What is a daisy chain in real estate? What to look out for
If you’re wholesaling, or investing and buying deals off-market, it’s inevitable…
You’re going to run into the term “Daisy Chain”.
Is it bad?
Is it good?
Should I avoid them?
How do I do them (is it wrong?)?
All these things we’ll dive into today…
What is a Daisy Chain
A daisy chain in real estate refers to a situation where multiple wholesalers become involved in the marketing and potential sale of a property without directly owning the property or holding the primary purchase contract.
Essentially, one wholesaler takes a property under contract, then adds a markup, and passes it along to another, who may add their own markup before offering it to their buyer’s list.
In this scenario, each additional wholesaler becomes a middleman, creating a chain of transactions increasing the final selling price without adding substantial value.
(NOTE this can be for rentals or flips or even primary houses you’re trying to wholesale)
Here’s a quick video that explains:
Here’s an example of a daisy chain in real estate
- John, a wholesaler, finds a distressed property and signs a contract with the seller for $100,000.
- He markets the property at $110,000 to his network, aiming for a quick profit.
- Sarah, another wholesaler from John’s network, sees potential and agrees to the price but adds her markup, offering it at $120,000 to her connections.
- Eventually, Mike, an end buyer in Sarah’s network, agrees to buy the property at $120,000, unaware of the original $100,000 contract price.
- The property has never changed hands physically; it’s been marketed up twice through this “daisy chain” before reaching the final buyer
Is Daisy Chain ethical in real estate?
Navigating the ethical landscape of real estate can be like finding your way through an intricate maze—especially when it comes to the practice of daisy chaining. At its core, daisy chaining is not illegal, but it can certainly tread a fine line when it comes to professional ethics.
The main pinch point? Transparency. While daisy chaining is frowned upon because it can lead to inflated prices and confusion, the biggest gripe comes from the lack of clarity. Wholesalers who have worked hard to secure a contract might not take kindly to others piggybacking off their deals without adding real value or being upfront about their intentions.
So, what’s the alternative that keeps your reputation intact and your relationships strong?
Consider co-wholesaling, where you partner up with the contract holder, combining resources and splitting the profits. Or, you could act as a connector, bringing your buyer to the table and helping the contract holder close the deal. The catch here is honesty—be clear about your role and your intentions.
The takeaway is simple: add value and be transparent. This way, you not only build a sustainable business but also nurture a network that trusts you, ensuring you’re a welcomed player in the real estate game rather than one who’s merely tolerated.
Spotting a Daisy Chain
If you’re worried that the deal you’re considering (you’re buying from a wholesaler) is a daisy chain… well your worry is justified/
You don’t want to buy a daisy chain. You’re paying a lot more for it. Instead, go direct to the contract holder.
Here are some ways to spot if it’s a daisy chain:
1. Multiple Middlemen: If you’re dealing with a property and notice that there are several people involved who claim to be “selling” the property but none of them seem to be the direct contact with the owner or the original contract holder, it’s a red flag.
2. Lack of Direct Communication: When you can’t get in touch with the property owner or the person who has the property under contract directly, and your inquiries are passed through a chain of individuals, you might be in a daisy chain.
3. Inconsistent Information: Pay attention to the details provided about the property. If the information changes as it passes through different hands, such as varying prices or terms, this inconsistency could indicate a daisy chain.
4. No Proof of Contract: A legitimate wholesaler should be able to provide proof of their contract with the property owner. If they can’t, or if they’re evasive about it, they might not have the authority to negotiate a deal.
5. Markup Without Justification: If each “seller” in the chain is adding a markup without adding value or justifying the increase (such as through repairs, legal work, or other legitimate expenses), it’s likely a daisy chain.
6. Requests for Non-Refundable Deposits: Be cautious if someone asks for a non-refundable deposit to secure the deal, especially if they’re not the contract holder. This is often a technique used to lock in a buyer within a daisy chain.
7. Pressure Tactics: High-pressure sales tactics can be a sign of a daisy chain, with middlemen trying to close a deal quickly before buyers realize the markup or the number of people involved.
By staying vigilant and asking the right questions, you can often detect and avoid getting entangled in a daisy chain, steering clear towards more transparent and straightforward deals.
If you’re Daisy Chaining, here’s what you can do instead.
Most people that daisy chain do it as a way to make a quick buck because they don’t have deals.
Don’t waste your time learning how to do Daisy Chain (its a skill set you’ll abandon later).
Instead, learn to find your own deals:
Make Offers
Making offers is the pulse of your real estate hustle. Think of it as your batting average—the more swings you take, the better your chances of hitting a home run. And in the world of real estate, swinging means making offers, relentlessly.
Set yourself a quota. Say it’s 10 a week. That’s 10 times you’re reaching out and communicating value, 10 conversations with potential sellers, 10 opportunities to close a deal. And if by Friday you’re short on your count? Don’t just sit there—hit the MLS (Multiple Listing Service) and start making offers.
It’s about creating a rhythm, a consistent beat to your business drum. And here’s the kicker: don’t get bogged down with the how ‘ridiculous’ your offer might seem. This isn’t about pride—it’s about numbers. Some will say no, but it only takes one yes to make your week. So, make your offers, lose the shame, and let the law of averages work in your favor.
Data is King
In the realm of real estate, data isn’t just king; it’s the entire kingdom. Before you can mail out flyers, dial for dollars, send texts, or knock on doors, you need the map that leads you to the right castles—the data.
This data is more than just names and addresses; it’s the golden key to understanding who might sell and why. Are they facing foreclosure? Is it a probate property? Maybe it’s just a landlord tired of the late-night “my toilet is broken” calls.
Starting with robust and accurate data sets the stage for every interaction you have. It informs your approach, personalizes your message, and sharpens your pitch. It’s the difference between a scattergun approach and a sniper’s precision. So, before you step out the door or pick up the phone, make sure your data game is strong. That’s where the real deal-finding adventure begins.
NOTE: To read about the data provider we have reviewed and recommended (and not recommended for certain investors) check out our review of Propstream here.
Direct mail
Direct mail stands as a tried and true method to reach potential sellers, and the effectiveness of your campaign often hinges on the quality of your data. The cost of direct mail campaigns can vary widely, mostly depending on the size of your mailing list. But here’s the kicker: a smaller list isn’t a setback if it’s a niche list.
So, what’s a niche list? It’s a focused segment of the market, honed to pinpoint specific situations where sellers are more motivated to make a deal. By targeting a niche, you’re not just casting a wide net—you’re fishing with precision. Here are some examples of niche lists:
– Expired Listings: Properties that didn’t sell during their time on the Multiple Listing Service (MLS).
– Tax Defaults: Homeowners who are behind on property taxes and may face foreclosure.
– Bankruptcies: Individuals who’ve filed for bankruptcy, potentially needing to liquidate assets.
– Divorces: Divorcing couples looking to quickly sell a property as part of the settlement.
– Probates: Heirs of an estate who might want to sell inherited property.
By tailoring your direct mail to these specific niches, you increase your chances of connecting with sellers who are not just considering, but actively seeking to sell—potentially leading to more deals, and more importantly, better deals.
NOTE: speaking of niche lists, there’s an awesome tool that allows you to STACK NICHES together… making your list extra valuable. Check out our review of ReiSift.
Cold Calling
Cold calling is like the bread and butter of proactive real estate prospecting—it’s where the rubber meets the road. You’ve got your list from diligent data gathering, and now it’s time to bring your voice into the mix.
Before you start dialing, you’ll need to skip trace to find the phone numbers associated with your list (don’t worry, we’ve got a roundup of the best skip tracing tools for you). Then, arm yourself with a reliable dialer, like Batch Dialer, to streamline the process and keep the calls flowing.
Now, for the script. You want to be direct but not pushy, professional yet personable. Here’s a simple one to break the ice:
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“Hi [Seller’s Name], this is [Your Name] from [Your Company]. I’m calling to see if you received our letter about your property. We’re interested in buying houses in your area and would love to talk about whether you’re considering selling. Do you have a moment to discuss this?”
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Remember, the goal of your call isn’t just to check a box; it’s to open a dialogue, build a connection, and gently position yourself as the solution to their property-selling needs.
Driving 4 $
Driving for dollars is a grassroots strategy that can be incredibly effective for finding off-market real estate deals. It’s about hitting the streets, scanning neighborhoods for potential investment opportunities. But remember, this is just the start—once you’ve spotted a property, you’ll still need to reach out through cold calling, mailing, or even door knocking to make that connection. Here’s your quick bullet guide on how to drive for dollars effectively:
– Preparation is Key: Before you start, have a clear plan for which neighborhoods you’ll target. Look for areas with high potential for distressed properties or where market trends are favorable.
– Know What to Look For: Keep an eye out for signs of neglect, such as overgrown lawns, boarded-up windows, piled-up mail, or visible disrepair. These can indicate a homeowner might be ready to sell.
– Stay Organized: As you find potential properties, document them. Use a spreadsheet or a driving for dollars app to track the addresses and any notes on the property’s condition.
– Follow Up Fast: Time is of the essence. As soon as you have your list, start the outreach process. The quicker you are, the less competition you’ll face.
– Use Technology: Leverage driving for dollars apps (check out our review on the number one app for Driving for dollars) to streamline your process. These apps can help you route your drives, track properties, and sometimes even assist with skip tracing and direct mail.
– Be Consistent: Like any good strategy, consistency is crucial. Dedicate time each week to drive for dollars. The more regularly you do it, the more leads you’ll generate.
Driving for dollars is a proactive, boots-on-the-ground approach. It’s about getting out there, being in the right place at the right time, and harnessing a little bit of that real estate magic that comes from doing the legwork.
Follow up
Follow-up isn’t just a step in the real estate process—it’s where the treasure lies hidden. The truth is, a “lead”—that’s someone who could potentially sell you their property—rarely jumps at your first “hello.” The real deal-closing power comes from nurturing those leads over time.
Here’s how you make follow-up your secret weapon:
1. Invest in a CRM: Customer Relationship Management (CRM) software is your central hub for keeping track of leads. Without it, you’re navigating the wild without a compass– here’s a list of the top CRMs in REI.
2. Document Interactions: Every call, every email, every smile exchanged at the door, make a note of it in your CRM. These details are gold when you revisit a lead.
3. Set Follow-Up Tasks: Never leave a conversation without setting a task in your CRM for the next touchpoint. Consistency here means leads don’t slip through the cracks.
4. Automate with an Autoresponder: A robust CRM like REISimpli can send follow-up emails or texts for you, keeping the conversation warm even when you’re focusing elsewhere.
Remember, the magic happens in the follow-up. It’s where “maybe” turns into “yes,” and “not now” turns into “let’s do it.” Equip yourself with the right tools, and follow-up becomes less of a chore and more of a strategic game—a game you’re set to win.
Build your brand, today — not tomorrow.
The quest for organic leads in real estate is akin to planting an orchard. It requires patience, care, and time, but once it starts bearing fruit, it can be one of the most rewarding harvests. And the first seed? Setting up a solid online presence.
Start with a Carrot site—a platform known for helping real estate investors and agents carve out their space online. Why Carrot? Because their sites are optimized for performance in the real estate niche, giving you fertile ground for your SEO efforts — see how much it cost and our review of Investor Carrot here.
(Alternatively, there are other website builders for investors as well)
Here’s the lowdown on nurturing organic leads:
– Content is Your Water: Regular, valuable content tailored to your market waters the seeds of your SEO. Blogs, market updates, and how-to guides keep your site fresh and authoritative.
– Keywords Are Your Sunlight: They fuel your visibility. Research and use the right real estate keywords to help potential leads find you naturally during their search queries.
– Patience is Your Fertilizer: Organic growth is slow. It’s about consistency and quality over quick fixes. But with time, your SEO efforts can place you at the top of search results, where leads come to you.
– Branding and Conversion: While you’re waiting for your SEO to climb the ranks, your site acts as a branding tool, building trust and credibility. So when those organic leads trickle in, they’re landing on a site that’s ready to convert.
Remember, while organic leads can take time to cultivate, they often result in the highest quality prospects, because they come to you with trust already building—they found you, after all. Plant the seeds now, and you’ll thank yourself later.