Best method to Wholesale with no $?

Question

Hi everyone,

I am a newbie to the site. I have been searching the forums for about a month or so. Great Site!

For a few months I have been aquiring buyers and researching houses with the plan to wholesale them. Finally I feel like I can begin to consider making offers. My question is what can I expect when I have no money? My income is around $30,000 a year and I have little money for down payment. I know pre-foreclosures are the best way to go for my situation but should I even consider REOs or foreclosures. Will an offer even be considered by a bank? I am looking at houses from $40,000-100,000. My goal is to get I deal completed within two months.

Thanks!

Will Barnard · Answer

I would say that for beginners, the easiest (and it is not easy) is to go after short sale candidates. Once you get one, you can outsource the negotiations to an experienced negotiator and you can use transactional funding to fund your deal. All in all, you really can make a large chunk of money will liitle to none from your own pocket!
Just ask several others here on BP, they do it just about every month and I have funded their deals.

Ryan Webber · Answer

I actually was looking at expanding into McKinney a couple years ago.

I'm going to split from the pack here and advise that short sales and REO's are NOT the best way for you to start wholesaling.

The best way for you to start in McKinney with $0 is to start driving older neighborhoods looking for vacant houses and tracking down the owners and asking them if they want to sell.  I would also start dissecting the newspaper and cheap classifieds.

In the meantime cut your expenses and start saving money for your business.  Making $30,000 a year is no excuse to not have a couple thousand dollars saved up.  Living above your means will cost you financial security, and making more money will not solve the problem.  You can be broke at any income level.  No matter what your income is, you should be saving money.  Even $50 or $60 a week will start adding up, and more importantly it will teach you how to live below your means.  I'd recommend you read The Richest Man In Babylon.  Great book on financial intelligence.

Brian Haskins · Answer

Well congratulations on taking action my question for you is why if you have no money would you consider reo's? you have to put deposits down and possibly fund the deal. And with pre-foreclosures your in most cases going to have to work a shortsale. Is that what you plan to do? If you want to wholesale and don't want to put any money out of pocket you need to consider dealing with homeowners with equity. trust me there are tons out there contrary to popular belief.  go after motivated sellers like tired landlords, probates, recent evictions, code violations ad so on. when your wholesaling you have to find people with equity that's the name of the game so you can buy them under value and flip for a profit.

Brian Haskins

James Ward · Answer

As others have stated, short sales will be a way to pursue.  But note:  be careful about just tieing up properties and never closing.

Demos Loizides · Answer

The only money you may need may be for marketing. And maybe the proverbial $1 or $10 for earnest money deposits or EMDs.

For wholesaling you find properties with lots of equity. You tie them up with a contract and you assign the contract to another investor. They close with the seller. Get used to this for a while before tackling REOs. That's another world completely.

Will Barnard · Answer

Brian,
Not sure I agree with your comments. Dealing with pre-foreclosures (short sales) can get an investor into and out of deals with no money out of pocket. REO's can be done with private money or jv partners. While that is certainly a more advanced strategy, it is also obtainable for even the newbies.
Just my opinion.

Ryan Webber · Answer

I'm in Amarillo which is in the Panhandle.

I would start with lower end, older areas.  Areas that have plenty of equity but stay away from absolute war zones.  From what I remember of McKinney I don't think you have any war zones.

You absolutely need to learn your farm areas like the back of your hand.  Pulling comps is the most accurate way to compare values, but I would also research every for sale house or rental in the area.  Know how long they take to sell at what prices, how nice the houses need to be, if they need tile, or vinyl, or central heat and air.  What are the rents for a 2 bedroom or a 3 bedroom?

Curt Davis · Answer

Eric,

Its going to be a while before your ready for bank REO's.  You might need to assign contracts for a while which will be very difficult. Keep with it, otherwise find a money partner and go for the bank owned deals.

Jeff Warner · Answer

I agree with Ryan. Dealing with private parties is a great way to start with little to nothing out of your pocket.

Another bonus on dealing with private parties is that most investors are not looking at or sending letters to these homes so you may be the only offer they get.

With that said, all the deals in the world will do you no good unless you have a solid understanding about the property value's in your area. Spend time learning the COMPS for your market so that you can make intelligent offers based on the numbers, not a guess or a hunch.

I know that a Realtor can provide COMPS for you but I don't recommend relying on a Realtor to tell you what a home is worth. Learn the market and you won't need a Realtor to pull COMPS for you.

Jeff

Will Barnard · Answer

An excellent point James. Reputation is important and the ability to get it done and close is JUST as important as finding the deal & negotiating it.

Best method to Wholesale with no $?

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