Wholesaling Tips for Finding & Protecting Deposit Money
One of the top challenges of real estate wholesalers today is finding all the deposit money they want as well as the need to protect that money once deposits are made.
Whether it is coming up with the initial earnest money deposit for the first real estate deal to break into investing or trying to find enough money for multiple deposits to make more offers and scale quickly to take advantage of the current housing market, this is one of the top frustrations listed by aspiring investors.
At the same time protecting those deposits is a grave concern of all real estate investors and for many seems to becoming tougher and tougher to do as some real estate markets move back into ‘seller’s market’ territory.
So what’s the answer for overcoming these challenges and fears to close more deals?
3 Wholesaling Tips for Finding More Deposit Money:
1. Expanding Resources
Those that can’t save enough or are already spread thin due to other cash demands can find help from quite a number of other resources to build up the capital required to put out more offers and make the corresponding deposits.
Some ideas include:
- Borrowing from friends and family
- Credit cards
- Secured lines of credit
- Bridge loans collateralized by other properties owned
2. Smaller Deposits
How about simply shrinking the amount of money you need for each deposit. Some sellers and agents are very demanding. However, HUD homes usually only require $500 to $1,000 down. Alternatively deposits can often be broken up into two or three payments.
3. Get it From Your End Buyers
The savviest wholesalers even go as far as getting their deposit money from their end buyers upfront so that they don’t have to put anything out of pocket.
3 Wholesaling Tips for Protecting Deposit Money
1. Who You Deposit With
As the market continues to improve and confidence grows sellers and their agents will increasingly look for ways to seize deposits and simply move onto the next buyer. This is a serious issue and while it may seldom actually happen, it needs to be expected, prepared for and the risk minimized. The best defense is refusing to ever make deposits with anyone except for your own real estate attorney or title company. At least they’ll be fighting in your favor.
The more contingencies that you can squeeze into your contracts, the more protection for your deposit. The more outs you have to use, the better you will be covered and have the law on your side in case you do need to bow out. Do your homework and get in as many as you can get away with, without losing the deal to another buyer.
3. Back Up
Everything and anything that can go wrong sometimes does. The chances that something will go awry in your transactions can be greatly minimized by simply closing as fast as you can. Despite best intentions and preparation sometimes financing and end buyers will fall through for a variety of unforeseen reasons. So have a backup financing source and buyer in place to fund your deal so that you’ll never be caught short.
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