One of the life-changing habits in Stephen Covey’s best-selling book, The 7 Habits of Highly Effective People, is “Begin with the End in Mind.”
This highly effective habit directly applies to being a successful wholesaler! Many wholesalers actually go about wholesaling the wrong way.
Here’s the typical scenario for the average wholesaler:
1. Work extremely hard to find a deal to get under contract.
2. Finally get that deal in writing under contract.
3. Then market the deal to cash buyers hoping that it fits their buying criteria.
The glaring issue in this scenario is that the wholesaler first finds any deal they can get under contract and then tries to find the cash buyer that will buy it.
In this scenario the cash buyer they are marketing to may not even want the particular deal they have! How do you know that the cash buyer you are marketing will even buy in the zip code your property is in? How do you know your cash buyer has the funds available to make a purchase for the deal? How do you know your cash buyer can give you a response in 24-48 hours whether the deal will work or not?
Well, if you are the average wholesaler, then: you just don’t know.
However, there is an easy way to go from “hoping” to close the deal, to MAXIMIZING your chances of getting the deal closed & collecting your wholesale check!
What you need to do is “Begin with the End in Mind.”
Begin by networking and developing relationships with Cash Buyers first so you understand the exact types of properties they want to buy. This will alleviate confusion, increase response times, and increase your closing ratio when BOTH you & the cash buyer know you are working on deals that exactly fit their buying criteria!
In order to do this the right way, you need to build a Cash Buyers List…
So, What The Heck Is A Cash Buyers List?!
A Cash Buyers List consists of your cash buyer contacts & their buying criteria. Cash buyers are investors who are looking to purchase your wholesale deal to renovate and sell for a profit. When you get a property under contract below market value, you utilize your Cash Buyers List by giving them a call/email to see if they are interested in purchasing the property.
Building a Cash Buyers List is one of the first things you want to do as a wholesaler because when you get your property under contract it now gives you an exit strategy [*Cough* “Begin with the End in Mind” *Cough*]. The last thing you want is having deal in your hands and then, HOPING someone wants it & will buy it from you!
How Do I Build My Cash Buyers List?!
The single best way to build your Cash Buyers List is to strategically network! You’ll want to go to the local REIAs (Real Estate Investment Associations) where all types of investors, contractors, lenders, agents, and many other real estate professionals come to network. Here you will find many investors who purchase homes with all cash. These cash buyers are the ones you want to build a relationship with! They will be your go-to buyers once you have a property under contract.
The reason why you target cash buyers is because they can close on a deal very fast, usually within days, if not, a couple of weeks. This is important because when you get a property under contract with a motivated seller, you normally have to find a buyer for the property within 2 to 3 weeks (sometimes even a few days) before you lose the deal.
I am in the Southern California area, so a great REIA I recommend here is the San Diego Creative Investors Association (SDCIA). The events are usually once a month and every one comes for the same reason: to get more deals. I have met many buyers at these networking events that have not only brought in a lot of profits, but are also great friends still to this day! Another REIA I recommend going to in southern California is the North San Diego Real Estate Investors Association (NSDREIA). For a list of local REIAs in your area, simply visit the resources section here on RealEstateInvesting.com
What Do I Say To Cash Buyers At A Networking Event?!
Be up-front and authentic about what you are doing. Usually I start off conversations with “Hello, my name is Alex. I’m a wholesaler in San Diego and a pro when it comes to getting properties under contract below market value. Would you be open to doing business together?” If they say, “Yes,” then you need to take down their phone number and email so you can contact them in the future.
Being organized with your Cash Buyers List is half the battle. Be sure to log their information into a document or spreadsheet. This is the start to a Cash Buyers List that can literally make you hundreds of thousands, and in some cases, millions.
What Questions Should I Ask Cash Buyers To Find Their Buying Criteria?!
Here’s a list of questions to ask cash buyers to understand their buying criteria:
• What areas (zip codes, neighborhoods) do you like to buy in?
• What types of properties are your favorite to renovate?
• What types of properties will you absolutely not buy? (Properties that have cracked slabs, new builds, additions, cracked pools, septic tanks, death on the property, etc.,)
• How many renovation projects can you handle per month?
• How many projects are you currently working on right now?
• What type of return are you typically looking for on your properties?
• Do you purchase properties with your own capital, or do you borrow capital?
• How quickly can you close on a great deal?
• Will you respond to me within 24 hours if the deal will work for you? If not, what will be your typical response time?
From here, you need to weed out the cash buyers who are not serious. A cash buyer who is not too serious is one who has never renovated a property before. You want cash buyers who renovate multiple properties per month. These cash buyers will have a process in place to quickly & efficiently analyze the deals you send them. Speed is the name of the game because the longer a deal takes to wholesale, the less likely it will close!
In summary, network and meet Cash Buyers, find their buying criteria, build your Cash Buyers List in order to maximize your chances of closing the deal, and, finally, collect your wholesale check!
Congratulations! You now understand the types of properties your top cash buyers like to buy, and you now have confidence in their ability to close quickly & on time! The next step is to find the deals and make offers on the properties that your cash buyers will now buy.
And, remember, like Stephen Covey says, “Begin with the End in Mind!”