How To Wholesale Real Estate In Kentucky: Step By Step (2023)Mar 16, 2023
Are you someone that’s looking to take your income potential to the next level? Do you watch the news, read the business section of the newspaper, or walk the streets of Kentucky wondering how you could get a slice of the massive booming real estate market?
As of 2020, Kentucky’s population is over 4,5000,000. However, these 4,500,000 people do not have enough housing units to choose from. Over the years, the population has outgrown housing units by nearly 8%. A growing population coupled with not enough houses means opportunities for investors and - more specifically - wholesalers.
Wholesaling real estate is a great way to participate in the booming Kentucky real estate market and housing shortage without the need for as much capital as an investor. In this article, we’ll explain how to wholesale real estate in Kentucky.
- What Is Wholesaling Real Estate?
- How To Wholesale Real Estate In Kentucky (9 Steps)
- Is Wholesaling Real Estate Legal In Kentucky?
- How Much Do Real Estate Wholesalers Make In Kentucky?
- Do You Need A License To Wholesale Real Estate In Kentucky?
- Is Wholesaling In Kentucky Easy?
- Final Thoughts On Wholesaling In Kentucky
What Is Wholesaling Real Estate?
Wholesaling real estate is essentially real estate matchmaking, but for investors and sellers. Here is how it works:
A wholesaler will cold call owners, send advertisements or postcards, reach out to real estate agents and realty shops, and go under contract with a motivated seller. These motivated sellers need a quick close and wholesalers provide just that.
Once under contract, the wholesaler will sell the equitable right to the purchase agreement over to an end-buyer. These end-buyers are generally fix-and-flip investors also known as house flippers are looking for discounted properties and quick closing and are the perfect match for these motivated sellers. Typically, these end-buyers pay all cash.
Then, in exchange for making the buyer and seller connection, the wholesaler receives an assignment fee. Then, he or she rinses and repeats the process and looks for more deals to wholesale.
How To Wholesale Real Estate In Kentucky (9 Steps)
Now that we covered what wholesaling is, here’s our process for wholesaling in the Bluegrass State. Also, check out our in-depth video on how to wholesale step by step in 21 days or less!
With that in mind, here's our simple step by step process for wholesaling real estate in Kentucky:
- Partner With A Wholesale Mentor
- Learn Kentucky Real Estate Wholesaling Laws & Contracts
- Understand The Kentucky 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
1. Partner With A Wholesale Mentor
As a wholesale investor, you’ll want to learn from a wholesale mentor.
If you’d like to be successful, you’ll want to know how to cold call, who to cold call, which properties to look into, and which neighborhoods provide the best profit opportunities. A wholesale mentor will be able to assist you with all the above.
He or she has had success wholesaling in Kentucky. Perhaps they are a retired investor or a current wholesaler that would like to either partake in your deals or simply train the next generation of wholesalers. A mentor can help you hit the ground running so you can outsmart and outwork your competition to close better deals quickly.
Befriend these professionals and pick their brains constantly. Schedule weekly or monthly phone calls to touch base on your progress and compare notes. Then, once you get the hang of it, you can pay it forward and become someone else's mentor.
2. Learn Kentucky Real Estate Wholesaling Laws & Contracts
As mentioned, wholesaling real estate is the act of transferring a purchase agreement over to a different person or company. Remember, you are selling the equitable right to a contract, not the actual property itself. It’s very important to understand the nuance here because you don’t want to accidentally break the law by marketing a property in public or acting as a real estate broker without a formal license.
So, before you begin your wholesaling, familiarize yourself with licensing laws. Though as a wholesaler you won’t need to be licensed, it’s a good idea to understand which areas you can and cannot operate in.
Chapter 324 of the Revised Kentucky Statutes covers the conduct of brokers and sales associates. While these laws pertain mostly to licensed individuals, as a wholesaler, it’s best to understand the operational provisions and limitations you should focus on as you look into different deals.
For example, according to Statute 324.990, you might incur a significant fine if you engage in real estate brokerage without a license. The statute states that any person engaging in real estate brokerage without a license shall be guilty of a Class A misdemeanor for a first offense and a Class D felony for any subsequent offenses. A Circuit Court may impose an additional penalty by fining them not less than one hundred dollars ($100) nor more than one thousand dollars ($1,000) or imprisoning them for a term not to exceed six (6) months or both.
Kentucky does not joke around! It’s best to be familiar with these details so you don’t operate in the black and get fined unknowingly.
You might want to also take 30 minutes glossing through some key legislatures that might affect how you operate your business. A few examples include:
- 011 Definitions for 201 KAR Chapter 11
- Regulation 105 Advertising
- Regulation 121 Standards of Professional Conduct
- Regulation 170 Education Provider Requirements
- Regulation 190 Consumer and Administrative Complaints; Discipline; Administrative Hearings
- Regulation 210 Licensing, Education, and Testing Requirements
- Regulation 220 Errors and Omissions Insurance Requirements
3. Understand The Kentucky Real Estate Market & Lingo
When exploring a new market, you’ll want to assess all the market’s lingo, strengths, and weaknesses. Since 2020, every one of the top ten Kentucky cities has experienced positive population growth. So, in order to tap into that market, you’ll need to do your due diligence.
Kentucky has a number of major cities you’ll want to explore and get to know well. The top five cities by population are Louisville, Lexington, Bowling Green, Owensboro, and Convington. Louisville has a population of roughly 630,000 people, Lexington has about 320,000 people, Bowling Green has 75,000 people, Owensboro has 60,000, and Convington has about 41,000.
Each of these cities has something different to offer. Be sure to walk the neighborhoods and get a feel for the type of houses that are available to wholesale. It might be a good idea to check out the restaurants, walk around the local universities, and drive to the major city centers to see which areas are most popular.
Next, you’ll want to browse local real estate websites to learn about the ins and outs of the market. Check out the Kentucky Real Estate Commission (KREC) and Kentucky Association of Realtors websites for resources to build your market data. Additionally, you might want to familiarize yourself with the Kentucky Land Title Association. They serve the needs of the Kentucky land title insurance industry.
Most individual cities also have city-specific realtor resources that might be helpful to gloss through. See the below list for a handful of examples:
- Greater Louisville Association of Realtors
- Bluegrass Realtors
- Realtor Association of Southern Kentucky
- Greater Owensboro Realtor Association
- The Northern Kentucky Association of Realtors
4. Build A Cash Buyers List
After you’ve done your research, you’ll want to build a cash buyer list.
A cash buyer list is a compilation of investors who are interested in flipping houses. These individuals generally know the Kentucky market very well and are able to close a transaction with cash on hand within days of being contacted. Compiling a large list of these cash buyers will help you execute wholesale transactions with ease as soon as you go under contract.
Once you’ve compiled a list, you’ll be able to source properties on their behalf utilizing their specific investment criteria. Send out postcards, tap into your mentor’s rolodex, and attend networking events. Having a strong cash buyer list could set you up for tremendous success.
You can also check out this video on how to find cash buyers!
5. Find Motivated Sellers & Distressed Properties
Next, you’ll want to find motivated sellers and distressed properties.
Motivated sellers are homeowners that are willing to forgo fair market value for their house in exchange for cash and a quick close. These people are typically in a cash crunch and would rather have cash rather than take the time to formally market their property. As a wholesaler, you’ll want to stick to motivated sellers – whether from the local multiple listing service (MLS) or off-market properties.
Distressed properties are also another hunting ground for wholesale opportunities.
These properties typically consist of bank-owned foreclosed houses (REO properties) or dilapidated homes. These houses generally need a lot of work down - perfect for a wholesaler to scoop up and then sell to fix and flip investors.
If you can land an auctioned, distressed home, you might be able to secure a tremendous profit.
Check out the bank-owned properties in Kentucky for a list of properties up for bid.
6. Put Distressed Properties Under Contract
Now, you’ve identified a distressed property. It is time to put the deal under contract. In order to do that, you’ll need to perform the Maximum Allowable Offer - or the MAO formula.
This is what it looks like:
MAO = After Repair Value - Rehab Costs - Desired Profit - Wholesale Fee
Let’s take it to step by step.
After Repair Value
After Repair Value (ARV) is the value of the property as compared to other neighboring properties after it is purchased and renovated. To calculate this price, you’ll want to survey surrounding streets to determine what other houses of similar size, model, and make are selling for.
If you are buying a one-bathroom ranch, but wish to convert it into a two-story, three-bedroom home, you’ll want to research what other three-bedroom homes go for. This part of the equation will require some research. You can start by searching Kentucky homes on Zillow, the MLS, or Redfin. You can also reach out to local Kentucky real estate agents, appraisers, bankers, and inspectors. Since their business is largely based on networking and volume, they’d be happy to take some time out of their day to chat with a prospective buyer like yourself.
Rehab costs are the estimated costs associated with fixing up your distressed property. This could include anything from flooring, new tiles, updating the bathroom, painting, molding, or adding new appliances. Estimate how much the repair will take, because your buyer, the fix and flipper, will want to do some work to the house to increase its value before he or she lists it on the market.
Speak with a Kentucky general contractor or experienced rehabber to understand the costs of rehabbing a property.
Read Also: How To Choose The Best General Contractor?
Your end buyer is going to want to make a profit if they buy, fix, and flip your house. So, how much profit should you bake into your MAO? A range of possibilities.
Investors like to make anywhere between 10% profit on the low end and 30% profit on the high end. So, if you are selling a house with a $200,000 ARV, you’ll want to bake in at least a $20,000 - $30,000 profit when all is said and done.
The last variable in the equation is your profit – the wholesale fee.
This number is also entirely up to you. If you want to make a flat fee of $25,000 for every deal regardless of size and complexity, put that number in. If you want to make a percentage of the deal size, you can put that figure in too. It’s your real estate business, you get to choose.
Anywhere between $10,000 - $20,000 is reasonable.
7. Assign The Contract To Cash Buyer
Once you’ve gone under contract and contacted a cash buyer, it’s time to utilize the assignment of contract.
Here is an example of a sample Kentucky Residential Purchase Agreement. Familiarize yourself with your rights and responsibilities before going under contract. It might be a good idea to walk through the contract with a real estate attorney first. Then, assign the contract over to your cash buyer via an assignment contract.
8. Close Deal And Collect Assignment Fee
The next step is the best step of all: close the deal, sign the contract, and collect your assignment fee. Voila, you’ve wholesaled your first deal!
Once you’ve done that you are ready to surf the internet, speak to your mentor, and sift the market for your next wholesale deal.
9. Double Close Or Wholetail When Necessary
There are a handful of creative closing methods you should also be aware of as you go about analyzing deals. These strategies include double closing or wholetailing when necessary.
A double closing is when you go under contract with the cash buyer and the seller simultaneously and forgo entirely the need for an assignment contract. What you’ll do is essentially use two separate purchase agreements and sell the house to your end buyer as you purchase it from your seller.
You’ll take your contract you have with the cash buyer and then present it to the title company alongside your contract with the initial seller. Then, the title company will facilitate your closing with the end buyer and use the funds in escrow to fund the purchase of the property from your seller.
Be aware though, not all title companies allow this. If you have any trouble, you can use private money lenders or transactional funding to close the deal with the seller.
Another method to consider is wholetailing.
Wholetailing is a quasi-flip and quasi-wholesale. In this type of transaction you actually take ownership of the property, do some high return on investment (ROI) renovations to force some value appreciation, and then re-listing the property shortly thereafter on the MLS.
Wholetailing can be a great strategy if you don’t have a good cash buyer lined up yet or you are hoping for more favorable market conditions in a few weeks. Sometimes buying the property, doing some renovations yourself, and waiting for a savvy homeowner utilizing bank financing could mean greater profit for you.
Is Wholesaling Real Estate Legal In Kentucky?
Yes, not only is it legal to wholesale real estate in Kentucky, it’s a great idea!
As mentioned earlier, the Kentucky population is growing and it seems that there will be a continued demand for housing for many years to come. Wholesaling real estate throughout the various Kentucky neighborhoods could be a very lucrative strategy as long as you do it within the confines of the law.
There are no specific Kentucky laws on wholesaling, but there are specific laws regarding appropriate real estate licensing requirements. As long as you are just selling the equitable right to a purchase agreement and not the actual property itself, you’ll be okay to proceed with your wholesaling. Be sure to also never market the property publicly either. That is the realm of real estate licensed professionals, not unlicensed wholesalers.
Check out the Kentucky Real Estate Commission (KREC) website. All the ins and outs you’ll need to know about what you can or cannot do as an unlicensed wholesaler will be right there.
How Much Do Real Estate Wholesalers Make In Kentucky?
The answer to the wholesaler salary question is challenging. A wholesaler’s salary will typically vary based on the volume of wholesale deals, the Kentucky and United States market conditions, and the size of the specific transaction.
If you are wholesaling lower-priced real estate investments like 1,000-square-foot ranches you’ll likely make a smaller wholesale fee. But, if you sell larger deals such as small duplexes, properties in affluent areas, or larger mansions, you could make substantially higher profits.
On average though, you can expect to make anywhere between $10,000 - $25,000 per transaction. Complete just one wholesale deal per month, and you’re potentially earning multiple six figures per year!
Do You Need A License To Wholesale Real Estate In Kentucky?
No, you don’t need a real estate license to operate in Kentucky, but it might be a good idea.
A few potential benefits include: the licensing application fee is only $130 - a drop in the bucket compared to what you might generate as a wholesaler; you’ll get access to multiple resources such as realtor networks and the MLS; and Kentucky also has licensing reciprocity agreements with Florida, Ohio, Tennessee, and West Virginia so you can broker deals out there as well.
There are loads of benefits to becoming a licensed agent while simultaneously wholesaling houses. Though it’s not a requirement, we recommend it because of the many benefits.
Read Also: Can A Realtor Wholesale Property?
Is Wholesaling In Kentucky Easy?
No, but it sure can be with the right resources and guidance. Coaches, mentors, and the proper training like the Pro Wholesaler VIP Program can give you a tremendous leg up against your competition.
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.
People from all walks of life are able to find success in wholesaling real estate. If you’re committed, diligent, and focus on the right process, then hitting your goals is simply inevitable.
Final Thoughts On Wholesaling In Kentucky
Wholesaling is a great strategy for beginners or seasoned real estate investors looking for real estate properties across Louisville, KY or any of the Kentucky submarkets. Although wholesalers generally find opportunities in foreclosures, forced sales, and distressed properties, they can also find rental properties or wholesale properties on social media as well.
Consult your local mentor, hard money lender, or real estate licensed individual to help you in your search for attractively priced real estate deals and investment property lists. Then, find the types of properties you want to purchase and enter a real estate contract.
Finally, act like a middleman and assign the contract to a fix and flip buyer and rinse and repeat. You can also 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. To your success!