Wholesaling Basics: How To Flip A House With Little Or No Money Down – Part 1
There was a time when I was broke. I had no connections, no resources and no mojo when it came to talking to people.
In short, I was a newbie to the real estate investment game, just like some of you. I barely understood the concept of investing, let alone actually flipping houses. I sure as heck didn’t understand that there was an actual fool-proof, clever way to invest in real estate.
But I had a dream and lots of hope. And once I understood that clever real estate investment strategies existed (hence the “Clever Investor”), I fell head over heels madly in love with flipping houses in creative ways.
And here’s the thing… anyone can do it. Yep, you. It doesn’t matter where you come from or what you’ve been doing for the past 15 years. Most importantly (and no, this isn’t a typo) you DON’T need a lot of money, and you DON’T even need to buy a house.
All you need is some knowledge, education, guidance, efficient processes and the ambition to make it happen.
The House vs. The Contract
Which is more valuable? If you immediately think house, you’re not alone. But those seasoned investors out there know (and you soon will, too) that the contract is money. Paperwork is the key to no money down real estate investing.
This is how it works…
We’re always trading cash for houses, right? That’s what we do! And there are cash buyers out there – landlords and rehabbers, for example – who are looking to add properties to their portfolios and add value to properties so they can flip them.
But you want a piece of the action too, don’t you? You want to get in the game, and I’m here today to tell you it is possible, even if you don’t have the money to fix and flip. The key is understanding the paperwork to control the house.
It goes without saying that everyone needs a place to live, and life happens every day. People get divorced, they lose jobs, loved one pass away. What I’m saying is there are lots of reasons why people no longer want to own real estate.
These folks are called motivated sellers.
Now, there are 2 things that can tell us as investors who owns a property:
- Deed of Trust or Mortgage (depends on the state)
If there is a loan on the house, there is the note, which means the seller owes the bank a certain amount of money. As investors, you want notes on properties where the motivated sellers have been paying off the note to create equity.
Did you notice the two key words in that last paragraph?
Equity + Motivation = potential good deal
This is my formula for flipping houses with little or no money down.
Enter the Wholesaler
So now you’re on the hunt for motivated sellers, but what can you do to let the world know you exist?
You can rock some branded T-shirts or you can leave magnets at random high traffic areas (like gas stations). You can post ads on Craigslist, send direct mail and work the social media sites. Something as simple as watching the news can produce potential motivated sellers as well, so pay attention to what’s going on around you.
You’ve marketed, you’ve networked and now you’ve got motivated sellers live on the phone. Even professional, seasoned investors follow scripts, so do the same!
Read from your (awesome) script, and know when to ask questions, when to talk and, just as important, when to listen. Do your recon on the seller and the property, find out what the seller wants for it and what he or she owes, and know in advance what the property is worth.
Remember that negotiating and counter offering is all part of the process. Eventually, you’ll make an offer that your seller will accept. Just be patient, negotiate strategically and always be respectful.
Once your seller accepts, get the property under contract. This is called a Purchase and Sale Agreement.
Have you noticed how little you need to do to get to this point?
Let me break it down for you – you got the seller to raise his or her hand, you read a script and you negotiated. And all this will be done over the phone! At this point, you don’t even need to see the property!
Remember to include your closing terms (I suggest 15 days), and offer to pay closing costs. Understand what your seller owes, that you’re gonna pay closing costs and know that you will net a nice chunk of change. Then put $10 earnest to validate the contract.
It’s really that simple. So up to this point, the only money out of your pocket is $10.
Nope, it’s not Too Good to Be True
Do you believe me now?
With just a few clever but strategic moves, you truly can flip a house by simply controlling it and flipping it to a cash buyer – and make $10,000... all within the next two weeks. And when it’s all said and done, you will only need to invest $10.
Stay tuned for the next installment in this 3-part series, where I’ll cover escrow and closing agent tips.
Keep it classy, my fellow investors!
Got a basic wholesaling question? Leave it in the comments section below.