Wholesaling Tips From William Bronchick

Transcription

1 Wholesaling Tips From William Bronchick

2 Tip #1 Build Your Dream Team Many entrepreneurs believe that, if you want something done right, do it yourself. Personally, I believe that is the rationalization of control freaks unwilling to delegate. In reality, your dream team will help you reach your financial goals faster than you ever can alone.

3 Sure, you can find motivated sellers and build a great buyer's list on your own, but other tasks require the expertise of others. Some of the members of your team should include : real estate agents, who can bring you sellers home inspectors, who can spot things you might never notice

4 rehab crews, who can do work in much less time than you could,assuming you want to pick up a hammer contractors, who can finish off a repair job in next to no time appraisers, who can give you accurate values on given houses

5 mortgage brokers, who can arrange the needed financing for your buyers hard money lenders, who can provide needed financing in a crunch title company agents, who can prepare the proper paperwork real estate attorneys, who can make sure everything is in order

6 and last, but not least, your mentors, who can answer questions when you get stuck, and provide motivation should you need it. Some guidelines for dealing with your team: --- Interview all of them to make sure there is a good fit, that you are on the same page

7 --- Those with 2-3 years fulltime experience work best --- Those with experience working with investors like you is an added benefit --- Ask for referrals from each prospective team member --- Mutual benefit works best. You want everyone on your

8 team to make money by working with you. --- Don't depend on just one from each category. More than one gives you flexibility. Imagine if a rehab crew cannot get to your job when they are needed. Or to your buyer's job. Since you would rather have your fee sooner rather than later, you want to be able to have another crew on hand.

9 The more you use your dream team, the easier your job becomes, and the more money you will make.

10 Tip #2: Avoid These Fatal Wholesaling Mistakes Wholesaling properties is a lucrative business, but there are a number of costly mistakes to avoid. Namely Not understanding marketing. This is the ingredient that makes everything else go.

11 --- Not having a marketing plan. Having a marketing plan keeps you on track. A step-by-step system will help keep you in the black. --- Not performing due diligence. You need to take time to determine the true market value of each house. That way, you can accurately make a determination about what to offer.

12 --- Not having business cards. Pass these out to anyone who could help you make the money you want. Go to for 250 free cards. --- Not having a 1 or 2- line description for what you do as an investor. This comes in handy when someone asks you what you do.

13 --- Not having an organized follow-up system. Keep a file on everyone you talk to, including contact info., date, and a brief sketch about what you discussed. --- Not prescreening prospects. This relates to buyers and sellers. Spend as little time as possible with unqualified prospects.

14 --- Not making enough offers. Do not let fear keep you from making the money you deserve. --- Letting real estate agents discourage you. Find others who are encouraging. --- Being impulsive. Don't be so anxious to make a deal that you overlook key ingredients that will enable you to realize your fees.

15 --- Not paying attention to communication. Take your time with prospects, and be aware of HOW you are saying things. Be ready to answer questions, which tend to be the same across sellers. Study 3 x 5 flash cards with questions and answers until you have everything memorized. --- Not having a consistent source of properties. Develop

16 relationships with divorce attorneys, probate attorneys, hard money lenders, REO bank officers, bird dogs, and anyone else who can lead you to houses. --- Falling in love with the property. Just because a given house is beautiful does not mean it is right financially for you or your buyers. Keep your emotions in check.

17 --- Getting greedy. Don't try to hit a home run with every property. Leave a large potential profit for your buyers. --- Paying too much for a house. No profits = no business and a waste of your time. --- Ignoring the Internet. Use it to market to buyers and sellers. Use for free advertising.

18 --- Not building up a cash reserve. Sh@t happens. Count on it. A cash reserve can bail you out of a temporary problem. --- Not having a solid buyer's list. With this part of your system lacking, you cannot complete deals. --- Coming off too slick with sellers. Makes them suspicious

19 that you are taking advantage of them. Don't brag about the dozens of deals you have done. --- Thinking you wouldn't want to live in a given house. You are not a renter or buyer. You are a wholesaler. Someone else will certainly want to live there, even if it is in a war zone. --- Not running the numbers. Don't sign a contract before you know you can make a profit.

20 --- Thinking mistakes are the end of the world. Face it. You are going to make them. Being ready to deal with them is the solution. When you fail, learn. --- Not realizing how deep a discount you can get on a given deal. Don't be bashful about low-balling. You never know what seller will accept.

21 --- Not knowing how to close a deal. Educate yourself and be prepared. --- Taking seller's word that the house is in perfect shape. Let a home inspector tell you that. --- Not having relationships with private lenders, appraisers, contractors, rehabbers, etc. They represent your power team and can be instrumental in getting you paid.

22 --- Not doing research before hiring a contractor. Check out their references. --- Not sticking to a budget, especially when remodeling. Why waste money when you don't have to? --- Dealing with houses with weird floor plans (must go through bedroom to get to

23 kitchen, etc.). These are harder to sell, and your buyers will be reluctant to buy them. --- Not having someone to call when you get stumped. Extremely important to keep things running smoothly. --- Doing nothing. Procrastination kills. Talk to someone successful to help overcome your inertia.

24 Tip #3: What Kinds Of Houses To Look For In wholesaling, you want the type of house that your buyers will want, the ones that, for them, sell the fastest, and, of course, ones they can make a profit on. Following are some tips on what you should be looking for.

25 In general, especially if you are just starting out, avoid houses in the high end of the market. Yes, they can look beautiful, and clean up real nice, but most retail buyers will not be able to afford to live in them. And as rentals, they are murder when investors are trying to cover the mortgage payments. You want to work mainly with houses in working class neighborhoods. Investors will

26 be interested in these types of homes for rental purposes. And a majority of reliable renters will want to live in these neighborhoods. Look for houses in need of repair. Look for peeling paint, broken windows, unmowed grass, general disrepair. Especially in the beginning of your career, deal mainly with houses that do not need

27 structural repairs, like foundation work. You will receive your fees quicker because any needed repair work can be done relatively quickly. In the neighborhood you are working in, you want houses that are most affordable for first-time buyers. Those are the houses your buyer will want to rent out.

28 Put another way, you want houses in the median price range for your area. The ideal house investor will want to buy will have 3 bedrooms and 2 baths, although you can get away with 1 ½ baths. This is the bread and butter rental house for your buyers. If your area has only 2 bedrooms and 1 bath, you may have to go with that. Or, go

29 farther afield to do your hunting. What about war zone houses? Generally, you will do better in working class neighborhoods. However, if you have buyers on your buyer's list who want war zone types of homes, go for it. Avoid houses with weird floor plans. For example, houses where one is required to go through a bedroom to get to a

30 kitchen, etc. They will be harder for your buyer to rent or retail. Avoid houses that are too small. Medium size houses are what you are after. Medium for your area, that is. The more equity a house has in it, the better your chances of making a deal with your buyer. More equity means there is plenty of room for your buyer's profit, not to mention your fee.

31 You, of course, want to be dealing with motivated sellers who are willing (or forced) to take a discount from their asking price.

32 Tip #4: What Are The Benefits Of Wholesaling Real Estate? The formula for wholesaling is simple: find a house, assign a house; Find a house, assign a house; Find a house, assign a house. Tricky, huh? The benefits of wholesaling are numerous...

33 --- hands down, the fastest way to stuff your pockets with cash --- the lowest risk, highest returning, headache-free way to invest in real estate --- your ability to cover shortterm cash flow gaps

34 --- build a monthly income that surpasses your annual salary in less than 92 days --- siphon off piles of cash on even the trashiest properties --- tell your boss to shove it in less than 12 months --- make money in a booming market; make even more in a down market

35 --- net $15,320 for 3 hours work --- you control how much you make each month --- get handsomely paid as a middleman; let others do the heavy lifting. --- create your own cash machine

36 --- support yourself with one deal a month; live well with two deals a month --- get paid consistently month after month --- generate cash profits NOW, not months or years into the future --- insulate yourself from risk

37 --- ability to buy for pennies on the dollar --- recession-proof business key players on your dream team will increase your profits by up to 400% --- avoid shelling out hundreds of dollars to home inspectors

38 --- succeed without ever setting foot in a bank (except to deposit your profits) --- make thousands without lifting a finger for repairs --- you don't need a real estate license --- succeed with no money, no job and no credit

39 --- close on houses sight unseen --- no mortgage brokers, no real estate agents, no title company fees --- avoid the headaches associated with buying and holding

40 --- what do you mean you can't wholesale an REO? Now you can --- get completely out of debt within 12 months --- get around lender seasoning rules --- build an 11-person buyer's list in under 9 days

41 --- stick it to the tax man (legally) types of buyers will help you succeed --- pay off credit card bills with a single transaction --- tie up a deal worth 5 figures with a ten dollar bill

42 --- work from home in your pajamas --- total time from contract to close? 7 days; profit? $2, skinny deals, (less than $2,000) allow you to knock off monthly bills Whew! Quite a list. Actually there are dozens more.

43 Certainly worth a look at wholesaling. Now...decision time: It's either umbrella drinks in your favorite tropical resort, or back to the 9-5 rat race.

44 Tip #5: Build A Profitable Buyer's List When you start out wholesaling houses, one of the first things you want to do is build a buyer's list. Don't make the mistake that many beginners make by waiting until you have a house under contract. If you do, you put yourself under pressure. Scrambling to find a buyer

45 could also put other profitable activities on hold. Numerous groups of people will want to buy houses from you: real estate newbies, rehabbers, contractors, retailers, investors interested in doing lease options, etc. Make a connection with someone in any one of these groups, and they could become regulars.

46 Here are a few ideas about how to reach potential buyers. --- Get hold of a list of section 8 investors at your local property management company. Property management companies can also put you in touch with other investors who might be interested. --- Put a classified ad on Craigslist (

47 Investors wanted. Local property owner selling houses at huge discount. (phone number) Or some such wording. --- Join your local real estate club and network with the investors there. --- Call the for sale classified ads in your local newspaper. Especially the ones that say newly renovated. That indicates a rehabber or

48 contractor who might be interested in future deals. --- In the classifieds, look for the words rehab special to find investors --- Other words to look for in the classifieds: Thousands below market, or I buy houses. In short, any indicators that you might be dealing with an investor who can potentially

49 be responsible for stuffing your pockets with cash. --- You are walking or driving down the street and see a house being remodeled. Stop to chat with the contractor or rehabber. Or get the contact information of the owner, if the workers are only hirees. --- Contact hard money ( read higher interest rates) lenders for investor names.

50 Tip: Go to and send for 250 FREE business cards you can hand out to potential buyers. --- Of course, you can always place your own classified ad. Something like House for sale. Thousands below retail, or investor special to get your phone ringing. VERY IMPORTANT: Be sure to get the contact info, including the

51 address, of everyone who calls. You want the address so you can do an e-blast without having to write individual notices to prospects. By the way, in your e-blast, create a frenzy with some message of urgency about your offer. Some sort of first come, first served message. Suppose you don't have a house for sale? No problem. Always

52 be running blind ads in order to strengthen your buyer's list. Something to say when a caller responds: That house has been spoken for, but I will call you when the next one comes up for sale. Put an asterisk beside the names of potential buyers who 1)can close fast, 2) who are cash buyers, and 3) who are experienced. You don't want to waste a lot of your time,

53 especially at first, hand holding a newbie who can exhaust you, and possibly make you think that wholesaling is not profitable. It is. Interestingly, you don't need dozens of buyers to be successful. You are more interested in the QUALITY of your buyers, especially ones who are experienced cash buyers and can close fast.

54 Tip #6: Negotiate Your Way To Five Figure Paydays You've seen a house inside and out, done the necessary calculations, and now it's time to negotiate with the seller(gulp!). Not to worry. Like anything else, negotiating can be learned. Some tips(not in any particular order):

55 --- Determine what your financial goal is for each deal. What do you have to earn to make it worth your time to proceed? --- On the phone, determine if seller is genuinely interested in selling. Try to set up an appointment. If he is reluctant, move on. --- Remember, negotiating is a PEOPLE thing. Use your

56 people skills. There's no need to be pushy. --- Knowledge about the seller's situation can be a great aid to the negotiation. If he is about to be foreclosed upon, you can ignore his gruff attitude. He needs you. --- If the property has just been put up for sale, sellers are more reluctant to negotiate. If the house has been on the market

57 for a while, seller is likely to be more motivated. --- When face-to-face with seller, don't be in a hurry to get down to business. Take your time. Ask questions. --- Before negotiating, know what the house is worth. --- Remember, an offer involves more than the price. Seller has

58 an emotional investment in the property. --- Recent life events (divorce, death in family, relocation, pending foreclosure, etc.) may motivate seller. --- Many sellers base their asking price on what I call plucked from air. Don't depend on that price for your starting point. Remember, the one with the gold(you) wins.

59 --- Know your limit. Do all necessary calculations beforehand. Have in mind who, among your buyers might be interested, and at what cost. --- On the phone, seller insists that you name a price: You say Assuming your house is in the same condition as some of the others in the neighborhood, my investors and I have been buying between (name a range

60 of prices). What if that is all I can offer you? --- After you have a brief look around seller asks What's your offer. You say Well, Mr. Seller, I don't really know the condition of your house. Can you tell me a bit more about the kinds of repairs it needs? --- Ideally, get seller to name his bottom line price first. Paying all cash and closing

61 quickly, what's the least amount you will accept? No matter what his response, follow up with Is that the best you can do. --- Be aware that seller can experience a number of bipolar mood swings. Just remain calm and accepting. Refuse to be intimidated.

62 --- Don't make your highest offer your first offer. You have left yourself no wiggle room. --- Name a range, not an exact figure. --- You make an offer and seller responds: No way will I accept that amount. I want at least $60,000. You have gotten seller to name a price.

63 --- Houses with recent price reductions indicate motivated sellers. --- Suggest a figure that is not a round figure. Makes your offer sound more legitimate, like maybe you know something seller doesn't know. --- Do not give seller more than 24 hours to accept your offer. That way, he won't have much time to shop your offer.

64 --- Use a partner as the one who could not live with seller's price. It's not your fault, so seller cannot take it out on you. --- Know the true condition of the house, in order to estimate needed repairs. --- Use this formula: after repair value(arv x.70% minus repairs minus your fee = the

65 price you want to offer). Begin somewhere below that figure. --- Find out from neighbors if there have been repairmen in and out prior to the house being put up for sale. --- Ask for something in the house you don't really want. This can take seller's mind off the price you are offering. You can negotiate these items away later as concessions.

66 --- Never, never put down the seller. --- Avoid confrontational language that can end the negotiations. --- Never put down the house. Admit that it needs work. --- Some buyers suggest that, if you are not embarrassed by

67 your offer, it is too high. I say, as long as your offer fits the formula above(arv), embarrassement is not necessary. --- Scared of facing a seller? Consider taking a more confident person with you. Learn from them. --- If a deal isn't going to work, be ready to walk away. Remember though, sometimes

68 seller will offer a vehement NO!, then call a few days later to say YES!

69 Tip #7: Qualify Potential Buyers With These Questions Once you start wholesaling properties, you want things to go smoothly and quickly. One of the ways to make things go smoothly is to have potential buyers already lined up before you start hunting for house sellers. That way, once you have a contract with a seller, there is no need to scramble to find an appropriate buyer.

70 You've done your homework ahead of time. In order to create the strongest list, you must qualify buyers. Qualifying helps you determine exactly whom to contact when you have contract in hand. Some questions to ask potential buyers:

71 Are you a cash buyer? Cash buyers make the wholesaling process advance faster. No need to THINK you have a deal, only to have it fall apart because of a lack of financing. Do you have financing in place? The next best thing to a cash buyer is someone who has financing in place (approval via a letter of credit, etc.) Again, saving time and getting your money to you faster.

72 Do you have a banking relationship that can result in quick cash? A potential buyer might answer that by saying that he has no problem getting loans, because he has done so many times before with X bank. How quickly can you close? Of course, you want your money sooner rather than later. Also, some deals may set up a time pressure. Better to go with

73 a buyer who can respond quickly. Have you done any wholesaling deals before? Extremely important. Experienced investors know how the game is played and know how to deal with roadblocks that inevitably pop up.

74 When you are starting out, you want someone who can oil the process so things go smoothly. What is your buying criteria? What kind of deals is buyer interested in? Rehab situations? Only in certain neighborhoods? A certain percentage of equity in the house? What is your exit strategy? Lease option? Retail to end user?

75 An important issue is whether or not you feel you can work with a given buyer. Or is his or her manner such that you think working together will be difficult? You don't need agony. You need someone who is willing to make money without conflict. By the way, do not be afraid to ask these questions. They are necessary for your success. An

76 experienced buyer who is interested in making money will be all too willing to answer them. So...how to categorize potential buyers? Perhaps first call those who are willing to pay cash or has funding in place vs those who will seek funding after you present a deal.

77 Or...categorize by the TYPE of deal they want. A rehab? War zone property, etc. Or...percent of equity they prefer in a deal. Besides the usual contact information, be sure to get addresses for all buyers. That way, you can e-blast a number of them with the punch of a button, rather than having to contact each one

78 individually. Categorize first, then blast. Create a written checklist to gather this information. Do not count on your memory. In the excitement of possibly completing a deal, you can forget things. Tip #8: Zero In On Motivated Sellers

79 When wholesaling houses, you want to focus your efforts on motivated sellers. This is true especially if you are just starting out. While wholesaling is the quickest way to fast cash, dealing with motivated sellers makes the process go even faster. Which means cash in your pocket sooner rather than later. Motivated sellers are people who MUST sell their homes.

80 So...what motivates a seller to have to sell his home? Financial distress for one. Maybe he is behind on payments. Maybe he is facing foreclosure. Maybe even bankruptcy. Maybe he is facing a huge medical bill. Or a divorce settlement is looming on the horizon. Positive reasons can force the need for a quick sale. A job relocation and not wanting to deal with a vacant house, let

81 alone rent it out and have the value plunge. Getting married and having no need for two houses. You may think you are taking advantage of these homeowners. Actually, you are doing them a favor. Think what happens if the homeowner does not make the sale. He could be foreclosed upon, or worse, forced into bankruptcy. Or an empty house could be destroyed

82 by vandals. Renters could wreak havoc on the value of the house. It's easy to see, then, that these sellers need you. You are, in fact, a savior of sorts. O.K. Now how do you find these motivated sellers? Some tips:

83 1. Build a website, or have one built for you, announcing that you buy houses. Not a techie? Then have someone from build one for you. 2) Run classified ads in your local newspaper. Place your classifieds in dailies, weeklies, even free newspapers. Hint: advertorials(looks like editorial copy; reads like an ad; purports to educate but is really an ad)

84 3) Set up bandit signs, those little signs on stakes and phone poles, announcing that you buy houses for cash, fast. Warning: Don't get carried away creating these until you find out they are legal in your area. If they are not, you can always place them after 5P.M. Friday evening through Sunday evening, because the sign police are not out and about then.

85 4) Put signs on your car. You are now a rolling billboard. You'd be surprised how many people will approach you when you are parked somewhere. 5) A bit more expensive, but take out a Yellow Pages ad. Hint: Use the advertorial approach to stand out from competitors.

86 6) On line, go to classified ad sites, especially free ones, like 7)Once you get going, and can afford it, going the direct mail route can be quite profitable.