Many first-time real estate investors start off wholesaling in order to gain the experience and get the exposure they need to become a fix and flipper or a buy and holder. If this is the case, then these first-time investors’ first step is to find cash buying investors or cash buyers to wholesale their properties to.
In this article, we will go over many ways to find cash buyers and discuss how to screen and qualify them.
Before we move forward, keep in mind that cash buyers can be either groups or companies, such as trusts, holding corps or LLCs, as well as individuals.
When wholesaling properties to cash buyers, you need to look at properties from two different perspectives:
- Fix & Flips – These are properties that you are trying to get at the highest discount you can. For most investors this could be between 25-35% below market or even as low as 40-50%. It’s key to find out from your cash buyer what their rehab budget is, as well as the level of profit they are looking for. This is critical in coming up with your offer amount on the property. A fix and flipper is looking for a specific profit after they buy the property, do the rehab and resale it.
- Buy & Hold (Rental Property Owners) – This is where you try to get the best discount you can. Usually if you can get an offer accepted at upwards to 20% below market then you have a good deal. You need to understand your cash buyer’s specific criteria on what types of rental properties they are looking for and in which market, the amount of cash flow they are looking for, and the capitalization rates they wish to get. Often, you can find the answers to these questions from the following sources:
- Real Estate Brokerages
- Property Management Companies
- Other investors and those you network with by attending Real Estate Investor Clubs
This will help with your preparation prior to reaching out to cash buyers, and it will help you get specific and detailed knowledge of the following:
- What type of properties are selling the most and the speed at which they are selling
- The median price of property sales, as well as the average price per square foot that they are selling for
In Part 2 we will go over some simple steps to consider.