Property Wholesaling Basics from

Services for Real Estate Pros with REIcreator

When you wholesale a property it is the fastest and, in my opinion, easiest way to make quick cash in real estate investing. What most people misunderstand is the fact that you never actually buy that property. No! In fact you simply put that house under contract and find a buyer, than match the two up, and collect your "finder's fee". If everything goes well you should be collecting your money in about 10 days.

Let's talk about what houses to look for. When you are looking for a good wholesale deal you are going to want to look at homes you probably pass everyday on the way to work or to the grocery store. I am talking about distressed properties. When I say distressed I mean houses that look vacant, abandoned or even boarded up. You're going to want houses that are single family because there will be a surplus of those houses and the buyer will most likely want those kinds of houses. When I mentioned that, I'll bet you know of at least one off the top of your head that's fits this description. I think we all do. These houses are great because if the home is not in livable condition bankers wont loan anyone money for it and insurance agents most times wont insure it and best of all, Realtors want nothing to do with it so, its most likely not listed anywhere.

The owners of these homes are almost always motivated sellers. This means that for one reason or another the owner doesn't have the money or time to worry about that property and has to sell it. You want to target these problem properties in middle to low income areas. A lot of these homes will only need cosmetic repairs but a lot will need some major renovations. That's where people start to get confused. Why would you want one of these homes? Because of the deal you negotiate with that seller and the deal the buyer is getting , they are happy to pay you a small fee for doing all that work for a property that will make him anywhere from 30-50k. You don't do any repairs!! You will be buying and selling as is.

A big part of finding the deals is doing your due diligence and actually going out and finding them at first. I found my first wholesale deal on my jogging route I ran everyday. At the time I didn't have ANY money to put into my real estate business so I had to do it the old fashion way. Now I use a lot of different strategies to have these sorts of deals find me. Below is a list of strategies I find work very well.

There are a lot of unique ways to market your services to let the public know what you do.

  • Flyers (It is important that a lot of your material be branded with your logos. Remember this business is about networking and you want people to remember your logo).
  • Door hangers
  • Bulletin boards
  • Car wraps (wrap your car in your company's logo and contact info. A lot of people will see this, especially in rush hour. You can also use car magnets.)
  • Direct mail
  • Business card

If anyone would like to know how to get all of those products, you can contact for all of your real estate marketing materials. They will make it easy and affordable for the beginner to get started and they will help you with great ideas specific to your needs.

There is one marketing strategy I left out of the above examples and I did it for a reason. Bird Dogs. A bird dog is someone who will go out and find these properties for you for a collection fee anywhere from $500-$1000. Most times you can set up a bird dog program like I did where I would get college kids who need money but don't have time to be an investor themselves, to go out and find properties specific to your criteria. They will find the property, take a picture of it and get a contact number for you and if you close a deal on that house, you will give them the fee for their services. This will save you a lot of gas which is especially important now more than ever. You will also have more time to focus on the more important aspects of marketing listed above. Other good bird dogs are people in the public sector i.e. Mail Man, Sanitation Department etc.

So now you're getting leads on houses and your getting ready to put out a contract on that property. There are two ways to wholesale a property. Assignment of Contract and Double Closing (simultaneous close).

There are two contracts involved in this type of wholesale deal. One is going to be the Purchase and Sale contract between you and the seller. When you write your name on that contract, you are going to be writing "and/or assigns" next to your name. (Zac Beatty and/or assigns). This important to remember because it gives you the power to assign that contract to another investor, which you will be doing. The idea behind this is simple, you have found the property and negotiated an awesome deal with the seller and now you are assigning your right to do this deal on the terms you have negotiated with your buyer.

The other contract is going to be between you and the buyer and is called the assignment of contract. This contract will have the properties address and some information about the seller, you as the original buyer and about the new buyer you are assigning this contract to. You can find all of these contracts on this site. Remember, I am not an attorney, so you are going to want to get these contracts approved by an attorney before you use them. In the assignment you will also have the price of what the buyer is paying you for your services.

You can download copies of these contracts and more from

A good wholesale deal would be around $3,000 - $7,000. However, in the market today, it is not unreasonable that you can go out make $8,000 + on your first deal. Note, when your profits are going to exceed $10,000 you will want to do a Double or Simultaneous close, but we will discuss that shortly.

Once you have assigned the contract you are going to want to collect a non-refundable deposit from the buyer. If you can get all of it than awesome! But this is just to make sure that if for some reason the buyer wants to back our of this deal, you still got paid some sort of compensation for your efforts. I would say half of the deal up front is reasonable.

So what you have done is sold your purchase contract to another buyer. You never had to own the property, you shouldn't have to pay any closing costs, and your name wont appear on the deed. So, get the property under contract, assign that contract, and make some cash! This is by far the best way to start your real estate investment career and will help you understand the industry and give you the opportunity to work your own hours on your terms.

As you now know with an assignment of contract the buyer can clearly see how much money you are getting out of the deal. Most investors and sellers will not care if you are making a couple bucks, after all, you did find the deal in the first place. You should defiantly be paid for your work. But, if for some reason they feel you are making to much money, they just might try to go behind your back or just never work with you again. If that is the case and you are going to be making $10,000 or more, you should do a double or "simultaneous" close.

When you are doing a double close you will be using two purchase and sale agreements. One between you and the seller with you as the buyer, and the other will be between you and the buyer, with you as the seller. Here is how it all works... You are actually "buying" the property and than "selling" it simultaneously to your buyer. The Title Company or closing attorney will handle the transaction making it a smooth stress free transaction without you, the seller, or the buyer together at the same table.

The buyer will typically be asked to come in first to close with you as the seller. They bring the money needed to buy the property (you will use this same money to pay the seller). The money is given to the title company or closing attorney and sits in a trust until the seller of the property comes to sign the papers with you as the buyer. You will show up last and sign both sides of the transaction (as seller and as buyer). Understand?? The seller will only see the transaction between you and them, and the buyer will only see the transaction between you and him/her. When you are doing it this way you may have to pay some closing costs, but you will be making more money so it won't be an issue.

This is a very important section to pay attention to when you are writing up contracts. Because these properties you are looking at are not homes you really want to purchase, you will use what is known as contingencies or "subject to" to protect yourself in the event you cannot find a buyer. (you will definitely want to check with an attorney before using any contract)

Whether you are doing an assignment of contract or double closing, you will be using the same contingencies in your addendum of contract. Always remember to put your name plus "and/or assigns" as the buyer on the purchase contract. In your addendum, put these contingencies and conditions:

* It is agreed that Buyer has 30 business days from the date of this offer to perform due diligence. This may include determining any needed repairs, researching the title, and confirming market value. In the event the buyer determines that the property does not meet with his/her approval, the contract will become null and void, and the buyer's deposit returned immediately.

* Upon acceptance of offer, buyer to receive key to the property and have the right to show to any and all prospective occupants.

If the property is For Sale by Owner use that second contingency, if it is listed with a realtor, put:

* Buyer to receive access to the property upon acceptance of offer.

If the FSBO is occupied, than use the clause of:

* Buyer shall receive access to the property for the purpose of showing the property to prospective occupants and to obtain bids on repairs.

It is important to remember that using too many contingencies can easily kill a deal, so make sure to be safe, but not over cautious and scare away a great deal.

An important part of being able to do assignments or double closings is having a good attorney or title company that understands what it is you are going to be doing. Some states, like Georgia, use attorneys to close real estate closings and others only need the title company to do such. You will want to check and see what your state requires. You are going to want to start calling around and talking to closing agents/attorneys. You want to talk to the actual person who will handle the closing so you will have to get past the front desk which isn't too difficult. Ask them if they are familiar with assignment of contract and/or double closings. Have they ever done them before?

Do not get discouraged if they don't know what you are talking about or if they don't do that sort of thing. You might have to call 10 or more offices before you find the right one. Sometimes it helps to get a referral from an investor who has done this before. If you are in the Atlanta area, I recommend calling Steve at Harlan & Associates. He is a really nice guy who will help you with any questions you might have and makes the process a lot easier.

You will want to make sure the closing agent understands you will not be bringing any money to the table when you talk about double closings. Ask them how much they would charge you for this type of transaction. Also ask them if they charge for assignment of contract, typically the buyer ad seller will pay the costs since you are out of the deal except for the check you will get from the buyer that has been agreed upon.

It is also important to know how the buyer is going to be paying for the property. You need to know this because if the buyer's lender sees your assignment they are most likely not going to want to do the deal. Or with a double close, they will see the contract between you two but your name won't appear on the title as the owner. Sometimes this is a red flag to the lender/bank. So be sure to ask the closing agent if they have ever had a problem like that and see if they were still able to do the transaction.

Do not worry yourself with the problems you will have with the bank, as you will be dealing with investors who use private or hard money loans to do their deals. These types of lenders do not care if it is an assignment of contract or a double closing. When you deal with investors they use cash and can close quickly.

It is never a bad idea to start looking for private or hard money lenders for you to use in the future if you decide you would like to start buying, fixing, and selling.

YOUR OFFER, NEGOTIATING THE DEALS: Now that you are on your way to doing a deal you need to know how to get a good price, and what a good price is. When I look at a property I will use this basic formula to figure out the number.

  1. What is the ARV or "After Repair Value"?
  2. Subtract estimated repairs.
  3. Subtract profit for your investor.(If ARV is under$75,000, subtract $15k. If ARV is over $75,000, subtract 20% of the ARV)
  4. Subtract at least $3,000 for yourself (can be more depending on the spread for the investment)
  5. Equals the most you would offer.

When you begin negotiating with the seller, it may not be easy for you at first, especially if you are a shy or timid person. You have to be straight forward and to the point with the seller. Do not let them know you are nervous. Once you get them on the phone you are going to want to introduce yourself of course. Than , you are going to want to make sure you are talking to the home owner and let them know why you are calling. make sure you let them know you buy houses cash, and can close quickly.

After you have their interest there are a few basic questions you need to ask them.

  1. Where is the property located? ( if you don't already know)
  2. How much are selling the property for?
  3. Why are you selling? ( This can always give you a good idea of the motivation of the seller)
  4. Do you own the property free and clear? ( meaning, is that property all paid off) If they say yes, that is great because they have more flexibility. If they say no you will want to ask them this...
  5. How much is the Loan Balance?
  6. How many years are left on the principal balance?
  7. What are your monthly payments? Including tax and insurance.
  8. What is the least you could take a a down payment?
  9. How much estimated repairs? (Whatever they say, double it)
  10. What is the lowest cash amount you would take for that property today?
  11. Have you had any offer? What were they? Why didn't you accept any?
  12. How long have you been trying to sell your property?

After you have spoken with them for a little while you will be able to determine how motivated the seller really is. If it looks like a good deal than you need to set up an appointment with them immediately to get a signed contract. Do not wait because if you do, you could lose the deal.

BUILDING YOUR BUYERS LIST In my opinion this is the easiest part of the Wholesaling world. There are so many wholesale buyers in this country it is insane. Especially with the market being the way it is, these guys are buying up everything they can get their hands on. It is important to remember an investor doesn't have to fall in love with a property like a home owner would. If the numbers are good, their will be no problem finding someone to buy it.

Now that you are on your way to becoming a Wholesale investor, you need to build your database of buyers. Do not freak out if you find an awesome deal and don't have the buyer lined up right away, but it is a good idea to start building your buyers list as soon as possible. There are many ways and places to find investors for your database...

  • Website: Having a website where people can sign up for your buyers list at their convenience is crucial in not only capturing that buyer's information, but organizing all of them in a CRM, or customer relations manager. You can manage all of your leads coming in from your marketing in one back office Visit and check out their CRM and website packages for any investor. They will work with you to optimize and automate your real estate business online at a very affordable price.
  • Advertising: All of your advertising i.e. bandit signs, car wraps etc. should steer people to your web site where they can sign up without you having to call or talk to each individual one. You want to have a short catchy URL that people will remember. They are going to be driving so you have to make them short and sweet. (REIcreator has URLs for sale as well.)
  • Join your local REIA (Real estate investors association) .You most definitely will want to join your Local REIA. There you will meet all sorts of connections and potential buyers. You will be able to build your business through the good referrals of experienced investors, which puts you at an advantage. Ask around, see what investors are looking for in a property and get their card and put them on your buyers list. See how easy it is??
  • Go to Foreclosure auctions at the court house: There are a bunch of investors down there every time buying up property. These are the Big Dogs who can do deals. You want to mingle and build your buyers list their as well. You don't ever want to look at other investors as competition. In fact, a group of like-minded investors working together can be an awesome advantage. There is enough to go around for everyone, so work together.
  • Talk to people rehabbing houses in your neighborhood: These are usually investors or the person in charge will be. Like that show Flip That House, there is a big trend with people doing that now more than ever and you want to have those people on your list as well. You will be finding all sorts of properties so it is a good idea to have a diverse buyers list.
  • Realtors, Lawyers, Bankers etc: These are professionals in the real estate game, they know investors and you want to make sure as many people as possible know what you do.

So, by now you should be well on your way to becoming a real estate wholesaler. Follow these basic steps and you should have no problem finding your first deal within weeks. Always remember, there is opportunity everywhere and it just takes a little leg work to get your business going.

For more information on building your wholesale buyers list, check out this article on using REIcreator's Wholesale Property Websites to build and inform your buyers list.

Zachary Newland

Comments (2)



I wanted to make sure that I understand the and or assigns contract because I have no money right now to get start, and I was also wondering what about dishonest people?  Thank you so much!

Jul 30, 2008 03:09 PM
Zac Newland

Good question...The "and/or assigns" is a critical part of real estate investing especially when you are a beginner.  That is going to give you the power to tie that property up and "assign" that contract to another investor.  Since you will not be buying that house, you will most definately be assigning it. As far as dishonest people go...I am not quite sure what you mean by that,maybe you could elaborate?

Jul 31, 2008 03:38 AM