04.18.2023 PropStream
Wholesaling real estate can be a lucrative side hustle to supplement your full-time career or a way to break into the real estate investing industry with a small budget.
However, before you run out and facilitate your first wholesaling deal, there’s much to learn about the practice. This article answers five of new wholesalers' most common questions about getting started.
Keep reading to learn more!
Table of Contents
- What are the legal requirements for wholesaling in my state or region?
- How do I find motivated sellers?
- How do I determine the value of a property?
- How do I negotiate with sellers?
- How do I find buyers?
1. What are the legal requirements for wholesaling in my state or region?
Please note that PropStream does not offer legal advice. Before attempting a wholesale deal, we highly recommend that you educate yourself on the practice’s legality in your region and consult a legal professional.
While wholesaling real estate is typically legal when done correctly in most states and cities, some regions require a license for certain wholesaling methods or have implemented other types of regulations around the practice.
Because of this, we recommend regularly updating yourself on your local legislation to ensure you’re always up-to-date on the legal wholesaling practices where you work.
Additionally, your ability to legally sell your rights to a property’s contract will also depend on the terms of the contract, not just the region you live in. To ensure you understand which contracts will allow you to perform a wholesale deal, we highly recommend that you also become familiar with real estate contracts and the legal jargon around wholesaling.
2. How do I find motivated sellers?
To find motivated sellers, you need access to in-depth property information. One way to get this information is by utilizing real estate data software.
By studying real estate data, you can determine which homeowners are in situations that create a need to sell. As a wholesaler, you aim to create a margin between what the owner will sell the property for (this should be a fair value for the property as it is) and what a buyer will pay for it. This is where you’ll get your commission.
To get the best deal on a property, your greatest chance of success will come from reaching out to homeowners in situations that create a need to sell.
A few examples of homeowner situations that indicate selling motivation are:
- Pre-foreclosure
- Bankruptcy
- Pre-probate
- Divorce
- Liens
- Vacant property status
Owners in these situations often have distressed properties they can no longer maintain, or they may not be using the property, encouraging them to sell even more. By stepping in and finding a buyer for their property, you can get the property off their hands, help an investor find their next project, and scale your business simultaneously.
Pro Tip: With PropStream, you can easily identify homeowners in these situations and more by applying our Quick Lists and additional search filters.
3. How do I determine the value of a property?
One way to easily determine the value of a property is by running comparables, or “comps,” on it.
To run comps, you’ll use historical property data from similar properties to determine an average sale price. Similar properties will include the same or similar:
- Square footage
- Features
- Amenities
- Year Built
- Number of bedrooms and bathrooms
- Neighborhood
By comparing the sale price of similar properties and getting an average, you can determine a fair range to offer for the property you’re interested in wholesaling.
Additionally, if the property requires extensive renovations, you may want to estimate those renovations to help solidify your offer. Since you’re assigning the contract for the property as-is, the buyer must have enough extra funds after purchasing the property to put toward renovations if they will benefit from the deal.
With PropStream, you can run comps in minutes using MLS and public record data before printing out a comp report to show the seller. Additionally, you can use our built-in Rehab Calculator to estimate a project’s renovations easily.
4. How do I negotiate with sellers?
Once you’ve performed your research, ran comps to determine a fair sale price, and estimated rehab costs, you can begin forming your pitch using the property value you estimated.
It’s crucial that you perform these steps before attempting to negotiate with the seller, as this is how you will justify your offer.
While your goal is to get the seller to agree to your sale price, you’ll want to ensure the way you present this information is empathetic while listening to any potential concerns or questions of the seller carefully. After all, selling a property can be an emotional experience for a homeowner, especially if they have no choice but to sell and feel attached to the property.
Because of this, it is helpful to build rapport with the seller before launching straight into your proposal.
It’s also important to remember that sometimes a deal is not in your best interest as a wholesaler, depending on what the seller will agree to and what your intended profit margin is. To avoid spending time on deals that aren’t worthwhile, it’s good to be open-minded to the idea that, in some scenarios, walking away may be your best option.
5. How do I find buyers?
One way to find buyers for your contracts is to target other real estate investors who regularly fix up properties to either sell (flip) or rent out.
Since many of these investors deal with several properties each year, having a property brought right to them that they can secure for below-market value can be appealing. As you gain more experience, you may be able to build a network of buyers who you can turn to as new opportunities present themselves. This will allow you to assign contracts more quickly and move on to new deals faster, increasing your yearly revenue.
If you’re new to wholesaling and have not built your network yet, you can use real estate data to find investors near you.
With PropStream, you can apply our “Flippers” Quick List to find properties owned by flippers. Want to target buy and hold investors (or landlords)? Search for owners with several properties, or use our “Linked Property” feature to identify properties owned by the same person. Once you’ve found some promising buyer leads, save them to marketing lists, perform a skip trace to collect their contact information, and make your pitch!
Want to Learn More About Wholesaling Real Estate? Take Our Free PropStream Academy Course!
If you want to continue expanding your knowledge of real estate wholesaling, we have just the course for you:
In this free, interactive course, you’ll learn:
- How to use PropStream to build marketing lists
- Steps to take when closing your first wholesaling deal
- How to apply direct marketing strategies to find buyers
And more!
Psst! We even included some cold-calling scripts to help you negotiate with sellers.
Class is in session: Enroll in Introduction to Wholesaling today to begin scaling your wholesaling business.
Don’t forget to activate your 7-day free trial to follow along with the lessons and enjoy 50 free leads.
