Real estate wholesaling is the perfect way to dip your toe in the water of real estate investing. It allows you to run a real estate business with little to no funding. Doing business is even possible without actually owning a property.
Despite being a controversial topic, wholesaling real estate remains a popular method of making money in the real estate industry. Proof of it is the USD$67,000 average profit made for every home flip in the United States in 2021’s second quarter. (1) There’s no doubt that investors and investor-buyers continue to see wholesaling as an attractive way to drive profits.
Getting started in real estate wholesaling, however, can be tricky. For instance, new wholesalers often find lead generation a challenging task. This is especially true for wholesalers stuck with traditional real estate marketing tactics. That’s why it’s essential to understand exactly how real estate wholesaling works first before doing any wholesale deal. It’s also essential to discover new guaranteed effective ways of generating leads, such as voicemail drops via voicemail marketing platforms like Drop Cowboy.
What is real estate wholesaling?
In real estate wholesaling, a wholesaler profits by negotiating an under-market value for an identified property. The wholesaler then agrees to a purchase contract with the seller then assigns the contract to another buyer with a wholesaling fee attached to it. The wholesaling fee is often a percentage of the property’s overall cost. (2)
Most buyers in a real estate wholesaling deal are investors who’ll fix the property up for rent or resale. Ideally, wholesalers should look for cash investors or buyers for fewer transaction complications and faster closing times.
Is wholesaling real estate properties a legal activity?
Wholesaling is completely legal despite some criticisms against it. That’s because when a wholesaler signs a contract with a seller and gives the earnest money deposit (EMD) representing their good faith to purchase the property, the seller becomes legally bound to sell to them. (3)
Simply put, the agreed purchase contract gives the wholesaler ‘equitable rights’ to the property. And, selling those rights to another buyer is perfectly legal.
Unique but effective lead generation strategies
Traditional tactics for generating real estate leads may no longer be as fruitful as they were several years ago. Nowadays, many yellow letters get lost among dozens of other direct mails, and many street corners are crowded with bandit signs. That said, it’s time to identify new, unique ways of getting high-quality leads and focus your time, energy, and marketing money on them.
Here are some strategies to generate real estate buyer leads:
1. Subscribing to a wholesaler’s buyers list
The top real estate wholesalers maintain a buyers list. For newbie wholesalers, subscribing to these lists is one of the best ways to find cash buyers for their own wholesale deals.
This strategy works because, as a subscriber, you’ll receive the top wholesalers’ properties for sale via email. Of course, you wouldn’t be buying those properties. What you’ll do is go back to the emails you’ve received after about a month and start looking up the county records for those properties. That way, you’ll know who purchased them.
Most, if not all, of these buyers are cash buyers. So, if you’ve found a seller, call them or drop them a ringless voicemail to offer the property to them.
Networking, regardless of the industry you’re in, helps develop long-lasting business relationships. That’s why, as a wholesaler, you’d want to network with real estate agents, investors, and even landlords.
One of the best ways to network is by joining real estate investor groups. These groups are present in most cities and meet once a month or so for industry updates. Although these meetings focus on the speaker and the Q&A session that follows, they function as networking events. That’s because members chat with each other before the meeting formally starts.
The networking moments in real estate investor group meetups can be a great opportunity to know cash buyers that other wholesalers partner with for their deals. Often, cash buyers also join these meetings to network with wholesalers. That’s why you wouldn’t want to miss the chance to join these events and introduce yourself to individuals looking for certain types of deals. Also, make sure to ask for the contact information of anyone interested in properties to flip.
3. Joining real estate investing forums online
Message boards in online forums can also be a great way to introduce yourself to real estate investors as a wholesaler. Think of this strategy as the online counterpart of local investing group meetings.
The best thing about online real estate investing forums is that you can narrow your introductions. For example, you could introduce yourself as a wholesaler looking for cash buyers around New Jersey. Doing so will increase your chances of connecting with people searching for properties in New Jersey. And, if the deals you’re offering align with the goals of cash buyers who found your introduction, you could be closing one or two deals in the next couple of days.
4. Using lead capture forms
Online presence is essential for anyone hoping to run a successful business nowadays. That’s because the world continues to become more digital with each passing day. That said, even real estate wholesalers also need a website.
A website can become a great lead generation tool with the help of lead capture apps. Integrating lead capture software with your website lets you set up a lead capture form where potential cash buyers can add their contact information once they find you online. A new lead gets added to your pipeline every time the form on your website gets filled out. The next step is to reach out to your new lead so you can confirm whether or not they’re a cash buyer looking for properties to flip.
It’s essential to note that lead capture forms only work if you have a high-volume traffic website. Blogging and promoting your website through social media can help increase traffic to it. Also, you can bid on certain keywords using Google AdWords, so your website shows up higher in search engine results. That’s if you’re okay spending some money to increase your website’s traffic.
Now that you already know how to find cash buyer partners, it’s time to find motivated sellers.
5. Looking up FSBO (For Sale By Owner) listings on Craigslist
A combination of inexperience, poor marketing, limited resources, and unoptimized pricing is why 90% of FSBO properties don’t become closed deals. (4)
The difficulty of selling a property on your own is why FSBO property owners are eager to sell even at a discounted price. For real estate wholesalers, FSBOs are an opportunity to come in, save the day, and profit. Craigslist often has FSBO listings in which you can reach out and negotiate a discounted price, which may become your next wholesale deal.
6. Viewing MLS (Multiple Listing Service) listings
Motivated sellers might decide to list their properties with the help of a real estate agent, assuming that it’ll help make the sale faster. As a result, their properties appear in the MLS, a database that provides data about properties for sale. (5) That’s why checking out the MLS is also a working tactic for getting seller leads.
The goal is to find listings that have been on the platform for a considerable length of time. Owners of these properties may be more motivated than they were a few months ago. You can reach out to them, negotiate a discounted price, and make them realize it’ll result in the fastest sale.
Note, however, that the MLS is available only to licensed real estate agents. If you’re not a licensed real estate agent, befriending one can help.
7. Making HUD (Housing and Urban Development) offers
If viewing MLS listings isn’t an option, you can try offering for some of the US Department of Housing and Urban Development’s REOs, or real estate-owned properties. These are properties owned by a bank or other lenders that failed to sell at a foreclosure auction. Lenders, such as banks, want to liquidate these assets immediately as they have zero interest in maintaining them. (6)
Properties that the US HUD maintains are often listed at a significant discount. That’s why they’re ideal for wholesale deals. What’s great about HUD is that you can access the database even without a real estate license. (6)
8. Facebook or Instagram advertising
Paid ads on Facebook or Instagram help whether you’re trying to generate buyer leads or want to get seller leads.
Facebook advertising’s targeting options allow wholesalers to focus on specific interest groups. For instance, you can target divorce properties and vacant houses or probate properties if you’re generating motivated seller leads. Talk about motivated real estate sellers! Those three groups are all of that.
Real estate wholesaling is the best way to jumpstart a career in the industry, provided you know what strategies will bring profits to your pocket.
The lead generation strategies mentioned and discussed above will help keep your eyes and ears open and ensure that you’re visible offline and online, allowing you to crack more wholesale deals.