Real estate wholesale buying is a lot like Internet drop shipping, except this is for real estate. Furthermore, it is a perfectly legitimate business transaction that is done on a regular basis.
This is the way it works.
The Letter of Intent
First, call a bank or lending institution that might have REO, which stands for real estate owned. These listings could be foreclosures, which are often good deals. When you call the bank, ask about signing a letter of intent. The letter of intent indicates that you are interested in purchasing the properties on the list wholesale – that is, you are thinking about buying the whole list. That’s what is meant by “letter of intent”, signaling that you are seriously considering buying these properties.
As part of your conversation about the list, and during the process of filing the letter of intent, ask for some added information about the properties in question. Request the rent roll, the twelve-month trailing profit and loss statement, and the executive summary. This will tell you a lot about whether you want to keep all of the properties on the list, or whether you want to re-sell part of them.
How to Deal with a Broker
The banker might tell you that a broker handles their properties: Don’t despair! You aren’t done yet. Put some cheer in your voice and say, “Great! Who is your broker?”
Call the broker, and say, “Hi! I just spoke with George, over at Super Bank, and he suggested that you sell your REO properties to me.”
The broker, who is employed by George and wants to keep him in good spirits, says, “Sure! Come on over, and we’ll strike up a deal.” Incidentally, this is a deal for the broker and for George, because they want to sell those properties and you are helping them to do so. Therefore, it is a win-win situation for all parties involved.
Since you are dealing with a broker, be sure to get the marketing package in addition to all other information you would have requested from the banker.
Sell the Letter of Intent
At this point, you are ready to sell your letter of intent, or at least portions of it. You line up buyers for the properties on that wholesale list that you don’t want to keep, and you can use those sales to help pay for the properties that you do want.
Or, you can simply sell the letter of intent. At this point, you have no money in escrow, no money out of your pocket, and yet you have made quite a sale by doing so.