Do You Need A License To Wholesale Real Estate In Arkansas?
No, a real estate license is not required just to wholesale real estate in Arkansas. Just as you don't need a license to buy and sell a home for yourself or purchase an investment property, a broker's license isn't required to wholesale real estate.
A license is only required if you earn a commission for listing, marketing, negotiation, or performing any other similar action on behalf of a buyer or seller in exchange for a commission. Familiarize yourself with sections § 17-42-107 and § 17-42-301 of the Arkansas Real Estate License Law to fully understand which activities require a license.
Read Also: Real Estate Marketing (The Ultimate Guide)
Is Wholesaling In Arkansas Easy?
Like any real estate investing strategy, it takes time, patience, and determination to become a successful wholesaler. It may take from weeks to months or even years to close your first deal.
But with a reliable system in place and extensive research, it makes it much easier, especially with the right training and support from experienced investors that can support you in your real estate investing journey.
A newer wholesaler may consider finding an experienced mentor and enrolling in the world-class Pro Wholesaler VIP Program.
With a step-by-step process and expert guidance, you can get what you need to start scaling your wholesale real estate business in Arkansas.
The Pro Wholesaler VIP Program is designed for the modern entrepreneur to learn the basics and the easy potholes to spot and avoid. It is 100% online and is used for local and virtual real estate wholesaling.
Final Thoughts On Wholesaling In Arkansas
Arkansas is a beautiful state with affordable real estate and a low cost of living, making it a prime market for wholesaling. It's a great strategy for beginners because it allows you to earn large checks without risking your own money and credit while learning and building connections in the business.
So, if you live in Arkansas and are interested in wholesaling, these basic steps will get you started as you venture into scaling your wholesale real estate business.
Check out our brand new free training on how we help investors all across the country wholesale and flip houses from the MLS using only a laptop and a cell phone.