Summary of "If You Wholesale Houses - You Should Be Doing Novations: Part 1 w/ @NovationKing"

Summary: “If You Wholesale Houses - You Should Be Doing Novations: Part 1 w/ @NovationKing”

This video is an introductory masterclass on incorporating novations as a strategic business model in real estate wholesaling. The presenters emphasize that wholesalers who do not adopt novation deals are missing significant revenue opportunities, potentially six figures or more in idle deals.

Key Business Content

Strategy & Business Model

Novation Definition: Novation means replacing a contract with a new party. In this context, it’s used to transfer a seller contract to a third-party buyer without closing on the property first.
Rain Maker Method: The presenters call their novation approach the “Rain Maker Method,” focusing on connecting motivated sellers with retail buyers (often owner-occupants) without the wholesaler taking ownership or capital risk.
Business Model: Novation can be a standalone business model, not just a side strategy. It allows wholesalers to:
- Handle deals that don’t fit traditional wholesale cash offers.
- Capture more deals (2-3 novation deals per every 1 wholesale deal).
- Operate with less capital risk compared to wholesaling or “wholesale tail” (where you close on the property before resale).
Seller Spectrum: Novation targets sellers who want a hands-off, cash-offer-like experience but whose properties don’t fit deep discount cash offers. These sellers are typically in personal distress (financial, health, or life situations) but have properties that are mortgageable/liveable and priced between low cash offers and full retail.
Value Proposition to Sellers: Certainty of sale, peace of mind, and a white-glove, hassle-free experience without showings or repairs.

Operations & Processes

Novation Deal Flow:
1. Sellers agree on a net price with the wholesaler.
2. The wholesaler finds a retail buyer willing to pay closer to retail value.
3. The contract is novated (buyer steps into the contract).
4. The buyer closes directly with the seller.
Key Performance Indicators (KPIs):
- Target to get novation deals under contract within 3 weeks.
- Focus on quick deal flow to avoid leads “aging” (time kills all deals).
Lead Handling:
- Many inbound marketing leads don’t fit traditional wholesale cash offers but are good novation candidates.
- These leads often go unused in follow-up sequences but represent a significant untapped revenue source.
Joint Venture (JV) Model:
- NovationKing’s business operates primarily by JV partnerships with wholesalers.
- Wholesalers send warm leads (preferably without signed contracts) to NovationKing.
- NovationKing handles the novation process, keeps wholesalers informed, and shares profits.
- This model allows wholesalers to remain focused on their core business while earning passively from novations.
Marketing:
- NovationKing does no direct inbound or outbound marketing.
- Relies entirely on JV partnerships with wholesalers for deal flow.

Frameworks & Playbooks

Four Main Seller Solutions Framework:
1. Low Cash Offers (traditional wholesaling)
2. Novation Deals (mid-level sellers)
3. Creative Financing
4. Listing with an agent (for sellers wanting top dollar)
Lead Qualification & Segmentation: Identify where the seller fits on the spectrum between retail and low cash to determine the right approach.
Sales Process: Upcoming videos in the series will cover the novation sales process in detail, including scripts and checklists.

Metrics & Targets

Deal Volume: NovationKing has done hundreds of novation deals and scaled the business with a dedicated team.
Speed: Aim to contract novation deals within 3 weeks.
Revenue Opportunity: For wholesalers actively marketing, there is likely six figures of novation opportunities sitting idle in their pipelines.
Efficiency Gains: Experience and rapid iteration help avoid costly mistakes and improve deal flow and profitability.

Actionable Recommendations

Add novation deals to your business toolkit to expand deal flow and revenue.
Use novation to capture leads that don’t fit traditional wholesale cash offers instead of discarding them.
Consider JV partnerships with experienced novation businesses to start earning without learning curve risks.
Implement a lead qualification framework to segment sellers and offer the right solution.
Act quickly on leads to avoid losing deals due to aging.
Subscribe to the full series for detailed processes, scripts, and resources.
Use the free quick start kit offered by NovationKing, including contracts, checklists, and scripts.

Presenters & Sources

Jerry (Host)
Rich Wonders (@NovationKing) – Novation expert and entrepreneur who has scaled a novation-focused wholesaling business.

This video sets the foundation for wholesalers to understand novations as a scalable, less capital-intensive, and profitable strategy to capture a wider range of motivated sellers and grow their real estate businesses sustainably.