Is This A Good Wholesaling Plan?

Question

Hi all,

I've been studying real estate and am considering rehabbing once I save more money.

In the meantime, I'm looking for ways to get started in real estate that require little money (but more time), and so wholesaling seems like a possibility.

As I tend to be detail oriented and very careful, I've made a plan with specific steps, details about those steps, and then my thoughts/questions. If you could evaluate it I'd be very thankful! I'm especially wondering about the 7th point regarding double closing vs. assigning.

So here's my plan:

1.Create 	a list of possible buyers and learn what they want.

• This 		seems logical because if you know what people are looking for, you 		will know what kind of property to look for and save a lot of time, 		and also have people to contact if you do find a deal.
• I'm 			hoping to do this partially by this post. Please let me know if 			you want to be added to my list!

2. Find 	potential deals.

• There 		are multiple ways of doing this (mail, signs, driving around, 		craigslist, etc).
• I plan to especially drive around and look for distressed properties.

3. Find 	the owners of these potential deals.

• Look 		at online records, go 		to the courthouse, and talk 		to neighbors.

4. Figure 	out which deals are good/what to offer.

4.1. Estimate 		the after repair value (ARV).

• I 			plan to find this out by looking at prices on zillow and other 			similar sites. I've also been looking at lots of listings to get a 			rough idea of prices.

4.2. Estimate 		rehab costs.

• I'm 			a handyman and have experience working for real estate investors, 			so I'm relatively confident.

4.3. Estimate 		what rent would be.

• From 			working on rental properties for investors, I think I have a 			general idea of this.

4.4. Estimate 		other costs, such as taxes, insurance, utilities, etc.

• I 			plan to get most of this from the owner and then verify it.

4.5. Learn 		as much from the seller as possible. (e.g., are they happy to have 		the property taken off their hands? Do they have an asking price?)

• Basically 			I plan to take the price I think an investor will pay, subtract 			the expenses (and what I want to make), and then this would be the 			maximum I'd consider offering.

5. Make 	an offer.

• I 			want to be honest with the seller, and let them know that I will 			be looking for other real estate investors who want the property, 			and if I cannot find them, I probably would not buy the property.
• I'm 			thinking that the best way to do this might be with an option to 			purchase contract, because then it's clear I'm not agreeing to 			purchase the property but do have the right to do so. There would 			be some cost for this, but in real estate there is risk. Thoughts?

6. Find 	someone who wants the house.

• If 		a list was made earlier, then this should make things easier.
• I've 			heard that there are some problems with closing a wholesale deal 			if the end buyer is using a conventional loan, and so it is best 			to find a real estate investor. Is this true?

7. Close/Assign

• I know that a double closing is possible. What are the typical 			costs of this?
• Assigning a contract seems simple, and in my opinion is ethical 			and should be allowed in a free market, but whether it's legal 			seems unclear. Does anyone know if it is legal in Alabama? How 			about assigning an option to purchase contract? I could just 			double close, but in some cases having the possibility to assign 			the contract might be nice.

Does this sound reasonable? Any tips or constructive criticism? If you know of a better strategy for a beginning investor who has time and energy (but not so much cash) please let me know!

Thanks so much!

Donald Capwell · Answer

Account Closed - Step 4.1 can also be accomplished by adding a good real estate agent to your team.  This may take some time (but not too long), but when you build the right relationship with one or more agents, it becomes a quick text or phone call, and you'll get reliable comps.  Zillow / Trulia can give an estimate, but an agent can dial it down closer for you.

The only other thought I have on this - You said that you want to get into rehabbing, but need to start as a wholesaler.  You've already had a few folks on this post reply that they'd be interested in what you can bring to the table eventually and are willing to go on a buyers list.  As you speak with and build relationships with other investors, breach the topic of doing some JV deals with them... you bring the deals and be their "errand boy" (doing the crap jobs that they don't want to do), and you split the full profit instead of just picking up a few thousand dollars.

This is with the understanding that rehabbing is your end game, though, and not if you want to build a wholesaling business.  What I mean to say is, what is your GOAL in real estate?  Do what you have to do to work to that end - not pour all of your time and resources into one avenue KNOWING that you are going to change down the road.  If you want to be a wholesaler, pursue it with all of your passion - but if rehabbing is your ultimate path, use the techniques of successful wholesalers to find deals, then take those deals to a mentor that will help you toward your final goal.  Lather, rinse, repeat!

Go get 'em!

Matt Bell · Answer

Account Closed I am actively buying up rental properties in the Montgomery area and have my own contractors to do the rehabs.  Put me on your buyers list and give me a call sometime to discuss what we are looking for or email me directly.

Account Closed · Answer

@Donald Capwell, good point about RE agents. I also really like what you said about keeping the end goal in mind. I'm starting wholesaling because I think I just need to start taking action, and it seems to be one of the easier ways to begin--and beneficial too. But I am planning on eventually getting into rehabbing, and should definitely not forget that! I guess it's an art of balancing the practical short term plans while also not losing sight of the long term dreams or getting too boxed into one plan. Thanks so much for your comment and advice!

@Kevin Rodriues, good words. Thanks. All the best to you too!

Account Closed · Answer

@Matt Bell, thanks. Will do!

@Devin Morgan, makes sense.

Account Closed · Answer

@Steve Driscoll, thanks! Yes, it's pretty much just what I've read, but it feels reassuring to have it confirmed :-) I'll let you know if I have any deals. I can call you sometime; just tell me what time is best and at what number.

@Mike Watkins, thanks! I was hoping that was the case. Thanks for the tip about Montgomery. I'll probably start out in Birmingham, but will keep an eye on Montgomery.

@Devin Morgan, thank you! In terms of sequence, one cannot try to sell a deal to an investor until they have a deal, so that makes sense. I have read that it's often a good idea to have a list beforehand, though. I'm not very experienced, but I suppose the order is flexible. Anyway, I'll plan to seek deals AND connections. As for partnering with someone on a deal, it's certainly possible and something I'll keep in mind; thanks for the suggestion. Once I find a deal there will likely be multiple ways to profit.

Kevin Rodriues · Answer

Hey Stephen,

Sounds like you are heading in the right direction. I think we are in similar paths in our REI journey. I too am working towards getting my first wholesale deal. No matter what never give up and stay focused! Good luck.

Devin Morgan · Answer

Very true however finding a buyer (if you have a great deal) is far easier than finding a seller. Some people focus on getting a huge buyers list but some usually find they have the same few investors purchasing their deals. It's all preference really but I can tell you if you have a great product, buyers will come.

Devin Morgan · Answer

Maybe I'm backwards but I put more importance on finding deals vs finding cash buyers. And also instead of just wholesaling if there is another avenue you want to explore you don't have to wait, you just have to be able to bring something to the table (time, money, or experience). Being that you will possibly have the deal instead of wholesaling it you can see about partnering up with someone to rehab it instead (that would be the person with the money and experience). You won't walk away with a huge or quick profit but you will walk away with more experience.

Mike Watkins · Answer

it is legal in Alabama to assign. I would put "this agreement Mary be assigned" on your contract.

You generally want to double close when you don't want the buyer to see your profit (10kor more). All he sees is that you bought it, which you did and your selling it to him or her.

I hear Montgomery is a hot market this time of year. I mean January to April.

Steve Driscoll · Answer

Hi Steve...

Looks like text book wholesaling. You're in a good city to get started. I'm looking for deals there so... put me on your buyers list to start.  Give me a call when you have some time.

Steve D