The concept of wholesaling real estate is a simple one, you sell the house for more then you buy it for. It’s the same thing that Costco does with their products just on a larger scale. The problem is that finding the good buys is hard to do when you are a beginner and that can become really frustrating. That frustration, in most, will lead to giving up.
I’m not going to blow smoke up your butt and tell you it’s easy, because it is not! You have to work and educate yourself in order to find that underbelly of the real estate market. That is where you are going to find the deals. You have to locate the motivated sellers. The good news is that there are a multitude of ways to do this and I will give you an overview of a few of them. This should give you a good starting place for you to start your learning.
Pre-Foreclosures. These are owners who have had a Lis Penden (notice of default) filed against them. The NOD will be filed after they have missed a payment or two and it will be filed into your county’s public records. You can buy this list from a list broker such as ListSource.com or you can create the list yourself by browsing your public records. If you are lucky your county publishes those notices online, but even if they don’t a quick trip to the court house can get it done.
Probates. These are properties that come from estates. The owner has passed away and now the heirs are in charge of the property. This list can also be gotten at the court house. Look at your Surrogate’s web page for more information. If you are Really lucky there will be someone in your county who publishes a list of probates like ProbatesDaily.com in Carolina and Florida.
Short Sales. These will be properties that are upside down, meaning that they owe more then the house is worth. The only way for the sellers to get out of the situation without owing money out of pocket to the bank is to Short Sale it, which means getting the bank to take less money then which is owed for the property. Besides other investors, your compitition for here are Realtors. Short Sales have been big over the past year plus because of the decline in the housing market.
FSBO. Also know as For Sale By Owner. Owners who choose not to list their properties with Realtors because they either don’t want to pay the commission or can’t afford to pay it. These houses usually last a long time on the market in a slow economy because the owners lack the marketing skills to really get the house sold. They become motivated when after 6 months the house hasn’t been sold and they have already moved into their new house out of state. Now paying two mortgages and will do anything to get from underneath the payments….enter you
FRBO. Also know as For Rent by Owner. Being a landlord is tough and many people don’t understand what it takes to be a landlord. It’s tiring work dealing with tenants day In and day out, fixing broken toilets at 2 am or what have you. What I’m getting at is the current landlord might just want OUT of the rental game and be willing to sell you his hell for a song and a dance.
Absentee Owners. Most of the time these are Landlords, but sometimes they are people with second homes who can’t afford two mortgage payments anymore. If you live by a shore community then you will have plenty of these leads to pick from.
Auctions. Once a property has been foreclosed upon the bank that took it back will offer if up for auction in an effort to recoup it’s money. I’ve never been to an auction, but it is not for the beginners. You have to know your numbers and the house very well in order to be successful. You have to come with cash in hand equaling 20% of the bid and then be ready to close in 30 days or risk losing your 20%. Auctions are however a great place to meet some good investors in your area.
Foreclosures. I’m sure most of you know about foreclosures. This is where the bank has decided it is going to take the house back from the owner. Depending on the state you live in the rules vary. Some are slow foreclosure states other can happen as quickly as 30 days. This means there is a limited time for you to act, but you can be assured that the owners a VERY motivated to sell as a Foreclosure will significantly impact their credit rating and possibly keep them from getting any future loans.
Bank Owned. These properties are also know as REOs in the investment world. They are properties that have been foreclosed upon, been through auction and the bank bought them to try and sell themselves. As i right this article, this is the hottest investment strategy out there. You find REOs on the MLS which makes for a lot of competition because they are easy to find. Banks are willing to let some of these houses go for 30 cents on the dollar depending on their motivation. Get in good with an REO Agent and you can really work this angle.
Those are the major avenues for finding deals to wholesale real estate. To be successful however you really need to be consistent in your efforts and always keep trying. You might go 6 months in the beginning and not find one single deal. They are out there you just have to find where and how to look and soon you will be able to recognize the deals before anyone else.
Here are a few helpful links
County Records Site
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I am just starting in Canada. Any pointers on how to start?