How to flip houses with no money just time

Before we begin to discuss where to start with your house flipping career, we are going to talk about another important aspect of Real Estate Investing, and something that you should always keep in mind when going about your work. Even if you have enough cash to start flipping, as experience will tell you, always keep this in the back of your mind. What this is, is called wholesaling. Wholesaling is the infamous way to get into real estate without any money up front. You probably get shilled this on every ad on every video relating to real estate by some guy in a supercar explaining how its so easy, la-diddy-da. Don’t let them fool you. They just want your money and want to sell you on the positive points without showing you the real truth. I’m not going to lie, they hit the positives on the head, but they don’t like to share how difficult it really is. You think you can get your sticky little fingers on 6 figure assets without some hard work and finesse? Oh what I would pay to be young and naive again. It's possible, but the probability of success is solely dependant on you and the work you put into it.

We will discuss the pros in cons further along and how you can go about deciding what you want to do, but like I said, its always something to keep in mind. Why? Because as you will learn through these modules and the art of deal making and setting your timelines and margins, even though you can find a good house and get it cheap, it still might not make financial sense based on how you are going to fund it or the resources at your disposal. Does this mean walk away? Hell no. Sell the deal. That’s pretty much what wholesaling is at its core.

Simply, when you wholesale the house you are acting as everyone's favorite enemy, the middle man cock blocking both parties till you get paid. Now that is said with a negative connotation because sadly that is how most wholesalers behave, and also why most wholesalers fail, and in this competitive market, get reported to the Real Estate Bureau for breach of contract and misleading both parties. Our goal is to make sure you know how to do it properly and be more of an asset to both the buyer and seller as opposed to being their enemy. But essentially, wholesaling is how you get on the deals with no money or very minimal. One of the huge positives, and why we are even discussing it with you, because the same way you go about finding houses to flip is the same way you go about finding houses to wholesale. Really can knock out two birds with one stone. The only reasons why you would wholesale instead of flip is that you wouldn’t make that much profit if you did the flip yourself, or simply you found a good deal but don’t have the cash to capitalize on it. I get asked a lot if I wholesale and why I don’t do it all the time since it requires little to no money. Simply, I have enough money to capitalize on the deals, why make a few thousand when I can make a few hundred thousand. As you will learn through this, it's not like I even use a lot of money down when I do my flips, I just learned how to finesse the lending system. Now I do wholesale from time to time, and like I said, only when its really not an optimal deal for me, but there’s still a little bit of meat on the bone for the right buyer or investor.

Again, sorry for ranting, I haven’t even explained what it is yet, but hopefully you see I am trying to make sure you can comprehend the underlying processes and most importantly understand the logic and motivated self interest on why you would do such a thing. Further, I want you to maximize your time. The Real Estate game is a slow one, you want to make sure you are always making moves or always advancing in some way, its easy to spin your wheels and that’s what we want to avoid.

But in essence, just like flipping a house, you find a house for sale, or one that is about to be for sale, or just find someone who is willing to sell their house. Again, the goal is to get it below the current market price, whether it be because the house needs some work or simply the home owner is willing to sell it for cheaper (we will discuss reasons homeowners would do this, how to spot it and how you can even encourage it). Now in flipping, you would just find the property, buy it and do some work (or no work if you can finesse it like me, which my brother isn’t as big of a fan of like I am) then sell it at market price in a flip. When you wholesale, you do the same thing, but instead of buying the house and flipping it yourself, you “secure the contract”, and sell the deal to another investor or even sometimes to a buyer who just wants the house to live in, and get paid for finding the deal essentially. Don't worry about what contracts you need, we attached them below! You get paid a little more than just a simple referral fee because clearly you are doing 50% of the flipper/investors work, how much extra is up to you, but you will learn how to price them accordingly and make everyone happy.

I’m sure from that you have a lot of questions. What does it mean to “secure the contract”? Why doesn’t the investor just cut you out? Why doesn’t everybody do this? Can you lose money doing this? All are valid questions, and if you don’t have any of these questions yourself, really reconsider how much thought and effort you are putting into this whole flipping/investing thing.

We will start with the first obvious question. What is securing the contract? Now the other modules on being a Real Estate agent explain this because if you bought a property before or are looking to become an agent, you understand how the purchase process goes. When you put an offer on any house, even if you aren’t a wholesaler or investor, it is a legally binding contract essentially, if they accept it you just made a contract with them. Now there are certain terms and it's not always as binding as it may seem, but to a degree it kind of is. Not understanding this or paying little regard to this is where a lot of wholesalers mess up and can even get themselves into legal trouble.

Essentially though, if you put in an offer and the seller agrees, they have to sell you the house if you meet the certain conditions both parties laid out before accepting the offer. Therefore, if you give a formal real estate offer on a property and the seller accepts, you just secured the contract at that price. You got to make sure that those rights are transferable, which they mostly like are and which we will discuss more in depth later in the modules. But once you have that, you have a legal claim to buy the property at a certain price. Assuming you secured the property at a good price, you can then go to an investor or anyone really and offer to sell them the contract. Now what you sell it for is up to you, but hopefully through this you learn not to be a fool and ask for too much and that you have the contract properly secured. Usually you can charge the earnest money deposit and make a quick 1-2% of the purchase price, which seems like a little, but remember we are talking 6-7 figure assets, that adds up. Or depending on how good of a deal you secured and how much meat on the bone is left for the next guy, you can get a lot more. As we will discuss, the goal is to get it off your hands quick and for the most money. If you aren’t holding long on real estate, you want to be quick, the longer you hold and the greedier you get with flipping/wholesaling is how you mess up. I’ll be honest with you, rookie wholesalers pitch me deals all the damn time, most of the time I wait till they mess it up, piss off the seller or haven’t had the contract secured properly, and I go in and swoop it and cut them out. You can avoid this if you know what you are doing.

I’ll give you an example of a wholesale I did. I found a decent house in a really nice area in Beverly Hills. The owner was trying to sell it himself without an agent unsuccessfully for two years. Now we will talk later how to target homes to find when you are flipping and wholesaling, and FSBO’s (For Sale By Owners) is one of those methods, but its difficult nowadays considering they get harassed daily by degenerates looking to list or flip their home. I did just get lucky on this deal, right place right time, and I will say that's part of real estate investing. So if you are naturally a bad luck Brian, you might face some issues. Nonetheless, I saw he was trying to sell the house for about $1.6m unsuccessfully. Now to me, this didn’t make much sense at first glance, because it was the cheapest house in the neighborhood by $500k, and after running the numbers and checking the comparables, I came to an estimate that the house was worth about $2M. It had a lot going for it, turn-key condition (we will discuss what this means), excess land that was buildable, great school district, it didn’t make sense why he couldn’t sell it. That is something to note and what other people watch for, if the house isn’t selling at a low price, or any price for that matter, and is on the market for a long time, people will be turned off by it. Sadly though, this house wasn’t getting sold because of the competitive LA market and the shark agents. A lot of the time, if you don’t list with an agent, your house isn’t going to get shown and agents will detract their clients from viewing it, as there is little benefit for them if their client purchases a property. We will discuss this further in depth, and this is part of why I recommend you either become an agent yourself, have a close family member become an agent, or make solid strategic partners with agents that can help you and have a financial incentive to make you more money. Anyways, how I came to the conclusion the house was worth $2M was based upon what other houses in the area have sold for, this is a big art of wholesaling and flipping which we will dedicate a whole section too.

Skipping the good part, I made an offer to buy the house from the guy for $1.5M, right around what he wanted it for. He agreed and I secured the contract. We will get into the specific terms and how I secured it properly vs. improperly, but once I had it I started my work. Now initially I was just going to flip this house myself and I figured with the amount of land it had, I could even do a mini-development, add to the property and turn it into something I can sell for $3-4M. With the property under contract, I got inspectors to look at the property, and my contractors to come take a look to see what could be done and a potential budget. So far, this is just like a traditional sale where I, the buyer, start performing this stuff prior/during escrow. Now we weren’t in escrow at this point and and agreed to wait some time before the deposit was required, I specifically requested this. Now to my dismay, after my inspectors and builder looked through everything, it was going to cost me a lot to get it to the higher end point that I was looking for. Not only that, given it was in a nice area on top of a mountain, it was going to take a long time just to get zoning and approve hauling and all that crap. Given the high purchase price I had to make a decision, either put up the cash and sacrifice the opportunity cost of not being able to use $1.5M for at least a year, or finesse a loan and pay crazy interest that would cost me a few hundred grand, knocking down my margin. I had the house secured at an awesome deal, but sadly, the deal wasn’t that optimal for me. That didn’t mean however that it wouldn’t work for someone else.

This is where the wholesaling begins. I already did a lot of work, I got the property secured at a low price, got it inspected and made sure it was ready to go, had contractors look at the property and see what could be done. All this costed me money, however based on my experience I knew worse case scenario, I can just sell the deal (wholesale it) if all else fails. From all this work done and being right on my estimate that this house was worth at least $2M, I began hitting up my network of investors, most are my personal friends, and showed them what I got. Pretty much if someone had the cash and the time, they could come in put either $200- 500k into this house and make $500k-1.5M depending on what they wanted to do. If they had better resources than I and could build it faster and cheaper, even more profit for them. That being said, I offered the contract for $200k. This pretty much means that I said, give me $200k, and the deal is all yours, they pay me my money for the right to the property, than go buy the house from the original seller for $1.5M. They are in at $1.7M total, still $300k of wiggle room as is for them, with the same $1M+ upside if they want to remodel or develop. Just like that, I made $200k with only a little money upfront to get those inspections and what not done, and since I structured the deal a certain way, which doesn’t always happen, this seller was just motivated, I barely put down anything and walked away with $200k without ever owning the house or putting a dime into remodeling it. The guy I sold it to is working on it now and he is moving a long nice, he probably is going to net $1M after expenses, so he’s happy and he stays in touch with me asking if I got something new every month.

The two keys you can take from this is how I didn’t get too greedy, but I kind of did because $200k is a lot to ask for, but at the end of the day I secured the property so low in such a good area it was a good deal. In most cases I would have asked for dramatically less, you don’t get that great of deal all the time, maybe once or twice a year if you work hard. But the point is, even though I asked for a lot, there was still a ton of equity for the next guy to profit from, even if he didn’t want to remodel it. Remember, you need the other guy to make the deal and if you keep him happy, you can build some killer relationships. The next big point, or rather question, is how did I make that much off a house I didn’t even own, and why wouldn’t he just go to the homeowner and offer him more than I did, but less than what I asked for? Wouldn’t the homeowner get pissed if he found out too and just cancel? The easy answer for both is that the buyer or seller cant do anything about it. We agreed on the deal before hand. If the seller backs out for no real reason and I have not violated any terms, he would be in breach of contract. Vis-versa, even if the buyer approached the seller and told him what was going on, the seller’s hands are tied and he cant do anything about it. Again, this was all because I secured it properly and didn’t cut corners or rush the process. Now I also informed the seller I would do this if I couldn’t act on it beforehand and he was cool with it. This is one my biggest things I can’t stress enough, be transparent, people don’t care if you are going to make money, just don’t be a slime ball. They just want there house sold, usually.

Now this was supposed to be an intro but we went sort of in depth, as we get more into it, we will discuss more real life examples, how you can go about securing contracts properly and finding properties, and even give you contract templates to look over and that you can use in your deals!

In essence though hopefully this makes sense and gives a better understanding to the word wholesaling. You are literally doing what a wholesaler in any industry is doing. You are selling something to somebody else that is going to sell/retail what you gave them. You give it to them at a discount so that you can sell faster and in larger quantities, you make less because the person buying it does the rest of the work to take full advantage of the available margins. Simple as that!

Before we wrap up and begin discussing the pros and cons of flipping and wholesaling and which one would be best for you, lets touch on the last questions asked earlier in the module. Why doesn’t everyone do this and can you lose money? To answer the first one, everyone doesn’t do this because it is easier said than done. Remember you are doing the same work a flipper or agent would do finding a house, and at the end of the day you are going to make less than them. That means a lot of time and effort and again no guarantee of pay. Can you lose money? Simply, yes. Depending on how much time you put in first of all, but also if you put in money for inspections and other stuff, even marketing, if you get your numbers wrong or mis calculate, you can end up spending money on something that doesn’t have deal potential. Its easy to think you are special and found a killer deal, but at the end of the day, there are thousands of people in the same game, sometimes you got a deal because no one wanted it at that price, it wouldn’t make sense.

So lets get to the big question. Which one should you do? Flip houses or wholesaling? What is the best option and what are the downsides to each? Which is going to make you the most money? And best of all, where in the world do you start!?