Wholesalers play an important role in the "food chain" of real estate investing. They are experts in locating motivated sellers, estimating rehab costs, negotiating a fair price and placing a contract on the property. Wholesalers generally sell (or assign) the contract to a rehabber for a quick profit.

While wholesaling requires good negotiation skills, a network of rehab investors and an ability to find motivated sellers, it does not not require a great deal of money. Wholesalers generally "assign" the contract to another investor who is responsible for closing the sale and paying the wholesaler from the proceeds. Wholesaling does require minimal funds for "marketing costs" associated with finding motivated sellers.

For new investors interested in beginning a career in wholesaling, here is a brief description of the process. This is an example scenario that has worked for me. You'll want to modify this for what works for you.

1. Drive the neighborhoods in your area and write down the addresses of 50-100 houses that are either vacant or in disrepair. If you can't find any 50-100 in a couple hours then you are in the wrong area.

2. Find the seller information in the county appraisal district database - Dallas, Tarrant, Denton, Collin.

3. For the vacant houses or those in the worst shape, perform a reverse phone lookup and call the owner directly. Tell them you are interested in buying their house. Skip to #5.

4. Purchase blank USPS stamped postcards similar to these. Write on them something simple like "I am looking for a house in your area. I saw your house on XXX street and I want to buy it. I have cash and and close quickly." Give them your name and phone cell phone number.

5. Your primary objective for the initial call is to determine if they are a motivated seller and build a rapport. Don't ask too many questions from the start. Give them just enough information about your plans to find out how long they have owned the property and why (or if) they are interested in selling. You should try and get a feel for how much they owe on the property or how much they expect to get from a sale. If it looks like a potential deal then make an appointment to see the house.

6. Generate recent sales comparisons on the property. Without sales comparisons you do not know the true retail value of the property and therefore you cannot make a realistic offer.

7. Show up on time for the appointment - not one minute late or early. As soon as you enter the house, continue to build a rapport with the owner. They won't sell to you at a discount if they don't trust you. Look around the house for personal artifacts and strike up a conversation about their children, vacation, furniture, etc.. Be honest with them about the house. Inform them of the work required - but don't be offensive about it.

8. If you don't feel comfortable making an offer on the spot then tell them you'll run the numbers and get back to them later that day. You should make them an offer for roughly 60%-65% of retail value minus repairs. Don't pay too much or you won't be able to assign it to an investor. If they accept, walk the seller through the contract and sign it with your name "or assignee."

9. Have your attorney draft an "Assignment of Real Estate Purchase Contract" or find one online. Here are some examples: example1, example2, example3.

10. Once you have it under contract post it on our wholesale marketplace for $5k over your contract price. When investors inquire, send them the comps you've generaed. If it is a good deal, you'll have it assigned to an investor within a day or two.

11. Follow up with the investor until the property closes to ensure you get paid.

Check out an additional article, Anatomy of a Wholesale Flip from our guest investor, Steve Cook.

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