There are a lot of ways to make money with real estate. I prefer to focus my efforts on techniques which have the least amount of cash needed (low risks), don’t require buying the house, and yet they have big paydays which happen within 30 to 60 days.
There are only two strategies which qualify:
2. Highest Bidder Sales
Here’s a brief overview of how a wholesaling works:. You find old, run down, vacant houses – track down the owner so you can get a contract – then sell the house to someone who wants to rehab it. You are in and out in less than 30 days. No cash, no credit, no loans, no contractors. Profits range from $3,000 to $50,000… sometimes more. Wholesaling is a great way to make a lot of money fast.
We have a lot of Premium Training about how to do wholesaling.
But what about all those PRETTY houses in your town? The majority of houses in most markets are NOT wholesale flip candidates. Most houses are not old, run down or vacant. Yet, you can make huge profits with pretty houses too and you still don’t need much cash, no credit, no loans, and no contractors. A Highest Bidder Sale is the best strategy to use for pretty houses but you can use it for wholesale flips too. Here’s how it works:
You find a motivated seller who will sell their house below market. We discuss how to find these motivated sellers in the Premium Training at CashFlowDepot. Sometimes you write a contract to buy their house for a below market price so the seller is cashed out. Sometimes you write a contract to buy the house with seller financing.
You explain to the seller that you are not actually planning to buy the house but instead, you will do an aggressive marketing campaign then hold a two day open house where potential buyers will bid on the property. At the end of a two day open house you usually have 25 bidders.
After the open house, you call all bidders back to let them know what the high bid is and ask if they want to increase their bid. Some will increase their bid, so that becomes the new highest bid. Others will drop out. You keep calling everyone to tell them what the highest bid is and ask if they want to increase their bid. This whole process takes about 2-4 hours. At the end of the day, you have a highest bidder… and several back up buyers too. (Plus you built a huge buyers list)
Buyers absolutely love this open bidding process. Buyers are not negotiating with the seller back and forth and there’s no real estate agent in the middle of the deal. Iinstead Buyers are competing with each other to buy the house. Often auction fever kicks in which helps get the price up up up!
You’d be surprised how many cash buyers there are even for retail sales when you use a Highest Bidder Sale. But, I like to also have a mortgage broker at the house just in case any buyers need to get qualified for a loan.
For a $200,000 house, if I have a cash buyer for $190,000 or a $200,000 buyer who needs financing, I will always go with the cash buyer even though their price is less. Financing sometimes falls apart at the last minute and always takes much longer than a cash sale.
When you have a contract to buy a house with seller financing, you can sell with seller financing too. The process is very similar to what I described above except the buyers fight over who will give you the highest down payment… literally!
Using the example of the $200,000 house above, let’s assume that you have a contract to buy it for $175,000 subject to the mortgage. In the scenario above where you sold for $190,000, if you cashed out the mortgage, you’d make $15,000 in less than a week.
Some CashFlowDepot members are doing 2,3 4 Highest Bidder Sales per month!
That’s a Nice Payday… but it can get better:
If you sold the same house with seller financing, you could advertise the house for sale for $205,000 to the person who pays the highest down payment. You could easily get 10% down, or $20,000. Plus let’s assume the underlying loan payment is $1300 PITI. When you sell, you can get $1500 or $1600 per month payment so you will also get $200 to $300 per month in cash flow.
If you put a 3 year balloon on the note, you will also get an additional payday of about $10,000 when you got cashed out. Or, you could offer to extend their note for an additional 3 years if they pay you $3,000.
So you’d get multiple paydays — $20,000 at closing, $200 a month cash flow for 36 months = $7200 PLUS an additional $10,000 on the back end. You make $37,500!
See how you can make more money when you can sell with seller financing. And you get multiple paydays!
When you sell with seller financing you open up the flood gates of potential buyers too. So you will have more buyers fighting over who will buy the house. Using a Highest Bidder Sale, you get more buyers for your wholesale flip deals AND you’ll sell for a higher price if you offer seller financing. A Highest Bidder Sale works great for wholesale flip deals too!
One time I got $50,000 down for a property worth $165,000. Buyers were fighting over who would give me the most money. We closed 3 days after the Highest Bidder Sale.
Getting paid fast is much better than a s-l-o-w rehab project that sucks up cash (and your energy) every day.
At CashFlowDepot we have a ton of PREMIUM TRAINING about wholesale flips and doing highest bidder sales too. You can get answers to all your questions in our private coaching forum too.