All About My First Wholesale Deal

Uncategorized Jun 28, 2023

After weeks of grinding it out, searching for leads, making offers, finding cash buyers, and making videos of everything for you guys along the way, it's time!

So many of you have been with me throughout the entire journey, and you can tell from the title of this post that we made it.

I broke through that wall and got that coveted first deal, and as always I'm here to give you guys all the juicy details.

If you're new here, my name is LilI and I've been documenting my journey from start to finish of trying to get my first wholesale deal.

You can check the link to the entire playlist of me wholesaling a property from start to finish, and hopefully we'll all be able to look back on this first video and see that I actually did get a deal.

A quick definition of wholesaling is when you find a distressed property, put it under contract, and then sell that contract to a real estate investor for a fee.

I've got a ton of videos on my Youtube channel breaking that down even more in depth.

But right now I want to jump in and tell you guys how long it took me to find this property, what type of lead it was, how much I spent on the lead, how I came up with my offer price and negotiated to get the deal under contract, how I found a cash buyer, and what comes next after that.


What property is this?

So first, what property is this and how long did it take me to find it?

It's a three-bedroom two-bathroom and it's in a popular suburb right outside of town.

From the first day that I went driving for dollars and made my first offer until the day I found this property, it took around five and a half weeks.

In that span of time I made about 70 offers, and what you might find interesting is that this isn't actually the first offer that was accepted for me.

I actually got three offers accepted before this one, but for different reasons I wasn't able to assign those contracts to a cash buyer.

First, I got a property under contract for way too high of a price because I really didn't know what I was doing.

Then, I got a property under contract but we found a plumbing leak and the seller did not want to give a price reduction.

And for the third contract, I actually did get a buyer who wanted the property, but his hard money lender said that the property was in such bad condition they wouldn't even give him the loan and said the house should just be torn down instead.

Obviously I'm making so many offers on so many different properties that I can't make a video about every single one, but if you do want to stay up to date on exactly how all my deals are going, definitely follow me on Instagram at @liliinvests.

I'm posting there every day and giving you guys as much behind the scenes content as I can while I try to build this wholesaling business.


How I found this property

Next up, how did I find this property?

If you've been following along, you know that I've decided to target on-market leads rather than off-market leads.

This means that I'm using Zillow, Redfin, and “for sale by owner” listings to find the properties that I want to make offers on rather than driving for dollars, mailing postcards, or even cold-calling homeowners.

There are a couple of reasons that I do this, but the main reason comes down to this: every morning when I wake up and check the market, there are new leads dumped into my lap for free.

My town isn't thought of as a huge city, but between it and the surrounding areas there's about 1.5 million people.

This means that every single day there are properties on the market for sale, and a handful of them are in distressed condition and a good target for a cash offer.

And that's exactly what happened with this property.

It came on the market one morning and there were three things that immediately told me it was a good deal.

First, it was for sale for 62 dollars a square foot.

I've been doing a ton of research, and I know that homes in that area are selling for over a hundred dollars a square foot.

The second thing was that there were no interior pictures.

And this could mean two things.

It could mean that the inside of the house is in such bad condition that the agent doesn't even want to put pictures up.

Or it could mean that you just got to the deal so early that the pictures haven't actually been uploaded to Redfin or Zillow yet.

In this case, it was the second one.

The third important thing that I knew made this a good deal for me is that the property had just been posted on the market 20 minutes earlier.

This meant that all the other investors who are also looking on market for their deals may not have seen it yet, and I might have an advantage to get my offer in first.

So that's how I found it.

And I think the important thing, especially for those of you that are new and maybe don't want to spend a ton of money, is that all of my leads are free.

I didn't have to go out and have a car to drive for dollars, or spend hundreds or thousands of dollars on postcards, or do text message blasting.

I just sat down over my computer and got to work combing through all the properties that had come on the market that morning.

So once I saw it, I immediately called the listing agent.

I didn't call a buyer's agent, I called the listing agent.

I told her I was an unrepresented cash buyer and that myself and my partners were looking for investment properties in the area.

She started to tell me about the property and explained why it was priced so low.

It was because the house needed quite a bit of work.

Luckily, the seller had already gotten a quote for the major repairs that were needed and it came out to eleven thousand dollars for the structural work, four thousand dollars to repair the siding, and eight thousand dollars to put on a new roof.

I told her that none of that would be a problem and I asked her to send me pictures of the inside since none were online yet.

Initially, she told me that the pictures would be online in a few hours and I responded with something that I think really sealed the deal for me.

I told her that as soon as the properties hit the market, all of the other investors were going to flood in.

And with me being an unrepresented cash buyer, I offered her the chance to write the offer on my behalf and get double commission on this deal as my buyer's agent and the seller's agent.

She immediately understood why I wanted to move quickly, and she kind of got on my side and sent me a bunch of pictures of the interior so I could start to put together a rehab budget.

After a little bit more conversation, I also found out that the person who was selling this house wanted to sell it and buy another one.

And so she was going to need a little bit longer of a closing period to make sure that she had another place to move to when she moved out of this one.

I also had the thought that it might be helpful to her to leave anything that she wasn't going to take to her new house, anything that she just wanted to be thrown away.

She could go ahead and leave it in the property and the investor would take care of it after the closing since there was already going to be a dumpster at the property to take out the old carpet and tear the shingles off the roof.

It wasn't really an extra worry for the investor to throw away whatever she didn't want, but it did make a difference to her that she didn't have to haul all that stuff off to the dump.

The numbers 

So let's talk  numbers.

The property was listed for $89,900, which is 62 dollars a square foot.

Based on the comps in the area, I found that this property would be worth about $150,000 dollars all fixed up, which is 104 dollars a square foot.

That might seem like a huge gap right there, but in order to know if that $89.9k was actually a good price, I had to figure out what the rehab might cost an investor to fix this property up.

I already had the quote from the agent that it was going to cost around $25,000 to put on a new roof, fix the structural issues, and repair the siding to the house.

And because the cosmetics inside were pretty good, it really just needed new carpet, maybe a coat of paint, and maybe new kitchen countertops depending on how much the investor wanted to fix it up.

But that would probably cost somewhere around another ten thousand dollars or so.


The 70% rule

So if I put all of that into the 70% rule, which is what most people are told to use when they're flipping houses or wholesaling, it came out to the $150,000.

This was our ARV times seventy percent, minus the rehab of thirty five thousand, minus ten thousand dollars as my wholesale fee and that all equalled to $60,000.

But that is not what I offered because it is such a hot market right now, the cash buyers that I've been talking to have told me that they're using a new formula. 

I like to call it the “all in” formula.

I'll show you how it worked for this deal.

It's the purchase price from the seller, plus the rehab budget, plus my assignment fee.

All of that divided by the ARV needs to equal 80% or less.

You can also think of this just simply as the 80% rule, but I like to think of it in this way just because the math works better in my head.

Some of the investors have said they like this number to be less than 70%, some have said 75%, but the vast majority have said they're working with 80% right now.

So I just kind of played around with the math on my computer really easily and came up to $75,000 as a purchase price that would put this entire thing at 80%.

So then we started the negotiation with a listing price of $89,900, I offered seventy $73,900, the seller counted at $79,900, I counted at $76,000, and they accepted it.

Since this was an on-market deal, the agent took care of writing up the official state contract, sent it to me, I docusigned it from my phone, the seller did the same thing, and then later that day I took it to the title company that I had already told I would be bringing an assignable contract.

Then I gave them a $500 earnest money check to make the entire thing official.

Now when I wrote that offer to the agent, there were two really really important things that I included in the offer sheet that I sent her.

I made sure it specified that I had 10 business days to do my due diligence, which for a wholesaler means to find my cash buyer or to send this deal to a cash buyer that I already had in mind, which I did.

And then the second thing is this clause which just lets everyone know in writing that this contract is assignable, so I don't have any problems when it comes time to close on this deal and assign the contract to my cash buyer for a fee.

Do you absolutely have to include this and disclose that you're going to assign the contract and that you're not actually the end buyer?

Most people say no, but I like to be upfront about everything so I don't have to worry about how the agent's going to feel, how the seller's going to feel, and if anybody's going to object to me making money at closing.

And I don't want to leave a bad taste in anyone's mouth because I want to do repeat business with these agents when they get other listings that would be good for an investment property.

I got that specific language to put in the offer sheet from a real estate lawyer that I hired.


The disposition

So at that point, the acquisition side of the deal was handled.

I found the property, got it under contract, and now it was time for the disposition side and passing that contract off to a cash buyer.

Over the previous five weeks, I'd gathered about 30 email addresses from networking in the local investing Facebook group as well as cold calling some cash buyers in the area.

So then I emailed those 30 investors with a link to the Google Drive folder that had all of the information, pictures, and details about the property.

I told them I was asking $86,000 dollars for it, which would leave me a ten thousand dollar spread.

I also called up about 10 of those buyers individually because they were the ones that told me they were looking for properties that fit that 80% all-in rule, and I also knew that this neighborhood was an area that they were looking for three-bedroom two-bathroom properties in.

I got four cash buyers out to the property that day, and a lot of them seemed pretty interested but unfortunately I only ended up getting one offer that day for $73,000, which was less than I even had the contract for.

But it was only like the second day of my due diligence period, so I told that buyer $73,000 wasn't going to work but I would get back with them after I got offers from other investors.

The other three buyers that came out to the property all had different reasons, but it just ended up that none of them were going to be able to close on this deal with me.

I was getting a little worried that I would have to cancel another contract, but I just really felt like this was a good deal and I still had about seven days left in my due diligence period.

So here's what I did.

I went back on that Facebook group, and even though I had already posted my deal and sent it to everyone who had commented that they were interested, I looked at other people's deals.

Then I looked in the comments and saw who was interested in those deals

I then messaged those investors and said “Hey, I saw your comment in the investing group. If you're still looking for properties, here's what I have available.”

That link sent them to a folder with all of my available properties, and at the time I had two available over the next few days.

I probably sent out about 20 to 30 of those messages, and I got a handful of responses until I got this message.

The offer was for $82,000, which would make my first assignment fee six thousand dollars.

What do you think I did?

I took it!

And what's wild is that this buyer is buying so many properties and he's so confident in his investing system that he didn't even need to come see the property.

He basically looked at the comps that I sent him, the pictures, and the video walkthrough.

And it also helped that we already had the quote for the major damage that needed to be repaired.

And all of that was enough for him to run his numbers and make an offer.

I sent him the assignment contract for $82,000 to sign from his phone.

When he sent it back, I signed it, and sent it right to the title company.

And then the next day he took his $500 of earnest money to the title company to cover my $500 earnest money.

The closing will be in a few days, and there's nothing more for me to sign so I'm not even going to go to the closing.

I'm just going to wait for everything to be settled, then I'll go pick up my check which will be for $6,000 plus the $500, which is basically a refund of the earnest money that I put down initially.

I have learned so much over the last six weeks!

Until next time, thanks for reading!



So, now that you've gotten an intro to making your first wholesale deal, are you ready to get started?

If so, you can use my Free Resource Pack to help get your real estate investing journey off the ground. It includes:

  1. My Offer Sheet Template
  2. My Phone Scripts for Calling Real Estate Agents
  3. The Wholesaling Deal Tracker

So what are you waiting for?

Start your real estate investing journey towards financial freedom today!


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