Virtual wholesaling is a real estate investment strategy that allows you to buy and sell properties from anywhere in the world as long as you have a phone and internet connection.
If you're interested in getting started with virtual wholesaling, this step-by-step guide will walk you through the process, from finding properties to closing deals.
Virtual wholesaling is a real estate investing strategy that involves buying and selling properties without ever physically visiting them.
Instead, wholesalers use technology and online tools to find and analyze potential deals, negotiate with sellers and buyers, and close transactions remotely.
It can be a great option for wholesalers who want to expand their reach and find deals in different markets without having to travel or invest in a physical office.
It's also a great solution for those who live in more rural areas or out of the country but still wish to start wholesaling in the US real estate market.
I've successfully used virtual wholesaling strategies and know many people worldwide that have thriving virtual wholesaling businesses.
In this guide, I'm going to lay out the best practices to follow while starting and operating your wholesaling business. Let's get started.
When picking your virtual wholesaling market, you should keep a few considerations in mind.
Again, circumstances vary, and there might be a good reason for you to pick a market that lies outside of these recommendations. Already having buyers or a JV partner in a specific market would be two examples of reasons to override these suggestions.
Knowing the cash buyers in your market and what they are buying can mean the difference between success and failure.
Cash buyers are the investors buying properties to fix and flip or hold as rental properties in your virtual market. Let's go over a few strategies to identify these buyers and build your list.
As you build your list of cash buyers, you'll want to reach out to them to find out if they're open to working with a real estate wholesaler and to find out their buying criteria.
Here is an example of the questions you'd want to ask. (download the script below)
As your list of cash buyers grows, put them in some CRM or spreadsheet and categorize them by the areas they buy properties in (City, Zip, or County).
This will allow you to send only properties they would be interested in when you get something under contract.
Install a call recording application on your iPhone or Android device before initiating your calls.
Establishing a meaningful connection while trying to fill out your cash buyer's questionnaire is challenging. Therefore, I highly recommend recording your conversations.
This allows you to focus on the discussion, and later you can replay your conversation to fill out the script. Browse your device's app store to find a well-reviewed call recording application that suits your needs.
Building the skillset to find motivated sellers will almost guarantee your success in virtual wholesaling. You not only need to identify what strategies work best, but you'll also need to do them consistently to develop a steady flow of leads regularly.
Here are some of the best methods used by virtual wholesalers to find and generate motivated seller leads.
If you want to be a successful virtual wholesaler, master several of the above lead-generating strategies and do them consistently!
The truth is not every seller lead makes a good wholesale deal, so learn to identify if someone is motivated to sell and if you can buy the property at a discount.
If the person has no motivation to sell the property at a discount, then thank them for their time and move on to the next lead.
Once you have leads coming in, you'll need to speak with them to collect their property information and determine if they're motivated to sell their property at a wholesale price to property condition or a personal situation creating the need to move quickly.
Here are just some questions you'll need to ask (download the script below)
I'll reiterate my earlier tip...Install a call recording application on your iPhone or Android device before initiating your calls.
This allows you to focus on the conversation with the property owner without being distracted. Later you can replay your conversation to fill out the script.
Having "boots on the ground"—or a physical presence—in the city where you're virtual wholesaling offers several key advantages:
Market Knowledge: Local knowledge is invaluable when understanding a real estate market. A person physically present in the location can glean insights about the neighborhood, identify emerging trends, and provide details that online data might overlook.
Property Inspection: Someone that can make a physical visit to the property allows for a more detailed inspection. A local representative can take photos and videos and identify potential issues that may not be shown in taken by the owner. They can also notice odors, noise pollution, or minor but crucial property damage.
Building Relationships: Having a local presence facilitates stronger relationships with key players in the area. This includes local real estate professionals, contractors, property managers, and potential buyers or sellers.
Building these connections can unlock additional business opportunities and foster valuable partnerships.
Negotiations and Closing: Real estate transactions often involve considerable back-and-forth. A local representative can streamline this process by meeting with the involved parties, managing paperwork, and attending closings in person.
It's important to note that you don't necessarily need to be the one on the ground. However, many successful virtual wholesalers build networks of trusted partners or employ local representatives in their active markets.
These individuals act as their eyes, ears, and hands, offering all the benefits of a physical presence without needing the wholesaler to be physically present.
As a virtual real estate wholesaler, estimating property repairs requires careful analysis and a strategic approach.
The process begins with a detailed visual inspection using a reliable third-party, such as a JV partner or local contractor. If those options aren't available, have the property owner talk lots of pictures of the interior and exterior of the property and send them to you.
You can also leverage technology, such as virtual tours or video calls, to get a comprehensive view of the property.
With high-resolution images or video, one can easily spot obvious damages, such as water stains, cracks, old appliances, or outdated systems.
The next step involves categorizing these damages into minor, moderate, or major repairs.
For each category, assign an average cost that you gather from resources like HomeAdvisor, local contractors, or property inspection websites.
Be sure to factor in regional price differences. Remember to account for hidden or unobservable damages, usually, an additional 10-20% of the observed repair costs, to cover unexpected issues like plumbing or electrical problems.
Lastly, always reassess your estimates as you gather more information or receive professional feedback to ensure accuracy.
Estimating the After Repair Value (ARV) as a virtual wholesaler involves several critical steps that leverage online resources and local market knowledge.
Begin by identifying comparable properties or "comps" in the same neighborhood as your subject property.
These comps should be similar in size, age, condition, and style and should have been sold within the last six months to a year.
Resources such as Zillow, Redfin, or the Multiple Listing Service (MLS) can provide this information, although access to the MLS may require a licensed realtor.
Once you've identified the comps, analyze the selling price of these properties to estimate the potential value of your property post-repair.
It's important to adjust these prices based on significant differences between the comps and your property, such as an extra bedroom or a larger lot size.
Additionally, consider market trends, such as whether property prices are generally rising or falling.
The final ARV should be a conservative estimate based on this analysis to minimize risk and ensure profitability.
As a virtual wholesaler, calculating the Maximum Allowable Offer (MAO) is critical in ensuring a profitable deal.
The MAO is the highest price you can offer for a property while still making a profit. Typically, it is determined using the formula:
ARV - Repair Costs and Wholesaling Fee = MAO
The After Repair Value (ARV) is the property's estimated value once all repairs are completed.
At the same time, the Discount Rate is the percentage of the ARV that ensures a profit margin, usually around 70% but can vary based on market conditions and your business model.
Repair Costs refer to the estimated cost of getting the property to a sellable condition.
So, if the ARV of a property is $200,000, the discount rate is 70%, and the repair cost is estimated at $20,000, the MAO would be (200,000 * 0.70) - 20,000 = $120,000.
However, this formula should be adjusted based on specific business goals, market conditions, and risk tolerance, and it's always crucial to leave room for unexpected costs.
Therefore, your final offer might be less than the calculated MAO to ensure a safe and profitable margin.
For a virtual real estate wholesaler, effective negotiation can make a significant difference in the success of a deal.
Start by establishing rapport with the seller. Even though you're negotiating virtually, building a relationship based on trust and understanding is crucial.
Empathy is a powerful tool - strive to understand the seller's motivations and challenges.
Ensure your communication is clear, professional, and respectful.
Use video calls whenever possible to provide a more personal connection than phone calls or emails.
Preparation is another key component. Before negotiations, conduct thorough research on the property, the local real estate market, and the seller's situation.
This will allow you to present a fair offer and justify it with solid facts and figures. Be flexible and patient, showing a willingness to find a solution that benefits both parties.
Remember, negotiation is a process, not a single event. It may require several conversations, so follow up regularly and maintain open lines of communication.
Lastly, always have a plan B in case your original proposal does not work out. Doing this makes you more likely to succeed in your negotiations and secure profitable deals.
Despite the 'virtual' in the name, the contracts used in virtual wholesaling are the same as those used in traditional wholesaling.
These contracts form the backbone of the wholesaling business, providing a legal framework that ensures all parties are clear on their roles, responsibilities, and the terms of the deal. They include the following:
Purchase Agreement: This is the initial contract between you, the wholesaler, and the property seller. It lays out the terms of the deal, including the agreed-upon price, contingencies such as inspection periods, and the timeframe for closing the transaction.
It's important to ensure that this contract includes an assignment clause, allowing you to transfer the agreement to your end buyer.
Assignment Agreement: After finding a cash buyer interested in the property, you'll use an assignment agreement to convey your contractual rights from the purchase agreement to this new buyer.
Essentially, this agreement "assigns" your place in the original contract to another party, enabling them to step into your shoes as the buyer. The assignment agreement specifies the assignment fee, which is the amount you, as the wholesaler, make from the transaction.
JV (Joint Venture) Agreement: If you collaborate with another wholesaler on a deal, you'll likely use a JV Agreement. This contract delineates each party's responsibilities and how the deal's profits will be split.
Joint ventures can expand your network, increase your resources, and allow you to work on larger or more complex deals.
Option Agreement: An Option Agreement provides you with the right, but not the obligation, to purchase a property at a predetermined price within a specified time frame.
This type of contract is beneficial if you're unsure about lining up a buyer. It allows you to market the property to your buyer's list without being contractually obligated to purchase the property if you don't find one.
Notice of Cancellation: During your due diligence period, if you uncover issues with the property or encounter any other deal-breaking factors, you'll need to notify the seller that you're backing out of the agreement.
The Notice of Cancellation is a formal document that terminates the Purchase Agreement under the conditions stipulated in the contract (usually subject to certain contingencies like a satisfactory inspection).
Understanding these contracts is essential for conducting business as a virtual wholesaler. They govern the relationships between all parties involved, set the parameters for transactions, and protect your interests at each step of the wholesaling process.
You can download copies of all our real estate wholesaling contracts and watch the instructional videos on our contract page.
Collaborating with a title company that understands and supports the wholesaling business can significantly streamline your virtual real estate transactions. This is often referred to as a "wholesaler-friendly" title company.
Understanding of Wholesale Transactions: Wholesaling has unique processes and contract structures that differ from traditional real estate transactions. A wholesaler-friendly title company has an in-depth knowledge of these specifics and is prepared to handle them effectively.
Faster Processing Times: These companies are familiar with the pace of wholesaling transactions, which can be much quicker than conventional deals. They can expedite processes, reduce hold-ups, and help close deals faster.
Network Connections: Wholesaler-friendly title companies often have established relationships with real estate investors and other wholesalers. These connections can open up new opportunities and make your operations more efficient.
Problem-Solving: Issues can arise in any real estate transaction, but a wholesaler-friendly title company will be better equipped to resolve problems due to their experience with similar deals. This can save time, reduce stress, and keep transactions moving smoothly.
Education and Support: A good wholesaler-friendly title company can also be a resource for knowledge and support, especially for those new to wholesaling.
They can help you navigate the complexities of wholesale deals, offer advice based on their extensive experience, and assist in making informed decisions.
Finding and building a relationship with a wholesaler-friendly title company can be a pivotal component of your virtual wholesaling business, contributing to smoother transactions, quicker closings, and overall success in your endeavors.
Check out our Investor Friendly Title Company Directory to find one in your market.
Marketing a wholesale deal as a virtual wholesaler requires a slightly different strategy than traditional methods, especially when following a reverse wholesaling approach.
Since you already have an established list of buyers in reverse wholesaling, the key lies in understanding their specific needs and wants.
Start by categorizing your buyers based on their preferences, such as location, property type, budget, desired profit margins, and other important factors.
Once you secure a potential property deal that matches one of your buyer's criteria, reach out to them directly with all the pertinent information.
Provide them with comprehensive details such as the property's location, current condition, estimated repair costs, potential After Repair Value (ARV), and suggested offer price.
To share this information, leverage technology like email campaigns, private online portals, or personalized messaging. Use high-quality pictures and videos to give them a virtual property tour.
By tailoring your approach to meet your buyers' specific needs, you can efficiently market your wholesale deals without advertising them broadly on platforms like Facebook groups, Craigslist, or Zillow.
This method can save you time and effort and help build stronger relationships with your buyers, leading to more successful deals.
The role of a title company in a virtual closing involving a seller, investor, and virtual wholesaler is instrumental in facilitating a seamless and legally compliant transaction.
Once you've successfully put a property under contract and assigned it to a cash buyer, it's time to send all the paperwork to your investor-friendly title company.
Once they have everything in hand, the process typically follows these steps:
Title Search and Insurance: The title company initiates a title search to verify the legal ownership of the property and to identify any liens, encumbrances, or potential issues that could affect the transfer of the title. They also provide title insurance to protect the new owner and lender from future claims against the property.
Preparation of Documents: The title company prepares all the necessary closing documents. This includes the purchase agreement, deed, and settlement statement, among others. These documents are often shared digitally with the relevant parties to review ahead of the closing.
Coordination and Communication: The title company acts as the central point of communication between all parties involved. They schedule and coordinate the virtual closing, ensuring that everyone is available and ready to complete the transaction.
Escrow Services: The title company holds all funds in an escrow account until the closing is finalized. This includes the purchase price from the buyer or investor, any fees associated with the transaction, and possibly the wholesaler's assignment fee.
Virtual Closing: On the day of closing, all parties join a secure video conference. The title company will guide each party through signing and notarizing the documents. Digital signatures are typically collected using secure, legally recognized platforms.
Finalizing the Transaction: Once all documents are signed, the title company disburses the funds from the escrow account as agreed. They pay off the seller's existing mortgage if applicable, pay the wholesaler their assignment fee, and transfer the remaining funds to the seller.
They then file the new deed with the appropriate government office, officially transferring ownership to the buyer or investor. The use of virtual closings has been a major development in real estate, offering convenience and flexibility.
In closing, becoming a successful virtual wholesaler can be an exciting journey that opens up a world of profits and possibilities. This field combines the age-old principles of real estate with the modern marvel of technology.
It empowers you to find promising properties, evaluate potential deals, and connect with buyers, all from the comfort of your home or office. It's all about building relationships, honing your negotiation skills, and maintaining a keen understanding of the real estate market.
With determination, continual learning, and a dash of entrepreneurial spirit, anyone can master the art of virtual wholesaling. So, embrace the adventure that awaits, and dive into the rewarding world of virtual real estate wholesaling.
Believe in your potential, take that first step, and watch as the opportunities unfold. You can succeed and make your mark in the real estate world.
Happy (virtual) wholesaling!
Wholesaling is usually considered an investment strategy rather than a real estate brokerage activity, so it often falls outside the scope of licensing laws.
However, the legalities can vary by state or country, and some jurisdictions have rules or restrictions that could affect wholesaling activities.
For example, some states might require a real estate license if you engage in a certain number of transactions per year, while others might regulate how and when you can advertise properties for sale.
Therefore, it's important to familiarize yourself with the local laws and regulations in your area or consult with a real estate attorney to ensure that your activities comply with all applicable legal requirements.
There are no signs of real estate wholesaling becoming illegal anywhere.
However, some states or cities have imposed restrictions or requirements that can affect wholesaling practices, usually with the intent of preventing deceptive practices or protecting consumers.
For instance, certain states require a real estate license if you engage in a certain number of wholesale transactions per year, while others might regulate how you can market properties.
It's also worth noting that some practices associated with wholesaling, like false advertising or failing to follow through on contract obligations, can potentially lead to legal trouble.
For these reasons, it's crucial for anyone involved in real estate wholesaling to familiarize themselves with the local laws and regulations in their area and to conduct their business in an ethical and transparent manner.
Yes, real estate wholesaling is a legitimate business strategy, provided it's conducted ethically and in accordance with local laws and regulations.
The practice involves entering into a contract with a seller and then assigning that contract to a buyer, serving essentially as the "middleman." However, the legality and acceptance of real estate wholesaling can vary by location, with certain states or cities imposing more restrictions or requirements on the practice.
That being said, while wholesaling is a legitimate strategy, like any industry, it's not immune to unethical practices. False advertising, manipulation, or failing to follow through on contract obligations can lead to legal trouble.
Thus, it's important for wholesalers to conduct their business honestly, transparently, and in full compliance with local laws.
For those new to wholesaling, it's advisable to seek legal counsel or consult with a real estate professional to understand the legal landscape in your area.
This can help ensure that you're conducting business in a manner that's both legally compliant and respectful of all parties involved.
Yes, it is possible to start virtual wholesaling with little to no money, which is one of the reasons it's a popular strategy for new entrants into real estate investing.
The essence of wholesaling is to secure a contract to purchase a property and then assign that contract to an end buyer without needing to purchase the property yourself.
In an ideal scenario, you'll only need enough money to put down an earnest money deposit to secure the contract, which can often be quite minimal. Furthermore, some wholesalers structure their deals such that the end buyer's deposit covers the original earnest money deposit, reducing the need for upfront capital.
However, while it's possible to start with little to no money, it's important to remember that wholesaling - even virtual wholesaling - does require a significant investment of time and effort.
It also requires knowledge of how to analyze real estate deals, negotiate contracts, and build a network of potential buyers. Additionally, while the cost to start may be low, running a wholesaling business might involve other costs such as marketing, legal fees, and technology tools.
In conclusion, while virtual wholesaling can potentially be started with little to no money, it's crucial to be prepared for the time, effort, and potential ancillary costs involved.
Always conduct thorough due diligence and consider seeking advice from real estate professionals or mentors.
The income for a virtual real estate wholesaler can vary widely, as it's largely dependent on several factors, including the number of deals closed, the profit margin on each deal, the wholesaler's level of experience, and the specific real estate market they're working in.
It's common for wholesalers to aim for a profit of $5,000 to $10,000 per deal on the lower end, with experienced wholesalers sometimes earning $30,000 or more per deal in higher-priced markets.
However, these are just estimates, and the actual numbers can vary widely.