Wholesale real estate is a short-term business strategy that investors can use to make a quick and steady income in the real estate market. The wholesaler enters into a purchase contract for a home from a seller, for a small earnest money deposit. The contract generally spells out the amount the wholesaler will sell the property for and the required time period for the sale. After the contract is in place, the wholesaler attempts to find an interested investor. Once an investor is in place, an assignment of contract is put in place usually at an agreed upon higher price. The difference in price is know as the wholesale fee. This goes to the wholesaler.
Generally. wholesalers look for a distressed property that the owner doesn’t want to spend time or money on. The owner is motivated to sell and often doesn’t want to work with a real estate agent. It is also possible for a wholesaler to pick up a property that is publicly marketed by a real estate agent.
Tips on how to become a Wholesaler
1. Research – Learn wholesaling laws in your city and state. Find out if you need a real estate license. Study neighborhoods where you want to buy property.
2. Finding the Properties – Look for properties that are listed below market value or owners who may be motivated to sell, such properties being foreclosed upon or homes that have liens on the property. Look at social media platforms, foreclosure sites, real estate auction sites. MLS.
3. Learn the Math & how to due your Due Diligence – Once you find the property, make sure the property makes financial sense. You need to figure our a properties fair market value. Look at comparable properties sold in the area, cash-on-cash returns and calculate potential repair costs.
4. Reach out to the Seller – Explain what you do and that your goal is to work together. Be clear in what your role is and how you get paid. Wholesale real estate transactions are perfectly legitimate, as long as you follow state laws.
5. Contract – Present your offer to the seller and get the property under contract. Be sure you include the right to assign the contract to another party. Include a contingency period that allows you to withdrawn from the contract if you are not able to find a buyer before the contract expiration date.
6. Find the Buyer – Using networking skills, online platforms, and word of mouth to market your contract to potential cash buyers.
7. Reassign the contract to the buyer – Close the deal with the investor who fits your wholesale real estate transaction. Both of you have to agree to terms and conditions. You want to get paid for your the work you did and put the deal together.
Is Wholesaling for you?
It requires a lot of work, time, patience and commitment. You have to be great with communication and your marketing skills. You need to build a large network of investors who you can count on. You need to find the right kind of property for your investors to be successful in wholesaling. Here are a few Pros and Cons:
- Money is made quickly.
- No property renovation experience is required
- If you build a solid network of investors, you can sell the house quickly.
- You may make a large profit in a short time period.
- If you fail to find investors, you may lose your earnest money deposit
- Some states required a real estate license
- You won’t make money until you find the property, investor and close the transaction.
- You must be able to generate a solid pipeline of leads to deliver to investors
Wholesalers are middlemen. If involves zero capital investment. It involves a certain amount of risk but there is potential to make solid profits for those who commit.
If you have any questions or want to discuss how to do this, please contact me.