Contingency Planning When Buying Junkers - By Becky Sanders

Wholesaling is quick money, very little work, and you're often in and out without even taking title. This is very appealing to all of us, especially when we're cash poor and just getting started. But many new investors have trouble finding wholesale buyers. There's a reason for this.

A good friend of mine who has been in the business for a few years (which is a few years more than me) wholesales over 200 houses per year and has only taken title (done a simultaneous closing) twice. How does she do it? She has a very extensive and detailed buyer's list. She also lines up a minimum of two buyers per property (a buyer and a back-up buyer and so on). She doesn't advertise for buyers because she doesn't need to. This is where you need to get to if you're serious about becoming a wholesaler.

FINDING WHOLESALE BUYERS

How do you find wholesale buyers? Well, wholesale buyers are investors, so your number one resource should be other local investors.

How do you find these investors? Are you going to your association meetings every month? If you aren't, you should. If you are going, are you networking? You should walk away from every meeting having met at least 5 other investors and have their business cards. Also, other investors advertise in the paper under Real Estate Wanted. Call each of them if you haven't already. Then, of course, you can advertise for buyers.

Okay, so now you have the names and numbers of other investors. Now you need to know something about what they're looking for and what deals they can and want to do. You are ready to create your buyer's list. Here's what you should be asking your potential wholesale buyers: (By the way, I think LeGrand has a buyer's sheet in his manual, but here's mine.)

BUYER'S LIST QUESTIONNAIRE

1. What type of properties and what areas (cities, neighborhoods, etc.) do you wish to purchase?

2. What is the maximum percentage or ratio of price to fair market value after repairs (ARV) will you pay?

3. Is there anything I should know about what types of property you wish to buy that we haven't discussed?

4. Is there a price range for purchasing any individual property that you need to work within?

5. When I have a property that fits your purchasing requirements, how quickly can you close?

6. Are you cash buyer or will you be purchasing with financing? What type of financing do you use and do they have any requirements that may potentially delay a closing?

7. How many properties have you already purchased?

8. How many properties do you purchase per year or intend to purchase per year?

9. How long have you been in this business?

10. Can you give me any referrals of other people you have done business with? This can be other investors, buyers, sellers, contractors, bankers, etc. The point of this question is to learn whether this person has followed through on other projects and to learn whether they are reliable.

11. Do you know any other investors that purchase properties in areas beyond where you would like to purchase? If so, ask for their names and numbers so that you can further expand your buyer's list.

Obviously, the longer you're in this business, the easier it is to find wholesale buyers because you've established contacts and relationships with "doers". Being new puts you at a disadvantage in this regard; so minimize this gap by being proactive in making relationships and contacts and putting contingency plans in place.

CONTINGENCY PLANNING

When you get a house under contract, the race is on. Let me just say a couple things about my experiences with finding wholesale buyers. There a lot of "investor wanna-be's" out there. You'll meet a lot of them at your association meetings and at seminars. Some are serious and some just think they're serious. You'll need to weed them out. I have met many newbies who say they want to rehab, but when I presented them with an actual deal (a good deal at that!), they didn't follow through. Well, if you're deal is riding on someone that doesn't follow through, you're in trouble. So, really, they have to convince me that they're serious and can follow through if they want to do business with me. That's why I ask a lot of probing questions. But also, have a back-up buyer lined up on any given property. How do you get a back-up buyer? Well, call more than one investor. Call a dozen investors when you have a property for sale. The first one that makes an offer gets the deal, but the second and then the third get a back-up deal. You simply tell number two and three that you have a buyer but, if the deal does not go through, you'll sell to them, and work out the details from there. It's that easy.

CAN'T WHOLESALE? BE PREPARED TO BUY AND REHAB

Now what happens if you don't find a buyer, period? You're in trouble if you don't have the money to close. So, when you first get that house under contract, get approved for a hard money loan or have a private lender lined up for funding. I give myself at least 2 weeks for the hard money lender or private lender. I know some say that they can close in as little as 5 days, but what if the appraiser or surveyor or city inspector doesn't get out there in a timely manner? Don't get stuck between a rock and a hard place; plan ahead. By the way, you can get preapproval status from a hard money lender now (before you have any properties under contract) even if you don't intend to ever use them. You need them for a continency plan, and it's also helpful for use as proof of funds for those properties that require it with your offers.

MONEY PARTNERS

This is always an option and there are a lot of experienced investors out there that would love to partner with you. So when you're looking to create or expand your buyer's list, also feel these folks out for other creative deals you can potentially do together. If you talk to an investor who is experienced, then talk to them and find out what sort of things they are interested in doing. If they are not in the rehab business at all, they may be a good resource for being your money partner or to partner with you on pretty house deals. Even if they are in the rehab business, you may run across properties that don't meet their criteria for buying, but that they'll partner with you on if you're doing all or most of the work.

I know that I'm riding my networking horse again, but this is where it's at. You need other people's money, other people's knowledge, and other people's resources when you're getting started in this business. The reason why other experienced investors are successful is because they have a wide-reaching network. This is your goal.

Remember that nobody knows who you are and what you do when you're starting out. Nobody knows how to find you if they don't know you exist. So be proactive and find the people who can help you and find the sellers and buyers that you can help.