If the cost of getting into real estate investing is keeping you from getting started, this extremely undervalued (and underused) method could be exactly what you’re looking for.
With home prices appreciating 18% between June 2020 and June 2021, there’s never been a better time to get started than there is right now.
Especially when you can get started WITHOUT having to take ownership of the properties, manage the renovations, oversee the flips, or deal with tenants and toilets as a landlord.
With wholesaling, you can get your feet wet as a brand new investor without the high costs (and risk) involved with most real estate investing models.
And since more than 23% of adults agree that investing in real estate is the best way to build wealth — but only 12% of adults actually invest due to the high costs involved — wholesaling becomes even more attractive, especially if you don’t already have existing wealth to tap into.
In this guide, we’ll break down what wholesaling is, the pros and cons of learning and using the wholesaling model, and 5 of the most effective lead generation strategies you can use to start your investing journey the right way.
What is Wholesale Real Estate?
When you’re wholesaling real estate, you’re looking for property owners who want to sell their homes and connecting them with investors who want to purchase the property.
By negotiating with the homeowner and getting a signed purchase agreement, you can flip that purchase agreement to another investor — while pocketing the difference between what you signed the contract for and how much the investor purchased the contract from you.
For instance, if you find a homeowner who is willing to accept $100,000 for their home, you can sign a purchase agreement for $100,000.
Then, you would find an investor who is willing to pay you $110,000 (or more) for the purchase agreement.
Once the deal has been finalized, your investor would take ownership of the property, your homeowner would be paid the $100,000 they requested, and you get to pocket the $10,000 difference between what you signed the property for and what you flipped it to your investor for.
This is a super-high level view of the process, and there are other formulas you’ll want to take into account to make sure your deals are good for both your homeowners and your investors, but your goal as a wholesaler is to find properties for sale and connect investors with them so you get paid a finder’s fee.
Wholesaling keeps you from having to physically take ownership of the properties, manage (and pay for) the renovations, deal with flipping the property, or managing tenants as a landlord.
It’s one of the fastest and easiest ways for brand new investors to start getting their feet wet without pouring in a ton of time and money or taking on a ton of risk so they’re able to develop their skills, explore different investing strategies, and start getting cash flow in the process.
If you’re looking to hit the ground running on your new journey, check out some of the best wholesaling real estate courses available in 2023.
The Pros & Cons of Wholesale Real Estate
As with every model you can use to invest in real estate, wholesaling has its pros and cons. For some people, it’s the best way to get started. For others, though, there may be more profitable models you can follow – even in the beginning.
- Low Upfront Investment — You can wholesale properties without having any cash involved. Or, at the most, the cash you spend to generate leads. It’s nearly all profit.
- Quick Turnaround — You’re not sinking a ton of time into closing, renovations, flipping, or holding. All you have to do is get a signed purchase agreement, then flip it.
- Low Risk — If you’re not able to find a buyer for the property, you can get out from underneath the contract with no financial risk – if your contract is property written.
- Easy To Learn — There’s less skills to learn when you’re only involved in finding distressed properties and then connecting with investors who want to purchase them.
- Short-Term Profits — With wholesaling, once you’ve flipped the purchase agreement your job is done and you forfeit your ability to generate any more cash from the deal.
- You Need To Find Buyers — If the numbers in the deal don’t make sense, and there isn’t enough room to profit, you could have a hard time finding investors to take the contract.
- You Might Need A Real Estate License — In some states, because you’re marketing the properties for sale, you may need to be licensed as a real estate agent or broker.
How To Effectively Capture Wholesale Real Estate Leads
With wholesaling, lead flow is the name of the game. The more leads you’re able to generate, the more chances you have at getting properties under contract.
There’s a handful of proven strategies you can use to bring in fresh leads on a consistent basis so you’re able to get more signed purchase agreements – and more chances to flip those agreements to your investors.
Strategy #1: Buy or Build Your Lead List
One of the most straightforward ways to generate leads for your wholesaling business is to purchase a list of buyer leads, or build that list yourself.
You can use a tool like Propstream to save a ton of time, research larger areas, and create segmented lists to help increase the chances you’re contacting motivated sellers.
With Propstream, you can generate a list of properties in a specific area that meet the filters you’ve set – like vacant and in foreclosure – to help increase the quality of the leads you’re pursuing.
If you want to purchase a list of leads, you can use a company like List Source but, keep in mind, that buying leads can get extremely expensive and there’s no guarantee that these leads will actually convert into a purchase agreement.
Many times, with lead lists you’ve bought, other investors have already combed through them.
That doesn’t mean it’s a bad strategy. It just means that you’ll need to set a marketing budget that lets you still turn a profit when you flip the purchase agreement.
Strategy #2: Cold Calling/Text Blasting
Cold outreach is one of the most cost-effective strategies you can use since all that’s required is a bit of hustle on your part and being confident enough on the phone to start calling people.
There’s a few ways you can do this, ranging from cold calling, to text blasting, social media, and email marketing.
The downside of that, though, is that it can be incredibly time-consuming when you compare it to the return on your time invested.
You’ll need to contact a good number of people before you get someone interested, and then you’ll need a good number of interested people to get a signed purchase agreement.
That means consistency is the key when you’re doing cold outreach – the more often you do it and the more people you contact, the more you increase your chances of getting that “yes”.
Since you’ll be reaching a large number of voicemails (if you’re cold calling) or need to answer a large number of calls (if you’re emailing, texting, or using social media), you’ll want to use a service like Call Porter to answer your calls for you.
If you’re unavailable and one of those calls comes through, you’ve lost that lead. With a service like Call Porter, though, when the call comes in, they’ll answer it for you and book the appointment straight to your calendar – making your cold outreach far more effective.
Strategy #3: Content Marketing
Since real estate investing is a long-term game, one strategy you can use to generate a consistent flow of leads over time is content marketing.
You can create blog posts, YouTube videos, podcasts, etc. to get the attention of sellers in the areas you’re marketing to – and then convert that attention into leads for your business.
This is a great strategy for supplementing your lead flow but not necessarily one that you want to rely on as your primary lead source, at least in the beginning.
It takes time to create the content, and takes time getting that content in front of the right people at the right time. And, unless you already have an established website or you’re an SEO expert, it can be hard to get that attention in the beginning.
However, if you stay consistent with your content marketing and play the long game with the strategy, it can become one of the best sources of leads you’ll have in your business.
That means you’ll want to start your content marketing sooner than later while making sure you’re keeping your eyes on the long game – not instant results.
Strategy #4: Hit Your Neighborhood
The neighborhood you live in could be one of the best lead sources you have at your disposal.
This strategy doesn’t require anything except for your time and commitment to uncovering potential leads in your local area.
To get started, you can post bandit signs in high-traffic areas – the signs that say “We Buy Houses Fast!” that are planted on the corners where people drive every day.
With these signs, though, you need to be careful because they are illegal in some areas. To make sure you’re legally posting them, check out the tips in the guide we built teaching you how to legally post bandit signs.
You can place door hangers on properties that look distressed.
Things like uncut lawns, failing paint, failing roofs, unwashed windows, etc., are all things to look for that could give you hints the owner may be willing to sell the property.
With door hangers, you want to make sure your message is targeted and attractive. You can use door hangers like these to get the homeowner’s attention.
Each hanger is handwritten for you so your hangers look more personal (and professional) with a bunch of different designs you can choose from to match your business & brand.
Strategy #5: Direct Mailers
The final approach you can use to generate wholesale leads is also one of the most effective and affordable on this list – especially for beginners.
Sending customized, personalized direct mail can help you generate leads that may not be actively targeted by other investors. This gives you the opportunity to get in first and have a higher chance of getting a signed purchase agreement.
With direct mail, the average response rates are around 4.4% – or 44 responses for every 1,000 pieces sent – and personalization (like handwritten notes and envelopes) can increase that response rate by upwards of 50%, or more.
People who respond to direct mailers are also some of the most motivated sellers you can talk to in your business.
You can take a look at the guide we’ve built that teaches you different real estate mailing ideas to ensure your campaigns are as effective as possible.
Then, you’ll want to send out attractive postcards and flyers to get the attention of homeowners who may be interested in selling.
Here’s some of the most effective mailers we’ve sent out so far:
The Greeting Letter is designed to stand out in the mailbox so it grabs attention. Then, the personalized, handwritten letter helps keep attention to start generating calls for your business.
Our Americana line of postcards are one of the best selling postcards we’ve produced. They’re collectible with a timeless design so they end up hanging on your prospect’s fridge instead of getting tossed in the trash.
Our Comic Cards are another timeless design built to grab attention and quickly get your message in front of the right people at the right time.
This series, like our Americana series, helps people remember who you are so if they’re not ready to sell right now they’ll remember you when the time comes.
As long as you have enough lead flow and you’re using the strategies we’ve laid out for you here, getting leads flowing into your business (and turning those leads into signed purchase agreements) becomes a lot easier to do.
To get started generating leads for your wholesaling business, check out our timeless mailer designs now.