Real Estate Wholesaling
Real estate wholesaling is different from flipping houses, and real estate investors who make money flipping houses should know that real estate wholesaling will bring in much less money but with much less risk. When wholesaling houses, your role as real estate investor is as the middle man connecting motivated sellers with buyers. You work less per deal and you’ll be able to do more deals, so you’ll be bringing in that money more frequently. This is a brief guide on how to wholesale properties, and will help you figure out if wholesaling houses is right for you.
Real Estate Wholesaling is really just a simple 5 step process. When you know the formula, you can sell a wholesale investment property in under a week. The learning curve isn’t very steep, you just need to take the right actions to succeed. Here is how to wholesale real estate from start to finish.
Find Wholesale Houses
There are dozens of ways to successfully generate real estate wholesaling leads. You can put up bandit signs on telephone poles, “drive for dollars” looking for distressed or ’For Sale By Owner’ properties, place ads in the newspaper, and post ads on Craigslist or some other online classified sites. Once someone contacts you, they are a lead you will have to follow up with via email, phone, or in person. We recommend screening them first to make sure they are motivated and the house works as a whole investment property before actually going out to meet in person.
Secure Your Rights to the Wholesale Investment Property
After talking to the owner to make sure the house fits your real estate investment criteria, you will next need to meet with the homeowner. You need to get him or her to sign a purchase agreement with you which you can find in our real estate wholesaling contracts, otherwise another investor will come along and obtain the rights to the deal if it is a good deal. This puts them under contract to sell the home to you in 30, 45, 60 or even 90 days, depending on how you’ve written the contract. That time period gives you the time you need to contact other real estate investors and get yourself a buyer for the property. We recommend being honest and ethical if your intention is to simply wholesale houses and not close on them yourself, so be sure to explain that you’ll be looking for a buyer during the closing period and intend to assign the contract to that buyer.
Contact Real Estate Investors
You should use your time while waiting for real estate wholesaling leads to build up a buyer’s list. Buyers interested in wholesale investment property deals are going to be other real estate investors. Become a member of your local real estate investor association (REIA) and network with their property investment group. Call local landlords and see if they are interested in another bargain house or two. Even check with your contractors and builders to see if they are interested in buying a fixer upper. My other real estate wholesaling guides will have plenty about finding those buyers. You may have to show the house to the buyers to get their interest.
Assign the Wholesale Investment Property
When you find a buyer for your real estate wholesaling deal, you’ll have him or her sign the Assignment of Contract Document. This is a simple one page document that states you are giving up your rights to purchase the property you have under contract to the buyer. In exchange for your rights to the property, the buyer pays you a fee you’ve both agreed to. You get either part or all of your assignment fee immediately when you assign them the contract(and never assign without collecting at least $500-1,000 in case they back out), and if they only pay you a portion of the fee immediately, you collect the rest at closing.
Contact the Title Company & Close
After the meeting with the homeowner and the buyer, take a copy of the purchase contract to your chosen title company along with your assignment contract. The title company will then do the title report and survey, and schedule the closing. Attend the closing of your first couple of deals to see the process and to make sure all the ‘I’s are dotted and the T’s are crossed. Even as seasoned real estate wholesaling experts, we attend closings from time to time on deals with large profit margins or that we feel may hit potential snags last minute.Most real estate wholesaling guides make too much of the process of wholesaling houses, but as you can see the steps are easy. You only really need to know what order to complete each step in, and where to go for your next piece of information. Watching real estate wholesaling videos helps out as well. Wholesaling houses is an excellent way to earn a living without spending a lot of time on each deal.
Wholesaling Houses for Investment Capital
Many people investing in real estate use wholesaling houses to supplement their income on a regular basis, and provide additional investment capital for their long term buy and hold rental property strategy. Personally we recommend trying to sell the contract you have on almost every property for a quick $3,000 to $10,000 profit rather than tying up your real estate investing funds, and move on to the next deal quickly. If you are unsuccessful at selling the contract on the potential wholesale investment property, then move on to your plan B of either doing a fix and flip on the property, or to rent it out as a landlord. The money you make as a wholesaler can provide you with the funds you need to pursue other types of long term real estate investing, however if done right, you can do real estate wholesaling for your entire income and never have to deal with landlord responsibilities.
Real Estate Wholesaling Benefits
There are many great reasons to make wholesaling houses part of your real estate investing business model.
- Little to no start up money required (if done right).
- Very low financial risk (often just $10 to for the “down payment” to secure a property).
- No educational requirements, degrees or licenses needed.
- Work when you want, where you want, on houses that you want!
- Pick the people that you want to work with and when.
- Not time consuming (can be done part time and still make 6 figures).
- No need for good credit or finding financing.
- Get paid as soon as you close!
Your Power Team
When getting started as a wholesaler, you will really only need a good Title Company to do your closings through. Once you get more established however, you will want to include in your power team the following professionals:
- Title Company/Title Agent who knows how to handle multiple closings, and work with real estate investors. Finding one that will allow "dry" closings is difficult, but not impossible.
- Hard Money Lenders who will be able to loan your buyers money quickly to buy properties from you that meet the lenders loan criteria. They are also great to have if you find something you really want to buy for yourself quickly.
- Real Estate Contractors who can give you accurate repair estimates. You can possibly sell them wholesale deals, or offer their services to your investor buyer to make the property more attractive by having lined up a good contractor already.
- Real Estate Agents who can send you MLS listings that meet your wholesale investment property criteria. A good agent also has active buyers in their contacts list, so you can send a wholesale deal you have under contract to them and they may be able to bring you the buyer.
- Bird Dogs to bring you good leads. these can be literally anyone from utility workers, postmen, delivery drivers, or just someone who knows what a good deal looks like.
Real estate investing is an excellent way to generate additional investment capital or earn a living, but before you start wholesaling houses for a living you should take a little time to learn what it’s all about. Learning how to wholesale real estate will add one of the fundamental skills needed to become a successful real estate investor. If this article has whetted your appetite to get started as a wholesaler, the next step is to check out our page How To Wholesale Properties, and visit the resources, guides, contracts and videos pages for the best free real estate wholesaling resources available at Smart lazy Investor.