Updated: Oct 23, 2020
Wholesaling has exploded in popularity among real estate investors in recent years, and with good reason.
After 10+ years of market growth, more traditional forms of real estate investing have become difficult, and the market is crowded with both new and experienced investors.
Wholesaling, on the other hand, is just as viable in a saturated market as it is in a down market. Even better, virtual wholesaling allows you to skip the biggest downside of wholesaling (location-dependence) and access the best wholesaling markets around the US.
In this guide, we'll teach you everything you need to know to begin closing deals around the country without ever leaving your home.
Let's dive in.
What Is Virtual Wholesaling?
Virtual wholesaling is the process of wholesaling real estate remotely or "virtually", allowing you to access favorable markets outside your local area.
For the most part, it follows the same game plan as standard wholesaling:
Find undervalued real estate deals
Run the numbers on a potential deal
Negotiate a purchase with the owner
Find a cash buyer
The differences are found in HOW you complete each of these steps.
For example, a common strategy for finding undervalued real estate deals is called "driving for dollars", where you drive around local neighborhoods and look for signs of vacant homes that can potentially be purchased under market value.
This strategy, like many others traditionally used by wholesalers, is untenable for a virtual wholesaler.
In the next section, we'll be taking you through the wholesaling process but only focusing on strategies that can be executed remotely.
1. How To Find Undervalued Real Estate Deals Remotely
For normal wholesalers, you only have to ask yourself one question when looking for deals.
For virtual wholesaling, you need to ask two questions.
And which neighborhoods?
Virtual wholesaling allows you to spread your efforts across the entire country, which also means you have to pick and choose which markets to jump into.
While it’s impossible to know every area as well as you know your own stomping ground, there are some things you can do to get a better understanding of the local property market BEFORE you start wholesaling there.
To begin, create a shortlist of potential investment areas, then dive into the data to find the optimal city to begin your wholesaling campaign.
Once you've identified the right city, it's time to find the right neighborhoods. Most wholesalers prefer to operate in neighborhoods with home values averaging between $100k-$200k.
You can approach this one of two ways.
Assess neighborhoods by home value and then look for homes within that neighborhood
Find the right homes and then expand out into the full neighborhood
Starting with neighborhoods is how traditional wholesalers typically find deals. They use tax assessor records to identify neighborhoods with their target average home value, and then they go drive those neighborhoods or send mail campaigns or any other number of lead gen methods.
Looking up records can sometimes require an in-person visit to the county courthouse, and if that's the case, this won't be an option for you as a virtual wholesaler.
Instead, you'll probably want to start by identifying a few homes that are in the right price range using Craigslist or Zillow, and then send direct mail campaigns to the neighborhoods those homes are in OR use Facebook ads to target nearby homeowners.
If you want to take a more aggressive approach, using online advertising like this is a great way to get your offer as a wholesaler out to potential sellers — including those who haven’t listed their property yet.
Platforms like Facebook and LinkedIn allow you to target people by location, demographics, interests, and more. This type of advertising opens up opportunities that other options simply don’t.
You'll need to spend some time learning how to advertise on those platforms, but the upside is massive if you are willing to put the work in.
2. Run The Numbers On Your Potential Deal
Once you begin hearing back from homeowners, it's time to run the numbers.
What is the maximum amount you can purchase this property for and still make the wholesaler fee you are looking to get from it?
The official term for this amount is the Maximum Allowable Offer (MAO).
But to get this number, you need to first figure out five other numbers:
After Repair Value (ARV) - how much will the home be worth after it’s repaired?
Buyer Profit - how much is the buyer expecting to profit from the home?
Repair Costs - how much will it cost to get the home into sellable condition?
Fixed Costs - what additional costs are there, including holding and transaction costs?
Wholesaler’s Fee - how much are you seeking to make from this deal?
Once you know these numbers, you can plug them into our MAO equation to determine the max amount you can offer for the property.
Here’s the equation:
MAO = ARV - Buyer Profit - Repair Costs - Fixed Costs - Wholesale Fee
We break down these numbers in more detail in our guide to traditional wholesaling.
In traditional wholesaling, you often want to be partnered with a local realtor who can send homes your way while you send clients their way when a below-market deal can't be reached.
This will be even more important for you as a virtual wholesaler, as you really want to have someone on the ground to help you verify the status of the home as you project numbers for the deal.
Online pictures can't really be trusted. There are plenty of deals that LOOK great online but don't accurately represent the condition and value of the property.
3. Negotiate A Purchase With The Owner
Once you’ve found the seller and conducted your due diligence, the next step is to present your offer to the homeowner and kick off negotiations.
The negotiation process for virtual wholesaling generally pans out like it does in any industry. You make an offer. The seller presents a counter offer. And so on, until eventually you meet somewhere in the middle.
So how much should you offer?
There are a lot of things that can impact how well you do in negotiating the purchase price:
How motivated the homeowner is to sell
The homeowner’s expectation of what they’re property is worth
Your rapport with the homeowner
Your overall confidence and likeability
If you’ve established a good rapport with the homeowner, simply go ahead and offer them your MAO. In most cases, however, it’s best to leave some wiggle room and make an opening offer that’s anywhere between $10k - $30k below your MAO.
Once you’ve both agreed on a price , you’ll need to fill out a purchase and sale document. Keep in mind that this is different for each state, and the form you fill out will vary depending on where your buyer is based.
Your attorney should be able to help you with this documentation, or you can simply hop on Google and find the relevant forms for each state. When it comes time to send the forms to the buyer, you can either have them fill out the form and sign it electronically, or have them print it, scan it then send it back to you via email.
At this point, you’ll also need to decide whether to do an Assignment or a Double Closing contract.
The type of method you choose to do depends on how comfortable the buyers and sellers are with wholesaling, and the degree of anonymity for all parties involved.
With the Assignment method, you sign a contract with the seller, with your name listed as the buyer. You then assign the contract to the cash buyer, along with your assignment fee. In this scenario, you never actually own the property.
However, the drawback of this method is that everything is transparent — including your fee.
For this reason alone, most experienced wholesalers generally opt for the Double Closing method instead.
When you do a Double Closing, you purchase the home and do an immediate sale on the same date.
4. Find a cash buyer
You don't need to find a cash buyer until you have a purchase contract to offload, but most experienced wholesalers will find their cash buyers first and look specifically for properties that fit what those buyers are looking for.
We recommend the latter method, but whether you do it first or last, you will follow the same process.
The simplest method for finding a cash buyer is to to get a local realtor to help you identify cash purchases in the target area over the previous 6-12 months.
Investors who pay cash for properties often do so frequently and are looking to do more. If you can bring a quality deal to one of these buyers, it sets the groundwork for an ongoing relationship.
Once you have the buyer and seller, it's just a matter of crossing the t's and dotting the i's and collecting your wholesaling fee.
You’ll receive the money directly if you opted to do a Double Close; otherwise the title company will distribute your fee to you.
Additional Considerations For Virtual Wholesaling
One of the biggest differences between virtual wholesaling and traditional wholesaling is in how much you need local personnel.
With virtual wholesaling, you really, REALLY need a good team on the ground in your target area.
Here's who your local team should include:
Local realtor. You absolutely need to work with someone who knows the target market and can provide the same realtor help that you depend on when closing deals in your own local area.
Local title company. These agents ensure that you’re buying a legitimate piece of real estate. They also help facilitate the title transfer from the seller to the buyer. It’s important to find someone you can trust, so ask your current agent (or your wholesaling community) if they have any referrals.
Local attorney. Each state has different laws and regulations when it comes to closing property deals. A local attorney helps facilitate the transaction so everything runs as smoothly as possible and you close the deal as quickly as possible.
Local partners. One of the best ways to scale a wholesaling business is to partner with other real estate investors and split a higher volume of payouts. This can be especially powerful and even essential when attempting virtual wholesaling. If you can specialize in a certain part of the process via online methods, you can work with other investors and even other wholesalers who are doing other parts of the equation locally.
The Benefits Of Virtual Wholesaling
Now that we've covered how to wholesale virtually, let's review why.
There are some great reasons to choose virtual over standard wholesaling.
It allows you to avoid unfavorable markets.
Sometimes your local market just isn't great for wholesaling.
Having the ability to hit a different market where the conditions are more favorable has a ton of upside. You can take advantage of real estate deals in different states that offer a better return.
In short, it allows you to go where the opportunity is — rather than waiting for the opportunities to come to you.
You can close deals from anywhere.
People are increasingly tapping into the advantages of remote work, but traditionally, real estate investing tends to bind you to the area where your portfolio is.
Not so with virtual wholesaling. Everything can be done from your laptop or phone, and you can get all the benefits of both remote work and real estate investing at the same time.
It forces you to build processes that can scale.
Wholesaling virtually forces you to find ways to outsource parts of the wholesaling process. There is no way to be there personally, so you have to find ways to delegate or outsource to other people.
That might sound like a challenge rather than a benefit... and it is... but delegation and outsourcing are what separates millionaires from everyone else. You don't make seven figures in a year by doing everything yourself.
If you can build a system that works without you in one market, you can do the exact same thing in second market, and then a third... and so forth.
In other words, it sets you up to scale, and scaling is really the name of the game when it comes to wholesaling.
Learn How To Scale Your Virtual Wholesaling Business to 50+ Deals Per Month
Real estate investing can be approached in one of two ways.
Hustle hard for a bit of side income
Build a system that catapults you to seven figures
There's nothing wrong with looking for some side income, but if you are the type of person who is serious about building major wealth through real estate, then you'll want to take a few minutes to check out our case study on how Josiah Grimes scaled his wholesaling business up to 50-80 deals per MONTH.
That's not a typo.
Josiah built the #3 wholesaling firm in the US, and he breaks down exactly how in the video below: