One of my favorite parts of being a Real Estate investor is when the phone rings with motivated seller calls. For me each call is an acknowledgment of my marketing plan. It also marks the start of a new adventure – like a hunt for buried treasure.
If you’ve done any of your own marketing, you know that the vast majority of seller leads will not result in a deal. Sometimes the owner cannot or will not accept your offer. There may not be enough equity in the property to make it profitable. Other times the property just does not fit your buying or wholesaling criteria. Whatever the reason, some deals just don’t fit.
One group of properties that has historically fallen into my “no deal” list is what I call Grandma’s House. These are houses that are structurally sound, clean and well kept. While the properties are dated, they are livable and are often owner occupied. They would even qualify for conventional financing.
I’d always run into trouble with these houses for a few reasons. First, the sellers often had an emotional attachment to their houses. This made negotiation difficult. Second, the up kept condition of the properties made it difficult to justify significant repairs. Lastly, the sellers often spoke to a listing agent who promised them a full retail sales price.
My initial excitement on receiving these types of leads quickly extinguished when I was consistently unable to negotiate a reasonable selling price for the property. While I could often get a significant discount from the retail sales price, it was nowhere near where my numbers needed to be.
So for the longest time, I made it a point to ignore Grandma’s House. That’s until I was introduced to Wholetailing.
What is Wholetailing
Grandma’s House properties do not fit the traditional model for an investment property. They fall in the no-man’s land between wholesale deals and retail sales. Wholetailing is a solution for a Real Estate investor to capitalize on these opportunities.
Wholetailing is the process of contracting or optioning a property at a discount, and then using a Real Estate agent and the local multiple listing service to sell the contract for a profit.
The most obvious benefit of Wholetailing is the opportunity to capitalize on your existing resource of unused leads. Marketing costs remain the same, but profits increase. It’s a “no brainer”.
The reasoning behind listing a property on your local MLS is obvious. We want to find buyers willing to pay more than the investors in your buyer's list. These people include two principal groups: investors and retail buyers.
Not all investors have the same criteria when purchasing properties. No matter how big your buyer’s list, it’s unlikely that it will include everyone searching for an investment property in your area.
The retail buyer’s market is an area that wholesalers usually will not touch. These individuals are not going to buy more than one house from you, and they’re more work than an investor. On the up side, these buyers are willing to pay more for the home of their dreams. A lot of them are willing to do the heavy lifting of a handyman special themselves. All they need is a deal on the purchase price.
As a wholesaler, discounts are your business.
Wholetailing a property is a great way to capitalize on those properties that you just can’t seem to do anything with. Find an agent to work through the process with you on the first go-round. The end result will be more deals and more money. So do yourself a favor, stop ignoring Grandma.