Real estate wholesaling is a way of making money with properties that you don’t own without going through the hoops of becoming a real estate agent or broker. You don’t buy the property, so you don’t need to invest large sums in it. Still, people interested in this business wonder if they need to invest money to wholesale houses. This article looks at this question in detail. Read on to find out all about it!
Do I Need Money to Start Wholesaling Real Estate?
The short answer is: you don’t need a lot of money to start wholesaling real estate. But you do need some. Since you’re not buying the property or making any improvements to it, you don’t need to invest any money in it. If you have strong people skills and drive, that’s more than enough to start.
Realistically, though, it’s hard to avoid spending money on some things, such as a purchase and sale agreement with an assignee clause and other legal documents.
The main costs when wholesaling real estate are marketing expenses. Finding good property leads, developing them, and marketing to potential buyers – a real estate wholesaler is a marketer. For that reason, a beginning investment of even $500 for marketing costs and software can go a long way.
How Much Does It Cost to Wholesale Real Estate?
If you’re thinking about investing money to wholesale houses, these are some expenses to consider:
Email Marketing Software
An essential tool in the digital age is email marketing. It’s fast, cheap, and can bring great results. Sending out emails one by one to potential buyers is a slog, and double-digit response rates for email marketing campaigns are rare. That’s where email marketing software comes in – it allows you to send emails to hundreds and thousands of people on your list.
You can set up distinct addressee groups, such as potential buyers, already-bought customers, professional real estate investors vs. amateurs, and so on. You can also tweak email formats, templates, and wording for different groups, send one or several follow-up emails and manage an email marketing campaign on a much higher level than if you would be doing everything manually. You can use the free versions of email marketing software, but you’ll have access to more features and functionality with the paid versions. Prices start from roughly $15 per month.
A website is a good thing to have if you’re serious about real estate wholesaling. A website makes you look professional and your operation – more legitimate, especially if you add trust-building elements. With a bit of effort, you can easily create a clean, good-looking website that will serve your needs and attract potential sellers and buyers. Upfront costs can be as low as $15-20 to start and $5 to $10 per month for hosting after that.
Customer Relationship Management (CRM) Software
CRM software is a tool to organize and track customer relationships and projects. From deals in the pipeline to birthdays, purchase agreements, and more, CRM software is a tool that few serious real estate wholesalers can ignore. Once you start collecting more leads, keeping track of them and their details become messy unless you systemize the process. CRM software provides that system, and entry-level costs are low, starting from $12 per month.
Legal Documents, Real Estate Lawyer/Attorney
One thing that you don’t want to skimp on is a good lawyer, preferably specializing in real estate, who can draw up the legal agreements you’ll need to make a deal. Chief among them is a Purchase and Sale agreement with an assignee clause, which is what you need to put a property under contract and “sell” (transfer the right to buy the property) to the end buyer.
You can get a document template that you can customize for each deal or get a custom agreement drawn up every time. Prices vary depending on your area, the complexity of the deal, and the lawyer you use. Alternatively, if you are on good terms with a real estate broker or wholesaler and trust them, you can ask for their help with these documents.
Social Media and Analog Marketing
If you don’t have a mailing list of potential buyers, social media platforms are a great way to reach these people. Facebook Ads allows you to set up powerful, targeted ad campaigns. LinkedIn is another social network that many real estate investors (both full-time and part-time) are on, as are the BiggerPockets forums. You can start marketing on social media for as little as $5 a day (on Facebook). Then, you can choose to scale ad campaigns up or down depending on how the campaign is going.
Digital marketing is a powerful tool, but you should never ignore analog marketing. Billboards, signs, direct mail – these approaches have worked since the 19th century for a good reason. Nowadays, many people’s email inboxes are full of unwanted spam and solicitations. Real-world advertising is powerful and feels real. A well-written and attractively-packaged letter can easily outperform an email. A catchy sign, strategically placed at a busy intersection or junction, can draw many more eyeballs than an ad on Facebook feeds would.
How to Wholesale Houses With No Money: Step by Step
Do Your Research
Before even looking for undervalued property, sellers, or buyers, you should do a lot of research. Real estate wholesaling is lower risk than buying a property outright and flipping it, but you can still lose money on a deal. Start by researching the real estate market in your area, the condition of the housing stock, and laws and regulations that may affect any deals. Almost all of this information can be found online, but local associations, interest groups, and real estate professionals can also be a great source of free information.
Find Undervalued Properties
If you have no money to wholesale houses, you’re going to have to do everything yourself. To make a profit, you have to find undervalued properties and convince the owner to sell. One way to do this is as simple as “driving for dollars,” which means getting in your car and driving around, looking for distressed, neglected, or abandoned properties. Look for overgrown lawns, cosmetic or structural damage, graffiti – anything that might tell you that the property is in a state of neglect. You then find out who owns the property, get in contact with them, and make them an offer.
Another way to bring interested sellers to you is by using a tried and true tactic. Make some signs with easy-to-read – something like “Buying houses for cash,” along with your contact information. Go out on a Friday and place these signs at busy intersections or places where there is a lot of foot or vehicle traffic. You can also put them up in the neighborhoods you’re interested in. Collect them on Sunday and see if you get any bites.
The important thing is to get creative and hustle. Once you have both an interested seller and a property that you are sure is undervalued, move on to the next step.
Negotiate and Put The Property Under Contract
You’re not buying the property. Instead, you’re putting the property under contract through a purchase and sale agreement with an assignee clause. This clause allows you to transfer the purchasing contract to the real buyer. Make sure that you also include a clause that allows you to back out of the deal if you don’t find a buyer until the closing date. It’s important to act ethically – don’t deceive the seller and tell them you’re going to buy their property if you have no intention of doing so.
Find A Buyer and Sell The Contract To Them
An undervalued property and eager seller willing to sell it for less than the market price won’t make you any money unless you find a buyer. It’s a good idea to begin thinking about potential buyers while you’re still looking for a property. Take into account your expenses, set the selling price you’re aiming for and work hard to sell the property. You can do this through social media, by contacting individual real estate investors or associations, listing the property on classified ads, or otherwise.
When all is said and done, the property should be sold, with you making a profit on the markup between the price you negotiated with the seller and the price the end buyer agreed to pay.
These are the basic steps if you have little to no money but still want to get into wholesaling houses. Commitment and creative thinking are key. Good luck!