Houses for Wholesale: 3 Simple Steps

[tweetmeme] As a beginning wholesaler, figuring out how much to offer on a property is one of the most confusing aspects of the wholesaling process. It could typically take someone hours (sometimes days) of crunching numbers, running comps, and plugging figures into various formulas before reaching a decision about how much the offer should be and feeling comfortable with that amount.

Stephanie Davis, a wholesale expert has been in this business for that last three years and her method for determining offer amounts has changed quite a bit. These days she doesn’t use any sort of formula and rarely run comps.

The strategy she now uses is pretty simple, and can be broken down into the following three steps:

Step #1

Choose a farm area and determine who the active investors are in this particular part of town. There are multiple ways of finding out who the active wholesale buyers are in any given neighborhood, some of which I have written about in this article, and also this one.

Step #2

Once I have located some active cash buyers in my farm area, I ask them if they are looking for more deals in the neighborhood, and if so, I find out EXACTLY what they are looking for, including price range, preferred type of construction, minimum square footage, etc. I try to get as much information from them as possible so I have a very clear picture of what type of properties they are looking for and the prices they are willing to pay for them.

If I have the buyer’s first and last name I will do a search on the property appraiser’s website to check out what other properties they own and how much they paid for them. This gives me an even better idea of what they are looking for in a deal.

Step #3

Once I have located a few of the active buyers in my farm area and done some research to find out what a deal looks like in their eyes, I then head to the MLS and start making offers on properties that fit their criteria, making sure to leave enough room in the deal for both myself and my end buyer.

And Repeat.

Stephanie Davis has been using this strategy for the last few years quite successfully. “To me it is much simpler to just go directly to the end buyers and find out exactly what they are looking for,” Davis said. ” Approaching it from this angle removes much of the uncertainty and guesswork from the offer making process, and makes my job as a wholesaler much easier.”

Source: Stephanie Davis from flipthiswholesaler.net.


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Flipping Houses for Profit – 3 Important Steps

The flipping of houses can really be a quick way to create wealth as long as the flipper doesn’t let the “flippee house” take over his life and bank account.

The number one equation to take into account on this project is the margin. What is your cost to get into the house and the average sales price of a house in the selected neighborhood on a remodeled home? Obviously, you want this margin to be as high as possible. The challenge in today’s market, when looking at it nationally, is that many of the diamonds in the rough are located in areas where prices are still declining, so the investor must be sure to purchase the house, gut out the old, insert the new, and get out of the house before the declining price catches up with him and his profit.

Successful flipping is all about your margin. I would love to give you a set equation with fixed expenses, but every house is different. One house may need a kitchen, another, the kitchen and two baths. Here’s a pretty cool calculator online that can help determine your cost at www.RemodelingMySpace.com. With the flipping I’ve seen done in our market, it seems to be pretty accurate on its estimation of replacement costs.

Below are 3 basic steps to consider when you are ready to flip a house:

Step 1:

The first step in any real estate decision is to decide on your budget. Make sure that any loans being taken out will be paid back on time regardless of how well the property sells. If you stick to your budget you will greatly raise your chances of undergoing a successful house flip.

Step 2:

Take into account all of the fees you will need to pay. These fees include lawyer fees to ensure all contracts are in order and loan fees from your lender. Be sure to add these into your budget and although in some places you may be able to cut them out I would not suggest this as the peace of mind from having hired a professional lawyer is well worth the price and could help you undergo a successful house flip.

Step 3:

Set up a clear start and end date for your project, then begin looking for properties that would fit into this deadline. Be realistic when looking at properties to determine whether or not you would be able to do the work yourself, do you have the skills, do you have the time? Before purchasing any property hire a professional house inspector to look over the building.
Follow these steps and you should be well on your way to making a successful house flip and taking direct command of you finances.

Sources: M. Anthony Carr and M. Esther Sherman.


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