Are you a Kansas resident, work in Kansas, or are you someone that is simply interested in the Kansas residential real estate market? Do you walk the streets of Olathe or Topeka and wonder how you can get a slice of the booming real estate market?
When people think about Kansas, they generally think about the Kansas City Chiefs (which is actually in Missouri), the Koch brothers of Wichita, or the famous Kansas Cosmosphere and Space Center. But, what if we told you that there is more to Kansas than just those main attractions and employers? What if we told you that beneath the surface, hiding in plain sight, is a booming real estate market that you could tap into and springboard your financial freedom goals and dreams?
According to the United States Census, Kansas has nearly 3,000,000 residents. That is a nearly 150,000-person increase in population over the past 10 years. Though that might not seem like a tremendous amount of growth, the new residents have caused an immense amount of stress on the housing units available for purchase. This creates a phenomenal opportunity for the aspiring real estate investor that is willing to spend time sifting the market for attractively priced deals.
One such investment strategy you could implement to take advantage of this growing opportunity is wholesaling real estate. In this article we are going to teach you how to wholesale real estate in Kansas step by step.
Like buying investment properties, wholesaling real estate is a type of real estate investment strategy. However, unlike standard real estate deals, wholesaling is achieved with very little capital investment. In a nutshell, wholesaling is the process of connecting potential buyers and sellers in a real estate transaction in exchange for a fee.
Here’s how it works:
You, the wholesaler, sift the market for distressed properties and motivated sellers. Then, once you find an attractively priced house that you believe a fix and flip investor would want to purchase, you go under contract with your seller and immediately assign the contract over to another investor. Then, in exchange for sourcing the property and locking in a good price, you charge a fee to your end buyer.
In the following nine steps, we’ll show you how to wholesale properties in The Sunflower State. Be sure to check out our in depth video showing you how to wholesale real estate step by step here:
With that in mind, here's our simple step by step process for wholesaling real estate in Kansas:
Before you enter any real estate market - especially the Kansas market - you are going to want to get in touch with a wholesale mentor. A wholesale mentor is an individual with Kansas real estate market experience.
Mentors can help you hit the ground running when you decide to launch your wholesaling business. They’ll be able to put you in touch with the right cash buyers for your cash buyer list, the right attorneys to provide legal advice on your transactions, and the right brokers to help you find distressed properties to buy. They’ll also know which sub-markets and neighborhoods you should focus your search on to best optimize your profit potential.
Reach out to mentors, they could end up saving you a tremendous amount of time and effort in the long run.
After you’ve established a mentor, it’s time to dive into the Kansas real estate wholesaling laws and wholesaling contracts. The best place to start is to gloss through the Kansas Real Estate Commission (KREC) website. The KREC is the state agency that is responsible for administering and monitoring the salesperson and brokerage license requirements within the state. Though real estate wholesalers do not need a real estate license (more on that later), understanding the laws and regulations surrounding the overall real estate industry always helps.
The real estate law governing the behaviors and actions of a licensed real estate broker or salesperson in Kansas can be found in KSA Chapter 58, Articles 30, Sections 34 through 77 as well as KSA Supp 58-3078 through 3085 – collectively known as the Real Estate Brokers and Salespersons’ License Act.
The most important thing to consider is that a real estate wholesaler may not perform any actions that would require a real estate license according to Kansas State Statutes Chapter 58 – Article 30. Attempting to circumvent this restriction and violating these laws could result in disciplinary actions and fines. More specifically, a real estate wholesaler must avoid the actions of a real estate licensee as defined by KSA § 58-3035 (f) (1-10). These actions include, amongst others, negotiating a property’s price, marketing the property publicly, or procuring prospective buyers for a particular property.
As long as wholesalers simply sell the equitable right to a purchase agreement, rather than the property itself, they won’t need to worry about breaking licensing regulations. The purchase agreement is typically known in legal terms as a bilateral contract – with both parties to the contract required to execute the contract’s terms fully. Unless the contract states explicitly otherwise within the contract’s language or provisions, most contracts by default are assignable.
Be sure to review the purchase agreement before assigning it over to a third party for a fee. Here is a sample Kansas real estate contract. It might be worth your while to spend a few hours going over your rights and liabilities stated within this contract. The last thing you want is to mistakenly violate a certain clause and somehow lose your deal or violate the law in some capacity.
Download Free Wholesale Real Estate Contracts Here (PDF)
Next, after reviewing the Kansas wholesaling laws and purchase contracts, it’s time to understand the market and the industry lingo. A great place to start your search is glossing through the city-specific association of realtor websites.
These communities are a great source of educational resources, classes, coursework, networking events, referrals, and legal requirements you’ll want to know. Here is a list of some of the biggest realtor communities you should consider throughout the state:
After reviewing the above websites, consider walking the streets of Kansas and striking up conversations with local residents and professionals. Local attorneys, real estate agents, appraisers, and general contractors can all be tremendous assets for you. They’ll help you get a strong footing in the community and give you the proper tips and resources you’ll need to get a leg up against your competition.
Read Also: How To Wholesale With A Realtor: The (ULTIMATE) Guide
Building a cash buyer list is one of the most important aspects of the wholesaling process. When you find an attractively priced house and go under contract with its seller, you are going to want to offload that contract to a predetermined, pre-vetted cash buyer very quickly.
These cash buyers are very cash-rich and are hungry for deals in the state of Kansas. They know the area well and are willing to purchase agreements from wholesalers with only a few days' notice. Generally, these investors are fix-and-flip or rental property investors that know the market exceptionally well. Compiling this list ahead of time will help your closing process go smoothly and without any delay.
You can also check out this video on how to find cash buyers!
Once you’ve compiled a list of cash buyers, it’s time to find motivated sellers and distressed properties to wholesale.
Motivated sellers are homeowners that are looking to offload their property very quickly. These owners are typically in a liquidity crunch or simply don’t want their property anymore. They would rather sell their property quickly to a wholesaler for a below-market value in an off-market deal than wait around for a formal, publicly-marketed offer on the MLS or Zillow. If you want to find a good property to wholesale, find these motivated sellers and ask them the right questions.
You’ll also want to sift the market for distressed properties. Generally, distressed properties are properties that are in poor condition. Perhaps a previous tenant damaged the property, a natural disaster left its roof in disrepair, or a bank foreclosed on the owner and is now selling the property in an auction. Truth is, it doesn’t really matter why these properties are distressed, only that they are.
As a wholesaler, you focus on is finding these deals and flipping the contract over to an investor as soon as possible. Fix and flip investors love distressed properties because they can renovate them, stabilize them, and relist them back on the Multiple Listing Service (MLS) for a much higher price.
Read Also: Finding Motivated Seller Leads: Free & Paid Tactics
Once you’ve found the right property, it’s time to put it under contract.
This is where the MAO Formula - or Maximum Allowable Offer formula comes into play. This formula is the end-all and be-all of wholesale investing. It’ll ensure you, the wholesaler, make the right offer, and it’ll ensure you and the fix and flip investor both make a nice profit along the way.
This is what the formula looks like:
Maximum Allowable Offer (MAO) = After Repair Value - Rehab Costs - Desired Profit - Wholesale Fee
The MAO is the maximum purchase price a wholesaler should pay to purchase a distressed house. Step one is calculating the After Repair Value (ARV). The ARV is the value of a property after renovating it and bringing it up to its full potential.
You can calculate the ARV by networking with appraisers, lawyers, and realtors to determine what similar properties of surrounding markets have recently sold for within the past few months or year. You can also filter through sites like Trulia, Loopnet, and Zillow for recently sold properties in your area to determine a range of expectations.
Next, you’ll have to estimate the rehab costs necessary to fix up your distressed property. Is the property going to need a new refrigerator, an updated paint job, or a new roof? What about new siding, updated landscaping, or new flooring? Answering these questions - amongst others - will help you determine the time, cost, and scope of the renovation project.
Then, you’ll need to determine the project’s profit potential and bake in the wholesale fee and fix and flip profit. A good rule of thumb is to assume a cash buyer would want to make about a 30% gross profit on a flip and you, the wholesaler, would want to make at least $10,000 on a transaction. Check out this article on the 70% Rule to see how fix and flip investors analyze if a deal is worth their while.
Once you’ve calculated the MAO, put an offer at, or below, your calculated number.
Read Also: How To Build A Real Estate Network | Wholesaling & Flipping Houses
Once you’ve calculated the MAO and have a signed purchase agreement in hand, it’s time to reach out to your cash buyer, draw up an assignment contract, and assign it over to them. Then, in exchange for selling the equitable right to the purchase agreement, you’ll get a fee.
It might be a good idea to seek legal advice when drafting the assignment contract. As a wholesaler, the assignment contract is your primary tool to create income for your efforts. Be sure your interests are aligned, liabilities are taken care of, and your fee is accounted for. Your mentor could also help you out here and ensure you are operating on the right footing.
Once you’ve drafted the assignment contract and agreed upon a price with a home buyer, you’ll then assign the purchase agreement over to the new buyer and collect your assignment fee. Then, you rinse and repeat the process with more properties.
As you develop in your career as a wholesaler, you’ll want to expand the types of offerings and strategies you can employ. Two such creative strategies you should consider are what’s called a double closing and wholetailing when necessary. These two methods of wholesaling are great methods to add to your repertoire and help you expand ways to profit in the Kansas real estate market.
A double closing is a transaction where you avoid an assignment contract entirely and instead go under contract with the home’s seller and your end-buyer at the same time. Then, you’ll go to the title company and have them facilitate both closings on your behalf.
For example, if you see an attractively-priced home for $200,000 and wish to wholesale it, in a double closing you’ll go under contract with the seller at $200,000, put down an escrow payment, and simultaneously go under contract with a different buyer at $225,000. Effectively, your wholesale fee will be the difference between the two prices.
Though double closings are often very effective, they are not without their fair share of challenges. Since you are going under contract with a cash buyer before actually owning the underlying property, you might encounter some setbacks from your title insurance company.
Hard money loans or transactional financing could be great ways to circumvent some of these challenges. Keep in mind, you may be paying recording taxes, insurance fees, and attorney costs twice because, during a double close, you’ll be performing two separate transactions instead of the typical one wholesale transaction in a standard deal.
Wholetaling is also another strategy you might want to consider.
Wholetailing is a mix between a full fix and flip and a standard wholesale. In wholetailing, you’ll take ownership of the home, do some high return on investment (ROI) renovations like painting, landscaping, and other smaller projects, and then re-list the property shortly thereafter on the MLS. Wholetailing is a great exit strategy because you are able to increase the value of the house and potentially access a larger pool of buyers when you re-list the property on the MLS.
Yes, wholesaling real estate is legal in Kansas. As mentioned earlier, there are no distinct laws and regulations relating to wholesaling real estate in Kansas. Wholesaling is the act of selling the equitable interest in a purchase agreement to a different buyer.
As long as you are sticking to assigning a purchase agreement and not disobeying licensing requirements, you are fine to wholesale in Kansas.
Unfortunately, there is no perfect answer to the wholesaler salary question. The actual amount you can charge will likely differ from deal to deal.
For example, the fee you can charge on a multi-million dollar property is likely a whole lot larger than the fee you can charge for a small $100,000 property. Nevertheless, the typical fee you’ll likely see in the market is anywhere between $10,000 - $20,000.
No, you don't need a license to wholesale in Kansas. Although, it might be a good idea to get one. Having a license will give you access to a large number of available resources, networking events, and, of course, the MLS.
The requirements to get a license are not onerous. You’ll find that any of the fees, required coursework, and certifications are well worth it in the long run. Although it isn’t a requirement, having a license will surely help your wholesale business get more deals.
Read Also: Can A Realtor Wholesale Property? The (ULTIMATE) Guide
No, but it can be with the right coach, mentor, and the proper training. Here at Real Estate Skills, we offer the Pro Wholesaler VIP Program, a world-class program that has seen thousands of beginners learn the business and make a lot of money along the way.
The Pro Wholesaler VIP Program is designed for the modern entrepreneur to learn the basics and how to help new real estate wholesalers avoid the pitfalls typically found by beginners. It is 100% online and is used for local and virtual real estate wholesaling.
If you spend the time and determination on learning the business, you’ll become a professional real estate wholesaler in no time.
Kansas City, KS, Wichita, KS, and other surrounding cities are prime locations to wholesale deals. Reach out to a mentor, do your proper due diligence, and find discounted properties throughout the area.
A great place to start is by reaching out to lenders and sifting through foreclosure auctions to see if you could find attractively-price investment properties. Then, once you’ve fully grasped the local market and have truly understood the legality of the industry, reach out to licensed agents to help find the right properties to buy.
Once you’ve gone under contract, act as the middleman and simply assign the purchase agreement over to a new end-buyer. Then, once you’ve successfully completed a few transactions, you’d be shocked to see how quickly you could become a full-time wholesaler.
You can learn more about wholesaling through our free online training today and find out how you can start closing deals using only your cell phone and laptop. All you have to do is get started and hit the ground running. We are here to help!
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