Operate Your Wholesaling Business Like A Professional

I get so many emails from amateur wholesalers who don’t know what they’re doing. They are not operating their business like a professional. I run the numbers and politely suggest that they renegotiate the deal, because there is no profit for the wholesale buyer. They dismiss me without even looking at the numbers. If I get a few more nonsense deals from an amateur, then I’ll unsubscribe and send their emails to the junk folder.

If you want to operate a professional wholesale business, then there are some specific steps that you must perform with every property:

  1. Run the numbers the correct way. Use my spreadsheet to get it right, and to generate professional mail merge documents. Be sure to start your price negotiations about 10% to 20% lower than your calculated Maximum Allowable Offer (MAO).
  2. Using your professional documents, get a pre-approval letter or proof of funds letter from a private lender or a private equity financier. You will attach that letter to your “all cash” purchase offer to prove that you can close quickly.
  3. Get the property under contract at a price that locks-in profit. I am not saying get greedy, but you must lock-in a profit after all expenses, both hard costs and soft costs. Take the contract to your escrow or title company and open escrow. Let the escrow agent know that you intend to assign the contract or double close with a 3rd party buyer. Show the escrow agent the specific language in the contract that provides for you to assign the contract. If the escrow agent is uncomfortable, then go to another company.
  4. Get a “scope of work” written estimate from each of 3 experienced general contractors (GC). Use the highest estimate to renegotiate the purchase contract and use the lowest estimate to get new bids. Let the winning bidder know that if you buy the property, then they will get the job. If you wholesale the property to a 3rd party who uses his own GC, then you must pay a nominal fee for the report.
  5. Get an “as repaired” appraisal to support your analysis. Be sure the appraiser knows that you want a “30-day sell it now” appraisal. Renegotiate the purchase contract again according to the appraisal. An “as repaired” appraisal will almost always be lower than what you expected.
  6. Present the deal to your list of wholesale buyers in a professional manner. Use my “Wholesale Opportunity” mail merge template, and attach the highest “scope of work” estimate and the “as repaired” appraisal. Now the wholesale buyers have all the information they need to make a rational decision.
  7. Require a 3-day non-refundable deposit that is at least double your earnest money deposit. After 3-days, their deposit becomes non-refundable. They have that much time to review the documents and to inspect the property.
  8. Schedule a meeting at the escrow or title company to complete the assignment so you get paid to assign the contract (or double close). Be sure that your purchase contract fully releases you from all liability upon assignment.

This is not rocket science, but it does require a professional work ethic, proper tools, and proper education and training. Check my Property Analysis Worksheet Short Form product at http://bit.ly/pawsf-1, because it is designed for both wholesalers and rehabbers.

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