Thinking about joining the club of 32 million small business owners by buying an established business? Well, congratulations on taking your first step towards becoming a business owner – research! Do you know the saying “knowledge is power”? That certainly applies to the process of buying a small business. So then, your next step is - keep reading and learn how to buy a business! Becoming a business owner can be both an exciting and daunting prospect.  The exciting part is dreaming about printing business cards and t-shirts, redecorating, and inviting your family and friends to the “under new management” grand opening. The thing is, in order to get to your ribbon-cutting ceremony, you first have to go through several important steps that will ensure that you purchase your new business successfully. Don’t worry though!  We’ve done the research on how to buy a business for you. We’ve identified 5 important steps to take while trying to find a business to purchase. These 5 steps can serve as a roadmap to take you from where you are now – considering buying into a small business – to becoming a real live small business owner. So, let’s get you started on that!

Step 1. Find a Business to Buy

We don’t recommend just Googling “businesses for sale” or "business on sale" and combing through the hundreds of websites that appear in over a billion results. Where do you start, then? Start narrowing those 1 billion search results by answering these 5 questions:

1. What do you know how to do? – Warren Buffet, arguably the top investor of all time famously advised: “Never invest in a business you cannot understand.” Prioritize businesses that operate in a sector that you know and understand, or which require skillsets that you already have.
2. What do you like to do? – It’s easier to succeed in business if you like going to work. Do you like interacting with people all day? Or do you prefer working from home?
3. What do you want from the business? -  Is your goal to earn a living for yourself? Is it to build up an existing business so that you can sell it at a really high price? Are you buying an existing business for side income?
4. What will you do in the business? – Do you plan on running the business full time? Or, are you hoping to hire a manager and be relatively hands-off? How much time are you willing and able to commit to the business?
5. What can you pay to buy a business? – We’ll discuss how to budget for buying a business later, but before you start searching for potential businesses to buy, make sure you have an idea of what you can afford or what financial risk you can bear.

In addition to these 5 key questions, in our article 41 Essential Questions to Ask When Buying a Business, questions 29-35 provide some ideas for what to think about before you start looking to buy a business. Make sure to check them out! What's next? Once you have a better idea of what kind of business you want to buy and why it’s time to start searching for a business. But where, if not Google? Here are some common ways to find small businesses for sale:

• Business brokers
• Online business marketplaces (like UpFlip's marketplace)
• A business you are currently employed in
• A business you frequent a lot
• Newspaper and online ads
• Friends' and associates' word of mouth
• Commercial real estate agents
• Trade associations

Step 2. Determine Your Budget and Financing Options

Many of your answers to the questions in step 1 will help you to think about what your budget for buying a business should be and decide realistically what you can afford, taking into account that running a small business presents a set of financial risks. So, you'll need to take stock of your current and future financial picture. This is the first step in starting to think about how you will finance a business purchase. Budgeting is a bit of art and science, so it's time to get creative! You will want to create a personal budget that takes into account how much you plan to spend on a business (a down payment plus monthly payments), what kind of salary or income you hope to gain from the business, any income you will lose after leaving your current job, upcoming big expenses (like a car purchase), business starting expenses, and so forth. Need more guidance in figuring out your financial situation? Here's a guide to making a personal budget. In the budgeting process, make sure you begin preparing financial information to present to a seller or bank who will want to determine your creditworthiness. You can obtain your free credit reports here. You'll also want to prepare bank statements to show proof of funds, get your past tax returns together, and think about what collateral if any, you can pledge in exchange for financing. Once you better understand your financial picture, you can turn your sights to financing options. So, what are they? There are generally 3 categories of financing used to buy a small business:

• Seller financing
• Business purchase loan
• Alternative financing

1. Seller financing from the business owner

Sixty to ninety percent of small business loans involve some degree of seller financing. With this type of funding, the business owner provides a loan to cover some or all of the purchase price. The buyer provides a down payment and pays the seller back with installment payments that include interest. There are many advantages to seller financing, which is why it's such a popular funding source for the purchase of small businesses. This method of financing allows a lot more room for negotiation on financing terms such as the amount of down payment, interest rate, and monthly payments. Tip: The willingness of a seller to finance a sale, and the degree to which they are willing to finance you, is a good indicator of how much they believe in the business and how confident they are in its ability to generate enough cash flow, if not to pay you a big salary, at least to pay them back over several years.

2. Business purchase loan from a bank

Since a seller is unlikely to finance the entire purchase price, many folks who are buying an existing small business will consider taking out a loan to fund the difference. One of the most popular sources of loans to buy a business is the Small Business Association (SBA) loan program. The SBA provides a variety of government-backed loan programs to small businesses that are executed through approved banks and lenders. Contact your bank to find out if they are an SBA lender. If so, they can guide you through the requirements and the process. Tip: The Small Business Association provides a wealth of information, classes, and supportive resources for free that can assist you with buying an existing business. The even have incentives for women businesses. It's a good idea to check it out. What about other types of bank loans? It's generally more difficult to get a traditional bank loan to fund the purchase of an existing small business. In some cases, however, when the price paid is very close to the value of assets and equipment of the business, a bank may be willing to lend against the value of the business assets that are pledged as loan collateral. One other bank loan option, if you are sure about the viability of the small business you want to purchase, is a home equity loan. For these loans you borrow up to 80% of the value of your home, pledging your home as collateral. While somewhat risky, the advantage of these loans is that they typically have longer payback terms than personal loans. Tip #1: The SBA has a loan program specifically for women-owned businesses. You can find more information on it here. Tip #2: If the business you are buying an existing small business that has a bank credit relationship already and if your creditworthiness is good, you might want to try and obtain a loan from that business' bank. The bank will know the business you are purchasing more intimately and so might be more receptive to lending.

3. Alternative financing methods

There are many reasons to explore alternative methods of financing including a lack of immediate funds for a down payment, poor credit, or simply because you want to diversify your financial obligations.

Owner buyout

If you are currently working in a company that you'd like to own, an owner buyout plan may be an option. A little-known secret is that the majority of business owners (aka Baby Boomers) do not plan their business exit, yet they expect the sale of their business to fund their retirement. What's more, the majority of existing business owners have their personal assets locked up in the business. A study by the Exit Planning Institute found that most soon-to-retire business owners have trouble selling their small business because they haven't planned for it, as the following results from the study show. What does this mean for you? Well, particularly, if you are planning on buying a small business with no money in the bank to commit, you might consider trying to buy out your current employer or targeting a company to buy where you can work while you buy out the owner.

Lending platforms

Technology has enabled new types of personal and business lending platforms. These platforms offer an alternative to traditional banks. For a more complete list of lenders, check out UpFlip's top loan lenders to get a loan even if you have bad credit.

401k loans

If you've been squirreling away money into your retirement plan, you don't have to forego the opportunity to be a business owner. Under current rules (as of January 2024) you can borrow up to $50,000 from your retirement account or 50% of the vested value, whichever is less. For more information on taking money out of your 401k, read this Investopedia article.

Friends and family

Remember Apple was started in a garage? We now live in a world of Go Fund Me and career entrepreneurship. Don't underestimate the power of asking friends and family to help you buy into an existing business. The fact that you will be personally held responsible to pay them back is also a great way to make sure that you don't take unnecessary risks in buying a business.

Credit cards

Using credit cards to fund a business venture is the definition of a "shoestring budget". You're more likely to use this expensive alternative to fund business expenses once you're the owner. However, if you're short $10,000, even $20,000, on the sale price credit cards could be your last financing resort.

Step 3. Do Your Due Diligence

OK, you've thought about what kind of small business you should buy and how much you can afford. Then you've identified an existing business that you want to own. Now what? How on earth do you buy a business? Well, buying a business is a little like dating someone for a long time before putting a ring on their finger. You've got to take the time to get to know them and uncover and resolve any, err, issues before you put a ring on that finger. As we said earlier, you need to do your research. Due diligence is a fancy word for research. There's a lot of research that goes into evaluating an established business for sale. Don't let it put you off though, it's actually a good thing! Due diligence also affords you the time and opportunity to get to know the ins and outs of running your potential business before you sign on the dotted line. As they say, time is money. The time you spend researching a small business for sale that has caught your interest will either save or earn you money down the road. Another reason to make sure you do enough due diligence? People lie (gasp!) According to Andrew Cagnetta, President of Transworld Business Advisors:

"Approximately half of all deals fall apart during the formal due diligence stage, and one of the most common reasons this happens is due to the buyer uncovering an issue which the seller did not disclose earlier."

What to look for when buying a business

There are several critical factors to investigate when buying an existing business. We outline the major items to check off here.

Financial history

We previously mentioned that 65% of small business owners have never had their financials audited. That means they have been running the business books according to their own rules. If the business has a bookkeeper or accountant, have them take you through the financials. To be sure that you get an honest view of the business performance, you'll need to see several years of financial records including cash flow statements (most important), balance sheets, accounts payable and receivables, and debt. Look for patterns in the financials such as increasing debt or increasing receivables that might signal trouble. Are sales and net income growing or declining? Likewise, look for opportunities to better manage the financials once you take over to increase the value of your investment.

Stakeholders

Those with a stake in the business include employees, a customer base, suppliers, landlords, financiers, etc. Look at employee files including contracts, benefits, and compensation. Talk to employees to learn more about the business and identify issues. Talk to suppliers and assess if they are reliable. Most importantly, look at the customer base of the small business. This will be your bread and butter, what pays your bills. Is the customer base growing or declining? What are customers saying on social media? What kind of reviews do they give?

Legal

Make sure to investigate if the business has had any lawsuits. In addition, for any major contracts, you might want to have a lawyer review them to make sure they are sound. For example, if the business has a lease that forbids someone else from taking it over without the landlord's permission, you won't want to sign a sale agreement until you have that permission in writing and with terms you can accept. Other legal issues to watch out for include liens against property, business license requirements, regulatory and compliance requirements, and violations thereof.

Required seller disclosures

Speaking of sellers not disclosing information, there are Federal laws that mandate certain disclosures by sellers. It's a good idea to familiarize yourself with these. This video by the Federal Trade Commission explains the requirements of the "Business Opportunity Rule" which mandates business sellers to provide a one-page disclosure document with specific information to buyers, for example, to support any earnings claims about the business.

Other important information to investigate

The more you dig, the more questions you ask, the more parts of the business you research, the more educated you'll be about the next two steps, and about running a business in general. So here are some other factors to nail down in your due diligence:

• Buying assets vs. business entity - Are you buying just the corporation, partnership, or LLC? Which assets/equipment come with the business purchase and what are they worth?
• Owner involvement - Is the owner willing to remain for a while after the sale to teach you the business?
• Key employees - Will they stay and under what conditions? Do you want them to stay on? Can you let them go?
• Taxes - What items might the business allow you to write off? For what taxes is the business liable?
• Insurance - What kind is required and what does the business currently have? Will you be able to take over the policy?

Feeling like you might need a checklist at this point? SCORE, a national organization that provides free mentoring to small business owners, has a downloadable checklist for what to investigate when buying a business. You can download it here. Tip: If at any point in your due diligence the seller cannot provide you with definitive information and answers or does not want to do so, that's a good sign that you should move on in your business search. Remember there's a 50% chance that the seller is not disclosing something you should know!

Step 4: Determine a Value for the Business

After you've taken sometime poking around under the hood of the business, you'll have a much better idea of what's there and what it might be worth. You should also have a better idea of what you're willing to pay. You're going to use this information to decide on your offer price.

How to evaluate a business to buy

Determining a fair value or price at which to buy a small business is, like budgets, a bit of art and science. It's important to understand how to value a business because chances are the owner may not have done any official valuation of the business, although they most certainly will have a sale price in mind. For an in-depth guide to evaluating a business, we recommend you read our comprehensive guide here. In this guide, we outline the potential challenges of valuing a small business, and describe several different valuation methods, weighing the pros and cons of each. We also provide an example to use as a reference. Don't have time to read all that? Here's the super summary of five approaches you can use to value the business you want to purchase.

1. Asset-based method - This is what it sounds like. The value is determined by adding up the value of all company assets. Asset value minus liabilities equals company value.
2. Revenue Method - This method of valuation simply relies on taking the top-line revenue or gross sales and applying a multiplier to determine the maximum value of a small business. The multiplier can be less than one, or up to 2x typically. It will depend on the industry, economic environment, and business performance.
3. Discounted Cash Flow (DCF) - DCF is one of the most heavily used methods to value a business. This method takes the business’s projected future cash flow and the time value of money to determine the current value. The concept of DCG is best expressed by Aswath Damodaran, author of the book The Little Book of Valuation:

"...we observed that the value of a firm is a function of three variables—its capacity to generate cash flows, its expected growth in these cash flows, and the uncertainty associated with these cash flows."

1. Income Stream Valuation - This method of valuation differs from DCF in that it looks at cash flows over a specific period of time (rather than projecting them out into the future). Alternatively, it uses other income streams such as net profit, earnings before taxes, operating profit, or earnings from a specific period only. These are then discounted at a rate reflecting the business risk.
2. Range of Values - This method combines each of the previous methodologies and tries to derive an agreed-upon valuation through triangulation. With this method, the business owner or buyer can add other factors that affect business value. For example, if an owner knows that a small business has been lacking, he/she can indicate in the final value that with better management, the company could be making more and hence increase the value.

Do numbers freak you out? If after reading about valuation methods, you're feeling a bit unsure about the whole process, you may want to enlist the assistance of a professional appraiser. If you can't afford one or want help, a great option again is SCORE. SCORE provides free business mentors that can assist you with all aspects of buying and running a business including valuation.

Step 5: Create a Business Sale Agreement

Drum roll, please. If after all that due diligence and number crunching, you've agreed on a sale price with the business owner, you're ready, to use the previous dating metaphor, to put a ring on it. You do this by executing a business sale agreement. The sale agreement should capture every detail of the sale so that the seller can transfer ownership to you on the closing date without issue. Yes, it sounds complicated and it is. This is because you want to protect yourself and make sure to cover all the potential risks in the agreement. So, if you can afford it, it's a good idea to have a lawyer help you draw up and review your agreement. Don't like paying lawyer fees? If you have some degree of trust in the business owner and feel pretty confident about the transaction you can access templates for sale agreements from a variety of sources such as LawDepot.com, nolo.com, and LegalZoom. Following is a high-level outline of what should be in your sales agreement.

• Who is selling the business
• Who is buying the business
• What the business is - assets or entity, and what assets are included.
• Sales price - for assets such as inventory, equipment, and receivables.
• Liabilities - who is responsible for pre-sale debts, lawsuits, liens, back taxes.
• Payment terms - deposit required, payment to be made at the closing, promissory note, other seller security.
• Liabilities - how they will be addressed and by whom
• Representations - seller and buyer
• Noncompete agreement - restrictions on the seller
• Seller agreement to stay on - doing what, when and for how long

There are other legal clauses and language that will need to be in the agreement, but the above factors are some of the most important details to outline. In addition to the sale agreement, other legal documents will need to be drawn up including the promissory note (for seller financing), a bill of sale, a lease assignment, and others.

Conclusion

By the time you get through these five steps and have examined the other resources that we've referenced throughout this article, you'll have learned a lot about what it takes to find, vet, value, finance and make an offer for an existing small business that could become your key to success and happiness. So, after reading this, what's it going to be for you: stay in your job, start your own business, or buy an existing one?

Ever wondered how to start wholesaling real estate?

Todd Baldwin started Baldwin Capital by buying new homes and renting them out—then quickly realized he could make way more money with wholesale property. Today he brings in about $15K/month renting rooms and nearly $2 million annually.

Todd explained to us his wholesale real estate strategies that you can duplicate to make millions with just a few real estate transactions per year.

[su_note note_color="#dbeafc"]
By the time you’re done reading this blog, you’ll be ready for your first wholesale real estate transaction. Click on any of the links below to jump ahead.

• What is Wholesale Real Estate?
• Real Estate Wholesaler vs. Agent
• Wholesaling Real Estate vs. House Flipping
  
• How to Wholesale Real Estate Step-by-Step Guide
  • Step 1. Build a Solid Buyers List
  • Step 2. Forming Wholesale Real Estate Companies
  • Step 3. Create a Real Estate Wholesaler Website and Related Social Media
  • Step 4. Create a Real Estate Wholesale Contract Template
  • Step 5. Identify Opportunities
  • Step 6. Reach Out to the Property Owner
  • Step 7. Sign a Wholesale Real Estate Contract
  • Step 8. Escrow
  • Step 9. Close the Deal
• Resources for Real Estate Investors
  • Find a mentor
  • Read RE Books
  • Real Estate Wholesaling Websites
• Conclusion[/su_note]

What is Wholesale Real Estate?

Want to learn all about wholesale real estate? Maybe you’ve asked some of these questions: What is real estate wholesaling?, What is wholesaling real estate (RE)?, Wholesale Definition?, Wholesale Meaning? What is Wholesale?, Wholesaler definition?

Real estate wholesaling is the process of finding sellable homes that aren't on the market, negotiating to find a seller, and making a profit by selling to a real estate investor before a certain date.

Real estate wholesaling may be focused on:

• A distressed property
• High profit margin homes
• Pre-foreclosure homes

Todd Baldwin told us:

[su_quote]The main thing you need to close a wholesale real estate deal is a long list of people looking for other real estate investments.[/su_quote]

A real estate wholesaling business is a real estate investing strategy that people will commonly use when they don't have the funds or credit for real estate investing but want to get into the real estate industry.

How is Real Estate Wholesaling Classified?

Real estate wholesaling requires a bit of creativity when it comes to NAICS. Depending on how you operate within the real estate market, you might fall into the following categories:

• 531390: Real Estate Management and Consulting
• 53121: Real Estate Sales and Brokerage
• 425120: Wholesale Trade Agents and Brokers

If you are a licensed real estate agent, you might want to stick with the 53121 NAICS classification.

Otherwise, use classification 531390. Wholesale real estate would fall into the subcategory “other” in the IBIS database. From those figures, we know that this industry’s revenue was nearly $3.7 billion in 2021 and is expected to grow 1.8% per year until 2026.

Major Online Wholesale Real Estate Businesses

You'll find it difficult to find exact data on wholesalers, but these are the largest wholesalers online:

• New Western - by far the biggest real estate wholesaler in the US
• Net Worth Realty - in 21 major cities
• SkyStone Acquisitions - focused on Atlanta, GA
• Core Wholesale Properties - Florida homes to repair
• Arkansas Wholesale Homes - wholesaling real estate in Arkansas

Like Keller Offers, many major players in Real Estate Sales and Brokerage have divisions that are similar to wholesalers and house flippers.

Real Estate Wholesaler vs. Agent

The real estate industry has a variety of views on real estate wholesalers. They are effectively competing with real estate agents because real estate wholesalers pursue home buyers to help them sell homes.

Some agents love the wholesale real estate business because it provides another opportunity to increase their revenue. Todd falls into this category. He told us:

[su_quote]I make a lot more money through the wholesaling process! It’s nearly 100% profit. I’ve made up to $50K in 4 hours.[/su_quote]

Other real estate agents don't like wholesale real estate strategies because wholesalers primarily sell to real estate (RE) investors who are cash buyers looking to drive up local market prices by providing long-term or short-term rental properties.

Todd told us:

[su_quote]I made a commitment when I started renting homes that I would never raise rents on people. Today, I rent some spaces for less than half of the current market value. I still make $700 to $1,300 per room, though.[/su_quote]

Check out our interview with him below.

[su_youtube url="https://www.youtube.com/watch?v=jeO1dIv5k5k"]

Wholesaling Real Estate vs. House Flipping

Unless they’re house flipping, which involves buying and fixing up a distressed property, real estate wholesalers don't actually buy properties. Both wholesalers and house flippers might do repairs before the property sells, but the wholesaler has a much shorter time to find potential buyers.

When the wholesaler sells the property, they will make their profit based on the difference between the contract price + repair value and the fair market value. Flipping houses works the same way but can be a more lucrative business because flippers can rent out the property as well.

Another wholesaler, Santino Fillipelli, does a little bit of both wholesaling and house flipping. He will occasionally be a wholesale buyer if the property looks like something he can repair with one of his construction companies. He told us:

[su_quote]Basically, we look at, first of all, [and ask] 'What are the margins here?' If this looks like it's a property where we're not gonna hit that $50,000 mark but we see that it's a really good area and there's a lot of people coming in, good tourist attraction, basically we say, ‘Let's turn this into an Airbnb.'

But if we say, ‘Hey, we can make $100,000 off this in five months,' that's not bad. We'll take that. So, it just depends. Interest rates play a role as well.[/su_quote]

Benefits of Wholesale Real Estate

A wholesaling business is highly beneficial for several reasons:

1. Can make nearly double what real estate agents do
2. Helps people get out of distressed homes and improves neighborhoods
3. Much lower startup costs than house flipping
4. Home-based business
5. Lower risk than other real estate investment opportunities
6. Can be run as a multiple listing service
7. Can work from anywhere if selling online
8. High profit margin

So, what kind of risks are there when working with distressed properties?

Risks in Real Estate Wholesaling

Some of the risks of becoming a real estate wholesaler include:

• You might not find an end buyer
• Often takes time to become profitable
• Lots of research and math
• Lots of networking (or SEO for virtual wholesalers)
• Difficulty finding motivated sellers
• Inability to gain access to the property
• Fewer revenue options than other real estate investors
• Short contract duration

You might want to consider whether you are a prolific networker. Todd told us:

[su_quote]I like to look for real estate transactions in up-and-coming neighborhoods. Distressed properties may have a low market value, but if the property’s fair market value isn’t likely to increase, it might not be a great deal.[/su_quote]

Like any real estate job, real estate wholesalers rely on their people skills to find and close wholesale deals. Having solid communication skills to win over potential sellers and buyers can be crucial in this business.

How Does Wholesaling Real Estate Work?

If you're wondering how to get into wholesale real estate, consider these basics:

1. Set up a business.
2. Find wholesale real estate opportunities.
3. Reach out to the property owner.
4. Sign a wholesale real estate contract.
5. Find a buyer.
6. Close the deal.

Get ready to learn how to wholesale real estate as we further break down this process.

How to Wholesale Real Estate Step-by-Step Guide

Santino described the process like this:

[su_quote]1. The first thing you wanna do is figure out how your risk tolerance is gonna be. Do you want to pay everything (in) cash? Do you wanna finance it? Where is your money [coming from]?

2. And then after you figured that out, I would begin to look for a deal. I would start out really small and start to leverage.

That would be my best advice to leverage early on. That way you're not risking a lot of your own money. That's the way I started. And for me, that was something that was really great.[/su_quote]

He explained that the leverage he uses to grow his business limits his losses to an original $6,000 investment and a bad credit score.

That's a bit oversimplified because most businesses rely on some extra steps. You'll want to:

1. Develop a list of cash buyers.
2. Form the business.
3. Create websites and social media.
4. Create a wholesale real estate contract template.
5. Identify opportunities.
6. Reach out to the property owner.
7. Sign a wholesale real estate contract.
8. Submit to escrow.
9. Close the deal.

Let’s look at each step of how to wholesale houses and other discounted property listings.

Step 1. Build a Solid Buyers List

A successful real estate wholesaler needs relationships with potential cash buyers. You’ll want a cash buyer who is looking to invest before you start entering wholesale real estate transactions. You'll want to network with:

1. Licensed real estate agents
2. Hard money lenders: Brokers and other people who work with investors
3. Airbnb Superhosts: Check out Ask a Superhost to learn how they operate

Todd explained:

[su_quote]I have a list of 15,000 RE investors that could be potential cash buyers for an investment property.[/su_quote]

Look for people buying properties at places like:

• Real estate professional meetups
• Groups on social media
• Trade conferences

Next, you’ll want to create a business entity to keep your personal finance and business finances separate.

Step 2. Forming Wholesale Real Estate Companies

Before you start trying to approach homeowners of off-market properties, you'll want to form a business as either a limited liability company or corporation with your Secretary of State Office (SOS). This isn't absolutely required, but it will make it easier to find deals if you are a registered professional.

Also, remember to check if you need any local real estate or business licenses. Wholesaling laws vary from state to state, so check with your local business offices.

Do You Need a Real Estate License to Wholesale?

Most states don't require a wholesaler to be a real estate broker, real estate attorney, or real estate agent to get involved in real estate wholesaling, but you will have to describe yourself as a marketing company that helps buyers find, not sell, properties.

The following locations (and possibly others) have written laws regarding real estate wholesaling licenses:

• Oklahoma
• Illinois
• City of Philadelphia

Make sure you check with your local county clerk or business office to make sure there are no other requirements.

Do You Need a Business License to Wholesale Real Estate?

All states have different laws. Some states may require a business license to negotiate a wholesale deal, others may require a RE Agent or Broker License, and others do not require any licensing. You may be required to pay income taxes or business taxes depending on your state. You'll need to check on your state SOS website.

If you are wondering about the real estate agent license, Oklahoma, Illinois, and Philadelphia definitely require one. Other states may create wholesaling laws in the future.

Now that you’re up to date on licensure, one wholesale real estate strategy you’ll want to use is creating a website and social media.

Step 3. Create a Real Estate Wholesaler Website and Related Social Media

Wholesale RE investors will need a website and social media presence to look professional when they're working on a wholesale deal. Without it, how will potential buyers or someone with a wholesale property find you?

When you wholesale houses online, having a website helps you find more cash buyers who can afford the upfront investment with less money going to direct marketing costs.

Todd told us one of the things that makes him different is that he is a social media fanatic. He shares key takeaways so property owners can benefit from each wholesale real estate deal he makes.

Check out our blog on how to build a website to learn how to create your own or hire a website builder on Fiverr.

Step 4. Create a Real Estate Wholesale Contract Template

Every wholesale real estate transaction is effectively two deals: one between you and the property owner and the other between you and the end buyer. Wholesale real estate contracts are necessary for every deal.

You'll want a purchase contract and a seller contract. There are three types of real estate wholesaling contracts:

• Wholesale Real Estate Assignment Contract
• Wholesale Real Estate Purchase Agreement
• Double Close Contract

Wholesale Real Estate Assignment Contract

A real estate wholesaling assignment contract is a contract where the wholesaler sells the right to purchase the house to an interested buyer. It includes a wholesale fee that is in addition to the price the homeowner agreed to sell the house.

You can download a free printable real estate wholesale contract template PDF online. Make sure to consult a licensed attorney in your state to verify that the template you develop is legally binding.

You will need this contract in conjunction with a wholesale real estate purchase agreement contract, which we'll discuss next.

Wholesale Real Estate Purchase Agreement

A purchase agreement is a contract that can be used for wholesale deals between the motivated seller and the wholesaler. The contract will include:

• Seller and buyer information
• Property location
• Purchase price
• Payment method
• Zoning restrictions
• Closing costs and terms
• Prorated and delinquent tax terms
• Occupancy terms
• Access to property terms
• Assignment clause
• Terms of default
• Any additional terms
• Buyer and seller signature blocks

You'll use the purchase contract in conjunction with the assignment contract if other investors will be buying the home. Download our free purchase contract template.

Double Close Contracts

Double closing in real estate investing involves two contracts and two closing costs: One deal is between the homeowner and the wholesaler, while the other is between the wholesaler and the real estate investor.

These are primarily used when wholesaling real estate if:

1. Your profit margin is really high and you want to keep it hidden from the other parties
2. Your state requires wholesaling real estate to use this closing method
3. You do not have a real estate license and the title company requests it

These contracts are basically identical to standard real estate contracts used when buying a home. Real estate agents are not allowed to share closing documents—otherwise, I'd provide a template.

Step 5. Identify Opportunities

Next, you'll want to identify investment property opportunities that you can get under fair market value and sell to cash buyers for a fair price. We asked Santino where to find opportunities and he told us:

[su_quote]…definitely not Redfin or Zillow.

You're probably looking for off-market deals. Some of the best platforms that you can find are Batch Leads, Batch Dialer, or Remine.com.

There are a lot of resources [for] being a real estate agent as well that you have to find off-market properties, so there are both ways.[/su_quote]

He went on to tell us what he looks for in the way of profit margins:

[su_quote]Anything over $50,000 and up. So, if we (do not have) at least a $50,000 profit margin, it's probably not the deal for us.

Or we'll take it, and if it has more of a long-term potential or it's in a really good downtown area, we'll take it and we'll turn it into an Airbnb. And we've kind of switched from long-term rentals to more short-term because they've been way more profitable.[/su_quote]

Establish Your Risk Tolerance

While real estate wholesaling is lower risk than other ways a real estate investor might invest, there are still risks in any real estate deal. You might struggle to attract sellers, or there may be low liquidity to buy houses depending on how the market is doing.

A house that needs a new roof and foundation presents a greater risk than a house that just needs a new air conditioner. Remember to price that into your offer. An air conditioner might justify a $20K to $30K discount, while a new roof and foundation could mean your offer should be for the land value minus demo costs.

Step 6. Reach Out to the Property Owner

Next, you'll want to reach out to the property owner. You can call them, run direct mail campaigns, or reach out in person. Santino told us you'll be a successful wholesaler:

[su_quote]…if you're willing to pick up a phone and knock on a door. The phone's a little bit faster, but knocking on a door, meeting someone face to face and say[ing]:

‘Hey, have you ever thought about selling?’

Or

‘You know, I'm in the neighborhood. Just saw your house, I really love it.’[/su_quote]

Some will be interested and some people won't.

Be prepared to offer them a real estate deal if they show interest. Most real estate investors expect to pay around 70% of the after repair value (ARV) when flipping homes, which means you'll need to calculate:

1. After repair value (use comparables in the area)
2. Cost of repairs
3. Maximum allowable offer (MAO)

The repair value is based on the cost of a contractor or the cost of parts and the time to complete various upgrades. The maximum allowable offer will be equal to:

(70% x After Repair Value) − (Cost of Repairs) = MAO

Let's use an example of a $300,000 market value that needs $20K in repairs.

With that in mind, the highest offer you would want to make the homeowner is:

(70% x $300,000) – $20K = $190K

Anything more than $190K and you're unlikely to make a profit. But if you can negotiate to get the seller to accept a price of $140K, you'll definitely make a nice profit.

Step 7. Sign a Wholesale Real Estate Contract

Once you have agreed upon the terms of the offer, you'll need to get it in writing with the homeowner so you can reach out to real estate investors to find a buyer.

Step 8. Escrow

This stage of wholesaling real estate will be handled by a title and escrow company. The title company will make sure that any liens and tax defaults are identified. They make sure that the deal is ready and that everything goes smoothly for the homeowner, the contract seller, and the end buyer.

Step 9. Close the Deal

After everything has been evaluated, there are closing costs when buying houses. They range from about $1,500 to $7,000 without taxes and can be as high as $30,000 with taxes. Rocket Mortgage has a great article on closing costs.

Once the deal has closed, the homeowner gets the money, you get your wholesale fee, and the buyer has a new property.

Now that you know the process, there are a variety of wholesale real estate resources you may wish to consider.

Resources for Real Estate Investors

Santino emphasized the importance of increasing your knowledge in the industry to maximize your results. Some of the ways you can increase your knowledge include:

1. Find a wholesale real estate mentor.
2. Read wholesale real estate books.
3. Follow wholesale real estate websites and their trends.

Let's look at each of these.

Find a Mentor

If you are new to exploring how a wholesaler makes money, you'll want to find someone with experience to help teach you the market. While wholesaling doesn't require significant capital, the more upfront capital you have, the easier it will be.

If you can interact with someone who has already developed a process, you will learn how to do wholesale real estate faster. Some places you can find RE wholesaling mentors include:

• Facebook groups: Find wholesaling groups.
• Real estate professional organizations: The National Association of Realtors (NAR) has a list of professional organizations, and many have local chapters with meetups.
• Check out our blog on how to find a mentor.

Books About Wholesale Real Estate

This section contains sponsored Amazon links that earn UpFlip revenue when you make a purchase.

Check out some of the popular books for wholesale real estate including best-sellers like:

• How to Wholesale Real Estate: Learn ways to get into real estate wholesaling without money. Find it on Amazon.
• Real Estate Finance & Investments: The 17th edition of this textbook by William Brueggeman and Jeffrey Fisher teaches strategies used in real estate investing.
• 21 Ways To Find Off Market Real Estate: Learn marketing strategies like YouTube, SEO, mailers, remarketing, and other strategies to find real estate that isn’t listed.

Check out other popular books about the real estate wholesaling process.

Real Estate Wholesaling Websites

Looking at what the industry is doing well and what it is doing poorly can also be highly beneficial. Make sure to check out websites for real estate wholesaling to get a better idea of what other wholesalers are doing. Here are a few to check out:

• Real Estate Investing Websites: Builds websites for RE investors
• AssetColumn: Wholesaler and flippers market
• REI Kit: List of sites and groups for RE wholesaling and house flipping

Conclusion

Once you start looking, you'll encounter a ton of resources for wholesale real estate investing. You just have to decide you want to get into it, build a network, and close some deals. Once you build a little capital, you can start doing more advanced deals like home flipping or fixing up and renting Airbnbs.

What aspects of the real estate market would you like us to write more about?

It is tough to find great information on how to get clients for a cleaning business. There are plenty of Facebook scammers, pay-per-click advocates, SEO “experts,” CRMs, and people trying to sell us a bunch of nonsense. Fortunately, we found Chris Mondragon! He owns Queen Bee Cleaning Service, and has found a lot of marketing, technology, and strategies to find clients. He’s sharing all the lessons he’s learned through trial and error, hard work, and a few mistakes on his way to making $1.5 million in one year.  His strategies will help you book clients faster. He'll share ways to get cleaning clients including:

• Where to include your branding
• Software that helps get cleaning jobs
• Ads that get clients for a cleaning business
• Scripts for a successful cleaning business

Get ready for 21 proven strategies that get cleaning clients.

 Tip #1 Always Start with a Marketing Plan

Marketing is a huge part of finding clients. Without it, most businesses struggle to succeed. You'll need a marketing plan to keep you on track. There are a lot of moving pieces, and you’re sure to forget something if you don’t create a plan to drive what's important to you. Chris provides an example in his business plan presentation. It’s a single page but easy to follow: [su_note note_color="#dbeafc"]

• The sales process will begin by generating leads through our marketing campaign ads on Google, Facebook, and Yelp.
• We feel confident that the leads are more likely to be impressed with our professional and responsive customer service. 
• For clients over the phone, we will quote them a price. We will explain in detail why our service is priced a bit higher than most.
• Queen Bee Cleaning Service will explain all the different cleaning systems and what the customer should expect.
• The conversation will leave the prospective customer with the impression that Queen Bee is indeed different from the run of the residential cleaning services and that the price differential is justified.

[/su_note] While a marketing plan is a great start, you'll also want to build a distinct brand.

Tip #2 Target Marketing

Make sure to narrow your target market as well as you can. Research the wealth distribution of neighborhoods if you're doing Airbnb cleaning. If you are trying to find how to get commercial cleaning clients, narrow your search to specific types of businesses.  For example, you might want to clean a family business, or you might want to focus on cleaning banks. We discuss a lot more about how to get clients for a commercial cleaning business in our blog about how to get a cleaning contract. Check out the commercial cleaning blog. Find out how your name can help you find clients for a cleaning business.

Tip #3 Win with Your Name

Your name conveys who you are. The words you use matter. They have connotations and dual meanings, and when they are combined with other terms, different images come to mind. Let’s look at Queen Bee Cleaning Service as an example. What do you picture when you hear the word queen? How about the word bee? Now, when you combine them into Queen Bee, does it take on other meanings? For me, when I think of Queen Bee, I think of the top of the hive, the best of the biz. Then Cleaning Service tells us what business.  We have more great advice in our blog about cleaning business names. Check it out!

Tip#4 Branding a Cleaning Business

You’ll want to make sure to get a logo and put it on the following items:

• House cleaning business cards
• Car magnets
• Apron
• Shirts
• Website
• Social media
• Invoices
• Print materials

Check out the Queen Bee Logo: Visible branding makes your cleaning service stand out to potential customers. Your branding should be on everything your company does. You want the customer to instantly know what company you are when they see the logo. Next, you'll want to have your cleaning prices ready so you can use them in other steps. [su_note note_color="#dbeafc"] LEARN MORE: If you haven't already check out our blog about how to start your your own cleaning business. [/su_note]

Tip #5 House Cleaning Prices

Before thinking about how to get your first cleaning client, you’ll want to have prices put together in a way that is easy for clients (and later employees) to understand. Chris has a separate price list for house cleaning customers and Airbnb clients because they need different services. He also offers various add-on services from which his target audience can choose.

Tip #6 ClickFunnels Built for A Cleaning Company

In our interview with Chris, he told us he uses ClickFunnels and ActiveCampaign to assist with his marketing needs. He has recently changed to HighLevel because it replaces both software and saves nearly $1,800 to create email offers and campaigns to attract customers.  Having well-defined marketing funnels is a crucial part of how to market your business. If you have different segments, you’ll probably want a separate funnel for each type of cleaning service. Potential clients for an office cleaning company will have different needs than residential cleaning customers. Your funnels should be built to make it easier to get clients. If they don't speak to the target market, they won't work. You'll need email templates in your funnels and Chris shared some with us.

Tip#7 Email Templates for a Cleaning Service

Have response templates ready for common and predictable emails. That way, you can provide prompt service without putting much thought into it. Chris has templates for the following types of emails: [su_note note_color="#dbeafc"]

1. Airbnb Cleaning Quote
2. Bad Service Apology
3. Breakage
4. Cancellation Request
5. Deep Cleaning Quote
6. Difference Between Services Questions
7. Move-Out, Move-In Cleaning Quote
8. Office Cleaning Quote
9. Price Increase Email
10. Recurring Cleaning Quote
11. Termination of Services

[/su_note] I can’t include them all here, but I can hook you up with one of them today.  The example below is meant to be used with CRM and email automation. Check out how he responds to customer requests who want deep cleaning quotes:  You can get the rest of the templates from our cleaning course. Sign up now The occurrence of “${words}” means that this is pulling from a spreadsheet or CRM to provide the information. It helps automate emails. Just make sure to leave some time between receiving an email and responding with automation. Make sure to remove the red asterisk if you copy and paste into your system. Some people don’t like automation and may take offense if they get a response unnaturally fast. Make sure to have a few minutes delay. Are you ready for another way to get clients?

Tip #8 Google Business Profile

If you aren’t already familiar with Google Business Profile (Formerly Google My Business), it’s a service Google offers that helps cleaning businesses get clients by displaying them prominently on Google Search and Google Maps. You have to input your business information, then wait for them to send you a postcard in the mail. You can start adding all your information while waiting for the postcard. Once you put the code from the card into the website, your business is authenticated and shows up in search results (like Queen Bee above). Chris told us: [su_quote]Your visibility will be significantly reduced outside of a 20-mile radius, regardless of the service areas you list.[/su_quote] Chris is full of all kinds of unique cleaning business ideas. Watch our interview with him below to hear how he runs his company. [su_youtube url="https://www.youtube.com/watch?v=d4Iip7BHXwg"] I’d use a 20-mile radius as your maximum service distance, but you could use an even smaller radius.  Chris has a complete optimization guide he’ll share with people who take the cleaning master course. You don’t want to miss it. Any local business could use the information he shares for great results. In addition, Chris offered some input on direct mail and door hangers.

Tip #9 Direct Mail and Door Hangers for Cleaners

Direct mail, door hangers, and cleaning flyers should be part of the answer for how to advertise your cleaning business. Chris told us: [su_quote]Every house we clean, we put a door hanger on three houses in each direction.[/su_quote] If you clean three houses per day, that's another 18 people who can become potential customers. Just be careful in gated communities. I’ve seen companies banned for doing door-to-door marketing in some neighborhoods. 

Tip #10 Facebook Can Help Get Cleaning Clients Fast

Facebook is a great social media platform for cleaning companies. Most people are on it, so you can find your first clients by asking friends and family if they need their homes or businesses cleaned.  In addition, Facebook owns other social media like Instagram and WhatsApp. If you want to get cleaning clients fast, you can use Facebook Ads to get more cleaning clients. Chris spends between $500 and $750 on Facebook ads each month, accounting for approximately 23% of his ads spending.  It’s just one of the ways to promote your business. Keep reading for more ways to get cleaning jobs.

Tip# 11 Invest in Paid Ads

Most successful cleaning businesses will run catchy house cleaning ads on social media and search engines. It’s one of the best ways to get clients for your cleaning business. Last year, Chris spent between $2,150 and $5,400 per month on eye-catching house cleaning ads. Here’s the breakdown: [su_note note_color="#dbeafc"]

• Google Local Leads: 67%
• Facebook Ads: 17%
• Craigslist Ads: 7%
• Yelp Ads: 8%

[/su_note] It gets better. Check out his ads! Keep reading for more strategies on how to market a cleaning business.

Tip# 12 Koalas Help You Book Online

Booking Koala is an excellent service that makes it easy to book more clients. While some people in the cleaning industry make it a priority to have that personal touch to get your ideal clients, Chris realizes that not everyone wants to interact. He told us: [su_quote]I let people book online without ever having to talk to an employee. Some people just want to put in their information, get an instant quote, and pay for it. I like to make hiring us as easy as possible.[/su_quote] Check out his implementation. It’s one of the best booking tools I’ve ever seen.

Tip #13 Local Ads: Best Way to Market Your Business

Google Local Service Ads are the preferred method when paying for ads to attract new clients. They are only available to local businesses that have passed Google screening. The process requires verifying entity formation and business licenses, background checks, and insurance. Once a business owner and any relevant staff has completed all the checks, they qualify as either a Google Screened or Google Guaranteed provider. You’ll see them at the top of a Google search like “cleaning quotes for business.” They will show the Google Guaranteed checkmark like the picture below. Chris told us: [su_quote]It’s a great service. You only pay for actual leads and they’ll refund it if you contest billing for jobs you didn’t book.[/su_quote] You’ll want to have Google Analytics set up to easily prove where your home or commercial cleaning clients are coming from to find your site.  Chris also emphasized the importance of how you communicate with potential clients.

Tip# 14 Manners Matter

Remember, a cleaning company is part of the service industry. Clients for your cleaning business will occasionally have complaints or need to cancel. Regardless of the reason, you need to be polite. That’s why Chris suggests: “Beginning with “May I” is a surefire way to soften just about any question well. Try these on for size:

• “May I have your telephone number?”
• “May I ask what company you’re with?”

It sure does. The email templates we discussed earlier also help prevent business owners and employees from making the common mistake of sending an emotional email. Keep reading for information about how to turn bad reviews into a better cleaning business.

Tip #15 No! You Can’t Ignore Bad Reviews

Even if you have a reasonable price and consistently get more clients, you will occasionally have a bad review. Whether it’s from a current client, potential client, or just someone who doesn’t like the marketing campaign, you need to be ready for it.  That’s why Chris has email templates for complaints. He also told us: [su_quote]I reach out to customers after we clean their house to make sure they are happy with their cleaning. If they aren’t, I find out what we can do better and how to make it right. If the review is on a social media platform, make sure to respond ASAP and find out what you can do to make it right. [/su_quote] This solution is great! If potential clients see the review and that you handled it amicably, you will be able to minimize the impact it has on your business. Get ready to learn about how SEO helps get clients.

Tip #16 Optimize Your Site

I know search engine optimization can be frustrating. I deal with it every day by looking at what keywords Google wants to see, but you have to do it. Think about it for a minute…ask yourself: [su_quote]How can I get customers for my cleaning business without playing by Google’s rules?[/su_quote] Unless you have a vast professional network, lots of friends, and a large family that can all afford to pay for commercial cleaning, your business will have to play the SEO game. Here are some strategies: [su_note note_color="#dbeafc"]

1. Create a lightning-fast website (under two seconds, or you start losing mobile users).
2. Research keywords using SEMRush.
3. Scatter them throughout your website content.
4. Write blogs about subjects that interest your customer.
5. Post them regularly.
6. Use sites that help you get high-quality backlinks. There’s a list of 700 sites you can use to build your own backlinks.
7. Any time you update your site, submit a sitemap to the Google search console.

[/su_note] While your website isn’t the only way to get new customers, optimizing it for search engines helps.  You'll also want to optimize your phone conversations. Keep reading to find out how.

Tip #17 Phone Scripts that Make Millions

Once you get a new client on the phone, you’ll need a great script!  Chris shared his with us. Here’s part of it: I’d love to give you the rest of the script, but our team is working hard to create our cleaning business course. I can’t steal all their thunder.  Your team should get so good at it that they can narrate it in their sleep. Sometimes you’ll get commercial cleaning clients that are angry. If you have a potentially angry customer, soften your voice to a calming state, listen to their concerns, apologize for the inconvenience, and ask, “How can I make it better?” Chris told us:  [su_quote]If a client hangs up on you when they are angry, don’t call them back. It will just make it worse.[/su_quote] He said it’s okay to call back as long as the call was accidentally dropped.  Another way of getting and keeping cleaning clients is recurring discounts.

Tip #18 Recurring Discounts

Most businesses in the cleaning industry know that current clients cost less to keep than finding more customers. That’s why they offer discounts to get your house cleaned more frequently. If you played with the Queen Bee Quote System, you probably noticed that he gives an 8% discount for monthly cleaning and 20% for weekly cleanings.  With enough weekly cleanings, you can lower your spending on digital marketing campaigns and increase profit. You just have to reach the point that existing clients request enough services to make the money to take care of your family and employees. You'll also want to pursue references from current clients.

Tip #19 Seek Referrals 

Customer referrals tend to be your ideal client. Referrals carry more weight than marketing materials, and they are more likely to contact you. You can even give discounts when people refer new clients or companies looking for cleaning services. Chris sends emails with some tips for his customers on how to review and refer people to help maximize the benefits. Another way he brings in new and recurring clients is sending SMS discounts if he has a slower week. He told us he gets a 90% open rate and about 1 in 10 clients take him up on the offer. Get ready for another tip for finding quality clients.

Tip #20 Value-Added Pricing

If you are doing Airbnb cleaning or cleaning for other properties where cleanliness is their selling point, you may want to charge a value-added price.  For instance, Chris uses AirDNA to establish what the rental properties in an area go for and charge the property owner based on the cleaning fee. This can improve margins or prevent you from taking unwanted jobs. next, you'll find out why Yelp is so important to cleaning businesses.

Tip #21 Yes! Yelp! Matters!

You see so many businesses use Yelp because customers love it. It helps the cleaning business get more clients and offers high-level backlinks. Plus, Yelp penalizes businesses that incentivize reviews. That means customers can know the reviews are legit.

You'll Book More Clients Soon!

If you follow all these suggestions, soon, you’ll be featured in blogs about how to get clients for a cleaning business. If finding clients sounds like a challenge, you might want to buy a cleaning business.  Do you have any unique approaches you’ve tried while trying to figure out how to get clients for your business? Share your successes and your failures below.