How To Wholesale Real Estate In Connecticut: Step By Step (2023)Jan 10, 2023
Wholesaling properties in Connecticut is a great way to earn substantial fees while learning more about the real estate business. With a population of over 3.6 million and over 1.5 million housing units in the state, there is ample opportunity to wholesale in Connecticut.
But you must master the basics and understand your roles and responsibilities before you jump in. Now let's dive in on how to wholesale real estate in Connecticut.
- What Is Wholesaling Real Estate?
- How To Wholesale Real Estate In Connecticut (9 Steps)
- Is Wholesaling Real Estate Legal In Connecticut?
- How Much Do Real Estate Wholesalers Make In Connecticut?
- Do You Need A License To Wholesale Real Estate In Connecticut?
- Is Wholesaling In Connecticut Easy?
- Final Thoughts On Wholesaling In Connecticut
What Is Wholesaling Real Estate?
Wholesaling real estate is an investing technique that involves scouting a property on behalf of another real estate investor, typically a house flipper. A wholesaler's job is to look for motivated sellers and offer to buy their homes at a discount.
Once you find a seller who agrees with your price, you will get the home under contract and flip that contract for a markup to the end buyer, who will renovate the property for sale. You can then collect the difference between the ultimate purchase price and the amount you paid the seller as a wholesale fee.
Wholesaling is an excellent technique for beginners because it allows you to earn substantial fees without purchasing a property. That means you don’t need credit or money saved for a down payment to get started. You can also wholesale properties virtually anywhere, whether you live in Hartford or the Gold Coast.
You can find wholesale deals anywhere you can find distressed homes and buyers looking for an investment property. But if you want to be successful, you must be patient and willing to do your homework.
How To Wholesale Real Estate In Connecticut (9 Steps)
In the following nine steps, we’ll show you how to wholesale properties in Connecticut. Be sure to check out our in-depth video showing you how to wholesale real estate step by step here:
Here's our simple step by step process for wholesaling real estate in Connecticut:
- Partner With A Wholesale Mentor
- Learn Connecticut Real Estate Wholesaling Laws & Contracts
- Understand The Connecticut 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 Or Wholetail When Necessary
Step 1: Partner With A Wholesale Mentor:
First, you should consider working with a wholesale mentor. Although there is no formal requirement that you must partner with an experienced investor or company, it’s often very helpful. While anyone can become a wholesaler, learning the ropes often requires considerable time and energy.
Finding a mentor can help save you from making common mistakes that many wholesalers make when starting and speed up the time it takes to close your first deal. Plus, experienced wholesalers can show you systems and techniques they use to find real estate deals or introduce you to other homebuyers in their network.
Step 2: Learn Connecticut Real Estate Wholesaling Laws And Contracts
Next, it’s essential to study the wholesaling laws in the state of Connecticut. While wholesaling is legal, each municipality has its own rules and regulations regarding the practice that you must follow. Certain behaviors are prohibited, which you must avoid if you want to avoid trouble. So, before you begin pursuing leads, you must study Connecticut real estate laws and understand what contracts you’ll need.
First, you must avoid any activities reserved for brokers with an active real estate license.
The Connecticut General Statutes Section 20-311 defines a real estate broker as “any person, partnership, association, limited liability company or corporation which acts for another person or entity and for a fee, commission or other valuable consideration, lists for sale, sells, exchanges, buys or rents, or offers or attempts to negotiate a sale, exchange, purchase or rental of, an estate or interest in real estate.”
You should familiarize yourself with this text because it will tell you precisely what activities require licensure and any penalties associated with violations.
It’s also important to familiarize yourself with the standard purchase contract in your area. Each county in Connecticut has a different purchase contract they use to officiate the offer to buy a home and subsequent sale.
You must be sure that the contract is assignable to transfer ownership to the end buyer. Not all purchase contracts in Connecticut are assignable, so read the fine print before making an offer. It may help to consult a real estate attorney for legal advice if you need help with contracts or understanding the law.
Step 3: Understand The Connecticut Real Estate Market And Lingo
Next, it’s crucial to study the local real estate market and the lingo used by investors and realtors. Every real estate market is different and offers unique challenges and advantages. For instance, the real estate market in Stamford is likely much different than in Caanan. So, it’s essential to understand the price points and local market conditions to help you identify deals more efficiently.
You should study local property values, sales data, demographic information, zoning laws, school districts, and anything else you can come across. The National Association of Realtors is a great resource for finding this information. They not only publish studies and infographics on local real estate trends, but they also host frequent events where you can meet real estate agents, investors, contractors, mortgage brokers, and other real estate professionals.
Here is a list of the top NAR chapters in Connecticut:
- Connecticut Association of REALTORS
- Greater Bridgeport Board of REALTORS
- Greater Hartford Association of REALTORS
- Eastern Connecticut Association of REALTORS
- Stamford Board of REALTORS
You may also consider becoming a member of the Connecticut Real Estate Investors Association, which hosts regular meetings in Hartford. If you live near New York, you may also consider taking a trip to the city to attend networking events and informational seminars. The best way to learn the lingo and local market trends is to attend these networking events and talk to other investors.
You can also check this glossary of standard terms in real estate law published by the Judicial Branch of the State of Connecticut if you need help learning the vocabulary.
Step 4: Build A Cash Buyers List
Once you feel confident in your knowledge of local real estate law and property terms it's time to look at cash buyers, you can start building your cash buyers list. Your ideal buyer will likely be another investor who will renovate the property and sell it at market value. Working with buyers who can pay cash or have ready access to hard money loans is advised because wholesale deals move quickly, and you don’t want to waste time while the buyer finalizes their financing.
Before looking for deals, you should build a cash buyer’s list that you can reference when you get a property under contract. A solid cash buyers list is the key to successful wholesaling, so be as diligent as possible and connect with as many investors as possible.
You’ll want to look for real estate investors who are actively looking to purchase a property to flip. Then you will ask them questions and record the information in a safe place.
You can find cash buyers by:
- Attending local real estate events
- Networking on social media
- Posting Bandit Signs
- Posting Ads on Craigslist
- Working with local realtors
- Asking your personal network
- Starting a real estate-related podcast
Real estate investors are everywhere, so if you try a few or all of these methods, you should begin to connect with candidates. But it’s also important to know what to say to these buyers when you encounter them.
Be sure to collect this information and record it for a later date when you encounter a cash buyer:
- Name and contact info
- What they are looking to buy (single family, multi-family, commercial, etc.)
- How much they’re looking to spend
- When they’re looking to buy
- What markets or locations do they prefer
- How they are financing the deal
- Any other info you find relevant
You should also store this information in a safe and organized place, such as a spreadsheet or CRM software. Finding leads is a crucial aspect of your wholesaling business, so developing a reliable system for connecting with buyers will pay off.
You can also check out this video on how to find cash buyers!
Step 5: Find Motivated Sellers And Distressed Properties
Once you have a solid cash buyers list, you can look for motivated sellers and distressed properties. A motivated seller is any homeowner looking to sell quickly and may not be opposed to letting go of their home at a discounted price in exchange for a fast close. The seller may be motivated by a serious life event such as a divorce or death in the family. But in most cases, the property will be distressed, which means the owner is about to go into foreclosure or the process has already begun. Your job will be to make them a fair cash offer and get them to sign a contract agreeing to sell you their property at that price.
There are many ways you can find motivated sellers:
- Check public records for foreclosures, divorces, bankruptcies, tax liens, etc.
- Post Bandit signs that say “We Buy Houses.”
- Post ads on Craigslist or Facebook
- Drive around looking for abandoned homes
- Direct mail
If you drive around downtown Hartford or Stamford, you’ll likely see a few abandoned buildings or homes in need of serious repair. These are the properties you’ll want to target, so you should learn how to check local property records to find the owner and contact information of a particular building. Finding motivated sellers is another crucial part of a wholesaler’s job. So you’ll want to develop a system and technique that makes sense to you.
Step 6: Put Distressed Properties Under Contract
Once you find an owner willing to entertain your offer, you will want to have them sign a purchase contract agreeing to sell you the property at that price. This step is crucial because, without a signed contract, the buyer can go behind your back and cut you out of the deal.
But before you sign a contract, it’s important to crunch the numbers and be sure that your offer price is low enough to attract interest from buyers and still be able to turn a profit. So there are two formulas you should familiarize yourself with; After Repair Value or ARV and Maximum Allowable Offer (MAO) also known as the MAO formula.
ARV refers to the amount a property will likely fetch if renovated to market standards. Pull the recent sales data of 3-5 similar properties in the neighborhood to calculate ARV. You can do this using Zillow or enlist the help of a broker to be more precise. Then divide the square footage of each property by the sales price to determine the price per square foot and take the average of all your comps.
ARV = square footage x average price per square foot.
Then take the square footage of the wholesale property and multiply it by the average price per square foot to get a rough estimate of what the home might sell for in good condition.
Next, you’ll calculate your MAO. This is the absolute highest you can pay and still make a profit on the deal.
MAO = ARV - Fixed Costs - Rehab Costs - Desired Profit or Equity
Fixed costs refer to the costs of owning a home, such as taxes, insurance, utilities, financing, etc. Rehab costs refer to the amount needed to renovate the property to market standards. You can estimate rehab costs by hiring a professional contractor or using a rehab calculator to get the job done. Finally, the desired profit or equity refers to the amount the buyer wants to make on the deal. By subtracting these costs from the estimated ARV, you will know exactly how much you can afford to offer and still make money on the deal.
Step 7: Assign The Contract To A Cash Buyer
Once the property is under contract, it’s time to call your cash buyer’s list. This is where it will pay off to have a solid list because the more organized you are, the easier it will be to find a buyer. Keep calling names on your list until you either run out or find someone interested.
When you connect with someone willing to go forward with the real estate transaction, you will simply assign the contract to them and collect your fee. That’s why it’s important to double-check the local purchase contract in your county and be sure that it allows assigning. Doing so allows you to pass ownership rights along to the end buyer, so you don’t have to assume any responsibility for the property once it’s transferred.
Step 8: Close Deal And Collect Your Fee
When you have your willing buyer and seller in place, all that’s left to do is sign the contracts and collect your assignment fee. It’s important to note that Connecticut is an attorney closing state, which means that only a licensed attorney can close the sale.
You should have already signed a contract with the seller, but you will want to officiate the contract with the buyer and have them pay any closing costs. You will then finalize any outstanding paperwork and collect your fee. From there, the buyer will assume ownership rights, and you can move on to your next deal.
Step 9: Double Close Or Wholetail When Necessary
Although in most cases, it’s easiest to assign the purchase contract to the new buyer, you may have to double close in some scenarios. As the name suggests, a double closing is when you close on the home twice, once with the seller and once with the buyer.
This usually takes place on the same day and will require you to be included in the chain of the title since you are technically taking ownership of the property for a short period. This method is sometimes required if the buyer's lender can’t underwrite an assignment contract and needs a formal purchase agreement.
Wholetailing is a hybrid between a fix and flip and a standard wholesale deal. In wholetailing, you’ll take ownership of the property, do some high return on investment (ROI) renovations, and then re-list the property shortly thereafter on the market.
Read Also: Wholesaling Real Estate For Beginners
Is Wholesaling Real Estate Legal In Connecticut?
Yes, wholesaling is legal in Connecticut, although you must avoid participating in any acts that require licensure. A wholesaler’s job is to act as a middleman in a transaction, not work on behalf of anyone else. So, as long as you stay neutral in your relations between the buyer and seller and don’t represent anyone’s interest in exchange for compensation, you should be fine.
However, you should review Connecticut General Statutes Section 312 to understand the local real estate laws.
Section 20-325 states, “Any person who engages in the business of a real estate broker or real estate salesperson without obtaining a license as provided in this chapter shall be fined not more than one thousand dollars or imprisoned not more than six months or both.”
So you should study the law carefully to avoid any penalties.
How Much Do Real Estate Wholesalers Make In Connecticut?
The amount a wholesaler can make in Connecticut widely depends on the market and their experience level. Your fee will equal the difference between the amount paid by the end buyer and your offer to the seller. So the better you are at negotiating and spotting deals, the more you’ll make.
Say you got the seller to let go of the property for $205,000 and sell it to a buyer for $210,000. You would walk away with a $5,000 profit just for acting as a middleman. These kinds of profits are typical for wholesalers. Even novices can earn $1,000 to $5,000 per deal, with experienced investors earning $10,000, $20,000, or more per wholesale deal.
Do You Need A License To Wholesale Real Estate In Connecticut?
No, you do not need a license to wholesale real estate in Connecticut. A license is not required to buy or sell a property you own. So, as long as you act strictly as a middleman and don’t offer brokerage services for a fee, a license is not required.
According to Section 20-311 of the Connecticut General Statutes, a license is required when “acting for another and for a fee, commission or other valuable consideration in the listing for sale, selling, exchanging, buying or renting or attempting to negotiate a sale, exchange, purchase or rental of an estate of interest in real estate.”
So, as long as you do not represent the buyer or seller in exchange for a fee or other consideration, you do not need a license.
Is Wholesaling In Connecticut Easy?
Yes and no. Wholesaling is a great way to earn considerable fees in a short time that doesn't require a traditional job or formal education. Deals can often close in as little as 30 days, and you can easily earn four to five-figure checks in your spare time.
However, it takes time and patience to master, and there is no guaranteed money. You could get beginner’s luck and close your first deal, or it could take several months or even years of consistent effort to see any profit. So, while it isn’t as risky or challenging as other real estate investing methods, it isn’t a get-rich-quick scheme either.
Getting a coach, a mentor, and the proper training can make the wholesaling process much easier. At Real Estate Skills, we offer the Pro Wholesaler VIP Program, an elite course that can help set you up for success.
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 Connecticut
Wholesaling in Connecticut is a smart practice for anyone who wants to learn about real estate investing while earning significant fees. It's one of the simplest ways beginners can earn money through real estate investing without the added risk of purchasing a property. But you must be prepared for the challenges that come with it and do your research if you want to be successful.
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.