Selling To The Tenant, Buy Or Wholesale? Transitioning from Wholesaling to Fix and Flip

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Welcome To The Business Of Wholesaling Newsletter!

Every week, we’ll be sending you strategies, tactics, and tools used by successful wholesalers and we’ll cover any important market insights and news in the industry.

Here’s what we got for you today:

• Selling To The Tenant

• Buy Or Wholesale?

• Transitioning from Wholesaling to Fix and Flip

Free Training On How To Raise Private Money

This coming Monday on September 16th at 7PM EST, Dan Zitofsky is hosting a free training to teach you how to raise private funds.

Dan is one of the most sought after real estate coaches and is known for his expertise on passive wealth generation. One of the keys to that is accessing private money.

If you’ve ever come across a deal but couldn’t secure the funding in time, you won’t have to worry about that if you had access to private investors.

Here’s a few of the things on the agenda this coming Monday:

• How to identify potential private investors

• Marketing strategies to attract people with money

• Crafting persuasive proposals that get investors on board

• Building and nurturing relationships that last

• The legal and ethical ins and outs of private funding

• Negotiation skills to secure the best terms for your deals

Don’t miss out on this one! Dan is doing some giveaways during his training as well.

Selling To The Tenant

In some cases, you’ll find a landlord that has a longtime tenant with fixed rent. And when the landlord finally wants to offload the property, they are considering selling to the tenant.

What should you do in this situation?

The most obvious answer most would give is to walk away. But what if there was value in facilitating this process?

Yes, I’m talking about helping the landlord sell to the tenant. Very counterintuitive, but stick with me here.

Chances are, the landlord doesn’t know their way around setting up a deal like this. But you do.

So maybe you know a mortgage broker that you can connect the tenant to so they can secure a loan. 

By doing this, you’re actually wedging yourself into this deal and basically guaranteeing yourself this deal if it doesn’t work out.

Here is where you can start setting boundaries, especially if you know the landlord is looking to offload this property quickly.

First, you can ask the landlord to give the tenant a deadline to purchase the property. 60 days for example.

You can also tell the landlord to set a deadline for making a decision. A week for example.

You’re teaching the landlord how to sell to the tenant. You’re building trust with the seller in the process and showing that you know what you’re doing. 

You’re also fast-tracking this process along so you can swoop in for the deal if it falls through. Chances are if the tenant has been there for a long time, the landlord may have asked the tenant if they were interested in purchasing this property before. 

So we have deadlines. Now what? We need proof of funds from the tenant. 

Make sure you tell the landlord to ask the tenant for proof of funds to confirm if they can actually close. 

It’s going to be an uncomfortable conversation for the seller. But at least you’ve equipped them with the necessary tools. 

And if you can, get the seller to commit to selling to you if they can’t sell to the tenant. 

The only way this deal falls through is if the tenant actually buys. If that doesn’t work out, it’s your deal for the taking.

Buy Or Wholesale?

Sometimes you come across deals where it makes more sense to you to buy the property outright and put it on the MLS instead of wholesaling.

It may take more time, but you can take down more profits this way.

So how do you know when to do one or the other? It will depend on a lot of things like the market, ARV, etc. 

But here’s the main thing you need to focus on. Negotiating the front end.

Going through MLS means you’re gonna be paying out to a few different parties. Your agent, the buyer’s agent, a private lender (if you used one), repairs, etc. 

So you need to have room to accommodate all of those things. Because what happens when you get crickets on your first listing price?

As a wholesaler, you probably don’t want to hold properties for too long. So naturally, you’ll lower the price.

But don’t assume 1 or 2 price drops will bring demand. You may need to drop the price 3-5 times. 

This means you may need to drop the price $15-30K from your original asking price. And if you don’t have the room, your property is gonna be stuck. 

But if you do have the room, you can move the deal and walk away with a nice chunk of change still. 

This all depends on what you negotiate on the front end. If you can’t get the right number, then it probably makes sense to wholesale the deal. 

And remember, don’t be afraid to walk away if you can’t get your numbers.

Transitioning from Wholesaling to Fix and Flip

Many new real estate investors start with wholesaling.

It’s a straightforward way to enter the market by finding undervalued properties and selling them to buyers without actually owning the property.

But have you thought about what’s next for your investing journey?

As you gain experience, a natural progression is to move into fix and flip, where you can make bigger profits by renovating and selling homes.

However, before diving into fixing and flipping, it's important to have a strong foundation in wholesaling to ensure a smooth transition.

To build this foundation, begin by mastering the art of finding undervalued properties. This skill is essential for both wholesaling and flipping. Look for properties that need repairs or are priced below market value. These are the types of properties that, with the right improvements, can significantly increase in value.

At the same time, focus on growing your network of buyers, sellers, and contractors. The stronger your connections, the easier it will be to find and close deals.

Finally, get comfortable analyzing properties. This means understanding the current property value, estimating repair costs, and calculating the After Repair Value (ARV). Knowing these numbers helps you make informed decisions and ensures that you’re working with profitable deals.

When you're ready to transition into fix and flip, the goal shifts to buying a property, renovating it, and selling it for a profit.

Fix and flip can be highly profitable, but it requires a different approach than wholesaling.

To succeed, one of the first things you'll need to do is build up your capital. Saving profits from your wholesaling deals is a great way to create a financial cushion for your first flip.

You may also want to consider partnering with other investors or using hard money loans if additional funds are needed.

Be sure to plan for unexpected costs, such as higher-than-anticipated repair expenses or longer holding periods, which can cut into your profits.

In addition to managing your finances, it's essential to become knowledgeable about renovations. Not all home improvements offer the same return on investment, so focus on learning which updates provide the most value. Kitchen remodels or improving curb appeal, for example, often deliver higher returns.

A reliable network of contractors is also key. Find people you trust to give you fair estimates and complete the work on time and within budget.

Understanding the local market is just as important. Your renovations should align with what buyers in your area are looking for, ensuring that the improvements you make will attract the right buyers.

Once your renovations are complete, mastering your exit strategy is crucial. Knowing when to sell a property is just as important as knowing when to buy. Keep an eye on local real estate trends to time your sale properly, as selling at the wrong time can result in holding onto the property longer than necessary, which can lead to higher costs for taxes, insurance, and loan interest.

Pricing the property correctly is another important aspect. While it may be tempting to price high, an overpriced property can sit on the market for too long, which also eats into your profits.

Competitive pricing helps sell your property quickly and keeps your project moving.

To make the transition from wholesaling to fix and flip as smooth as possible, leverage the network you’ve already built. 

The relationships you formed with buyers, sellers, lenders, and contractors as a wholesaler will be invaluable when flipping homes. Use those connections to your advantage in finding deals, securing financing, and completing renovations.

Continuous learning is another key to success. Fix and flip requires new knowledge and skills, so take time to learn from experienced investors, read books, or take courses to better understand the process.

Lastly, start small.

Taking on a large project can be overwhelming, so begin with a smaller flip to get a feel for the process and minimize your risk.

​​Remember, success in real estate isn’t about making one big deal—it’s about consistency, growth, and constantly improving your strategies. 

Each project you take on is a stepping stone to building the wealth and financial freedom that real estate investing can offer.

Thanks for reading this week’s issue of the Business of Wholesaling. 

We’ll be back next week with more marketing & sales strategies, market insights, and other advice you can use to grow your wholesaling business. 

See you next week.

Team Business of Wholesaling