Google “How do you get started in real estate with no money?” You’ll probably find a list of articles, websites, and books teaching real estate investors how to “invest” with no money down. Yes, there are many different techniques for acquiring real estate deals with no money down. Still, there are better ways to get into real estate with no money than immediately jumping into owning property.
Gaining experience as a wholesaler first and working up from there can be incredibly beneficial for someone starting out in the industry. Keep in mind that consistency is key. Most strategies will take time and money. Building a real estate business doesn’t happen overnight, but it can happen with a minimum amount of capital. Here’s a guide on how to wholesale real estate with no money.
What is Wholesaling Real Estate With No Money?
In a real estate wholesaling deal, there are three parties. Of course, the buyer and the seller, but with a wholesale deal, we add a third element: the wholesaler. This is the person who brings the buyer and the seller together. The wholesaler finds a great deal on a property. Then, they find a buyer who wants to purchase the property from the seller. They connect the two people who want to make a deal.
A wholesaler makes money in this transaction by selling their place in the contract they’ve provided from the seller to the buyer. The wholesaler has done the work for both parties by finding and negotiating the deal and recruiting someone who wants to take advantage of it and has the funding to make it happen.
In this transaction, the seller doesn’t pay the wholesaler. Instead, the wholesaler makes money through an assignment fee to help facilitate the deal. The wholesaler didn’t need any of their own money. They use their time and resources without requiring capital for a down payment.
How Much Money Do You Need To Start Wholesaling Real Estate?
Although you don’t need capital for a down payment or making repairs to a property, when you wholesale real estate, you’ll still need some funds to get started. Fortunately, wholesaling real estate can be an inexpensive way to get into the real estate business. All you really need is money to advertise and market your wholesale property deals.
You’ll want to use advertising outlets that can help you find deals from sellers and show them to potential buyers. Free tools are available, but to succeed, you’ll want to put some money into your business. There are expenses associated with creating and signing contracts that you’ll need to consider when creating a budget.
Does Wholesaling Real Estate Work?
For the right individual, learning how to find wholesale properties with no money can end up being very lucrative. It’s a good way to get into real estate without having to have a large sum of money upfront. Those who become adept at finding deals and marketing them to the right people have an excellent chance of turning a profit when they wholesale real estate. However, this can be challenging, and it takes time to develop the right strategy, so it’s not for everyone.
How to Start Wholesaling Real Estate With No Money
If you’re interested in wholesaling real estate with no money, then you can follow these steps to get started:
1. Wholesaling lingo
The first thing you want to do if you’ve decided that wholesale real estate is learned the trade’s lingo. When you know the common terms associated with real estate wholesaling, you’ll understand what others in the community are discussing. A couple of key terms to know include:
- Appraisal: the estimated value of a property.
- Assignment: transferring a contract for the right to buy or sell something to someone else.
- Broker: someone who brings people together to make a deal.
- Clear title: when there are no liens on a property and the owner has the legal right to sell it.
- Comps: comparable property prices.
- Dual agency: representing the buyer and seller at the same time.
- Encumbrance: anything that may hold up the sale of a property.
- Fair market value: the highest price a buyer will pay and the lowest price the seller will accept.
2. Research, research, research
Before you get started in wholesaling real estate, it’s imperative that you do your research. Talk to other investors about their experiences in your local market, so you know what to expect. Short-term success is possible in real estate if you have the specialized knowledge to achieve it.
Learn as much as you can about wholesaling from credible sources with experience. It’s also useful to learn about your local area. Knowing what houses sell for and what different neighborhoods offer serves as an advantage when you start wholesaling.
3. Build your cash buyers list
Your buyer’s list is the most valuable asset you will own and develop as a local real estate wholesaler. A strong list of people who will buy deals from you is your golden ticket to being successful in this business. The beautiful thing about this is that compiling one does not cost money. It just takes a little effort on your part.
Here are a few outlets you can use to get started:
- Craigslist
- Auctions
- Local REIAs
- Newspaper classifieds
- Other wholesalers
- Bandit signs
- Realtors
- Tax record research
- Local lenders
4. Find distressed properties
Distressed properties are those that a seller needs to offload quickly. They might need to do this due to foreclosure, divorce, death of a family member, or many other reasons. If you know where to look for properties before they hit the market, you can get the properties at a good deal that lets you make money on the contract.
A few resources for finding distressed properties include:
- Check for pre-foreclosures
- Meet with divorce attorneys
- Talk to flippers and property managers
- Work with estate agents
- Find other wholesalers
5. Find and analyze deals
Most wholesalers find deals by sending out postcards, knocking on doors, putting up signs, and networking with agents. But when you’re just starting out, it often makes sense to form a joint venture with other wholesalers. You’ll find that there are other active wholesalers in your market who are constantly finding deals.
Align yourself with a few of these wholesalers and help them find buyers for their properties. You can often build in a referral fee of a few thousand dollars for finding buyers for their properties. This also gives you experience in finding deals and buyers. Ask the wholesaler to help you analyze the numbers on properties so you can learn what is and isn’t a good deal.
A wholesaler may have great resources for finding deals, but you may have compiled a strong list of buyers who can be used to help sell those properties for that wholesaler. In a joint venture, you could both succeed.
6. Run the numbers
Once you’re ready to start finding and marketing your own deals, you need to know how to look at the numbers to make sure the deal makes sense. Some of the things you need to consider about the property are:
- Its location
- Its condition
- It’s status
- It’s lowest price
You’ll also need to have an idea of the current market trends in the area where the property is located and what the comps are going for. Consider these factors to determine the assignment fee you’ll charge for the contract position.
7. Convince the owner to sell
After you’ve run the numbers and you’re sure it’s the right deal, you have to convince the owner to sell their property. This may be easy if you’ve found a distressed property that an owner is looking to get rid of quickly and at a good price. However, if you’ve found a house that isn’t on the market and that someone isn’t in a hurry to get rid of, you may have some work ahead of you.
Convincing an owner to sell may take a little encouragement on your part. You might have to sell them on the idea of getting rid of their property. Your wholesaling mentor could be a valuable resource for ideas on getting a reluctant owner to let go of a property.
8. Negotiate a deal with the buyer
So, you’ve got the owner to agree to sell their property. Now, you need to negotiate a deal with the buyer. This person is going to want to get the best deal on the property that they can, but the more you can sell it for above what the seller wants, the higher your fee can be. Convince the buyer that you’re getting them a valuable product that they can’t get from anyone else. Make sure you don’t drop the price so low that it’s not worth your time and effort.
9. Finalize and monetize
Finding financing ahead of time allows you to jump on a property when you find the perfect wholesale deal. The process of buying a contract can be sped up if you have secured financing already. You can find financing from either a private or hard money lender. However, hard money lenders often require you to put some capital down. Private money lending is all about building connections and growing your network, so start having conversations!
10. Have an exit strategy
Wholesaling includes buying and selling a contract or double-closing on a property within minutes. But what if something goes awry?
Like anything, there are risks in the wholesaling business. Preparing for the risk with an exit strategy can put you ahead of the game. Plus, it can let you make decisions without fear holding you back, which is an advantage in this industry.
How can you make sure you won’t get stuck with a property? Let’s review a few exit strategies:
- Buy and sell a contract rather than the property itself.
- Buy the property and then resell it as the owner, which can be done in minutes as a double-close.
- Consider the option of rehabbing a distressed property or making repairs and reselling.
Knowing your exit strategy before going into a wholesale deal is important. This ensures you’re protected if something doesn’t work out with either the buyer or the seller.
How To Find Wholesale Deals
You’ve built on your knowledge of wholesaling and understand what it takes to get started, so you might be ready to know when you can get started. Here are some methods on how to wholesale real estate with no money:
For sale by owner (FSBO) sites
These people are all ready to sell their houses. Generally, you will find they are too cheap to pay a real estate agent, but you still might find a deal. It will be better if you can use different strategies, like a lease option or owner finance, when working with an FSBO deal. With owner finance, the price is not as big a factor as the terms.
Ads on Craigslist
The second way is through Craigslist. Check the “for rent” and “for sale by owner” ads. Again, this has to be done every day. It will take time and diligence.
To work this strategy, you should block out two hours of your day — every single day — to make phone calls to people listing homes on Craigslist. The more people you talk to, the better the chance you have of getting a deal.
Cold calling
The third tactic is the hardest. It’s an old-school strategy: cold calling. You might start by buying a list or finding absentee homeowners. Then you would go to a site like 411.com or White Pages and see if you can get their information. At that point, you can try to make initial contact.
People use this strategy to get deals, but they work tirelessly at it. Maybe you can go on your city’s website to see who has code violations, search for the seller, and call them. This will take more time due to research. But this can work if you don’t have any money and really want to get into the business. You might get a deal on the first call or the 101st call. Results will vary.
Knocking on doors
The fourth way to find wholesale deals is by knocking on doors, and you can perform this in two different ways: getting access to a highly targeted list, like a preforeclosure list, or randomly knocking on doors.
If you don’t have a car, start walking in your neighborhood. Or get on the city bus to a different neighborhood and start door-knocking. Most people will laugh and say, “If you don’t have a car, how can you buy someone’s house?” Ignore them.
It all comes down to how badly you want it. This business is not for the faint of heart. This business is for people who go out and make things happen.
Pros And Cons Of Wholesaling Real Estate With No Money
Like any business endeavor, wholesaling real estate has pros and cons. You have to be aware of both to ensure you make an informed decision before you get started with wholesaling real estate. Consider these benefits and downsides to wholesaling properties:
Pros
There are many good things about wholesaling real estate that make it an attractive option for many getting into the industry. These are just a few of the positive things that come from this type of real estate transaction:
- Wholesaling is easy to start, and many people have the skills to make it work.
- Unlike other real estate transactions, you can wholesale with no money going into it.
- Faster closing when wholesaling makes it so that you get paid sooner than you would in a typical real estate deal.
- Virtually risk-free to wholesale because you aren’t the one buying or selling anything, so if the deal goes bad, you’re only out time and advertising dollars.
Cons
Of course, wholesaling real estate has its downsides as well. These include:
- Rising prices in the housing market can make it challenging to find good deals that buyers are willing to accept.
- Having unrealistic expectations is common among real estate wholesalers, as they think the process will be quick and easy.
Can You Wholesale Real Estate Without a Real Estate License?
A real estate license isn’t required for wholesaling, but it might make you more credible. It’s a good idea to have specialized knowledge about wholesaling and the real estate industry to avoid accidental malpractice. After all, wholesaling can be a risky business venture.
How Much Money Can You Make Wholesaling Real Estate?
While the real estate wholesaling business can be risky, a wholesaler can make money in the short term. If you know how to wholesale real estate with no money, you can make a couple of thousand dollars per sale, with the average being $5,000. That being said, certain deals, especially those with more expensive properties, can make between $10,000 and $20,000.
The average amount of wholesale deals per month is five to 10 sales, so there’s a large potential to flourish in the industry if you play your cards right. Your monthly revenue could range from a modest $25,000 to $50,000 if you make the average amount per sale and multiple sales per month. Don’t forget that any business expenses will be subtracted from your monthly revenue.
8 Common Lies Newbies Believe About Wholesaling
These are eight common lies that newbies believe about wholesaling that you shouldn’t:
- It’s illegal: Wholesaling real estate isn’t illegal, but it’s a good idea to have your real estate license if you’re going to be brokering real estate deals.
- It’s dead: Although finding a real estate deal worthy of wholesaling is getting harder, it’s not a dead practice. Many real estate professionals are using this strategy as you read this.
- It requires a license: You don’t have to have a license to facilitate a wholesale deal, but it’s going to make things easier if you do.
- It’s free: You don’t have to get a loan or have money for a down payment in a wholesale deal, but you will need money for advertising and filing paperwork.
- It’s risk-free: There are risks in every business venture, including wholesaling real estate.
- It’s for beginners: While beginners can use wholesaling as a way to get into real estate, it’s a strategy that many professional real estate agents use.
- It’s a solo enterprise: Just like selling real estate, you’ll want to have a good team to succeed in wholesaling real estate.
- It’s annoying to agents: Some agents may feel that wholesalers are taking properties off the market, but by working together, agents and wholesalers can get a lot done. Both can make money on wholesale deals if done right.
Conclusion
Many people want to learn how to wholesale real estate with no money because of the opportunity to get started with very little capital. While this is the case, it’s important to do it correctly. With a little creativity and research, just about anybody with a computer and basic networking ability can begin their real estate investment business and start wholesaling with no money today.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
