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By Larry Haines

If making $3,000 to $5,000 sounds like something you want to learn how to do, here is a practical guide to help you get started right away. First of all, let me say that the process is pretty straight forward. It is simple, but its not easy. It takes planning and work.

Let’s define Wholesaling. Wholesaling is when you get control of a property through a signed sales contract and then sell the contract to another individual for an assignment fee. That investors takes over the obligations and agrees to the terms and conditions of the contract and, in essence, steps into your position to buy the property from the seller.

Let’s say you find a property that is worth $150,000 and it needs remodeling worth $50,000. The seller can’t rent it in bad condition and normal end users aren’t going to buy it because they want something that they can move into right away. They want a “pretty house”. So the seller is stuck with not being able to rent it and he can’t sell it either. You happen to know that rehabbers like to buy properties like this but they want to make a profit so you need to get the property under contract for a price so everyone can make money, right?

Here’s a formula that you can use to help you get a grasp on what to offer.

The house has an after repair value of: $149,900

The rehabber is going to want a quick sale so he discounts it by 7.5% -$11,250

The costs to rehab is $50k -$50,000

He needs to make an additional profit on his rehab for the risk so he wants…. -$25,000

He borrows the money to rehab so his loan costs him -$5,000

He has to pay taxes and utilities during renovation & the time it takes to sell -$1,500

He has marketing and closing costs to pay for the realtors and title company -$12,000

Now you need to make some money, right? -$5,000

So that means that you can’t pay more than this amount for the property=== $40,150

Don’t be afraid to offer less because you can always raise your offer later. OFFER $30,250

Now that you have a grasp on the formula lets look at what it takes to generate this sale. Remember, you want to go from Zero to $5,000 in 90 days which you can do in one deal.

Summary of Steps:

Step 1 – Find motivated sellers of property

Step 2 – Build a buyers list of rehabbers, passive investors and/or first time home-buyers

Step 3 – Get criteria, documents, and assignment agreements

Step 4 – Build a team to help you

Step 5 – Take Action! Make OFFERS!!!

Let’s look at Step #1 in detail to help you understand the process.

First of all, you are NOT looking for properties. You ARE looking for motivated sellers. Let me say that again….NOT properties, just motivated sellers.

What makes a person a motivated seller? It can be any number of financial or life issues. Here is a list of some things that make people want to sell quickly and for less than what they might normally sell it for.

Divorce

Medical issues

Death

Inheritance

Bankruptcy

Job loss

Job transfer

Drug Abuse

Bad tenants

Built new house

Needs cash for Something

Out of state owner

Foreclosure

Parents going into nursing home

Lead Generation is critical. You don’t need buyers or documents or team members if you don’t have leads on which you you can make offers. This is a numbers game. You will not have a 1 to 1 ratio of leads to contracts. In fact, it is much higher so imagine that you will need to generate 100 leads which will turn into 10 negotiations which will turn into 1-2 contracts. So you have to ask yourself how you can generate 100 leads from potentially motivated sellers.

About the Author: Written by Larry J. Haines, Managing Partner, Road Home Builders, LLC – Investing in the Gulf Coast and rebuilding part of America’s Heritage; The City of New Orleans.For more information on real estate investing in New Orleans, please visit

New Orleans Real Estate Investing

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