Real estate wholesalers are the match-makers of the real estate industry. When you are a wholesaler, you spend your days, and some nights, creating deals that connect a motivated seller to an investor or buyer. And for this process to work, you need to locate property owners who are willing to sell for below market value.
Real estate wholesalers are the match-makers of the real estate industry. When you are a wholesaler, you spend your days, and some nights, creating deals that connect a motivated seller to an investor or buyer. And for this process to work, you need to locate property owners who are willing to sell for below market value.
Locating these motivated sellers of distressed properties is not as simple as looking at the MLS. Those properties are being marketed by a realtor and are not going to be sold economically. Instead, you need to be searching for the off-market properties that are not listed or under the control of a realtor. You are looking for that diamond in the rough that needs care and TLC that the current owner cannot provide.
The Three Ways To Accomplish A Real Estate Wholesale Deal
- Assignments
The process of a contract assignment is one of the most common among new wholesalers because it requires no cash upfront. As a wholesaler, you are securing the right to sell the property, not purchasing it from the motivated seller. Then you locate an investor who is willing to buy the property.
One of the considerations of a contract assignment is that you have a limited amount of time to find a buyer. The time frame is determined by the date you and the original seller agreed upon. Another shady area of contract assignments hinges on the fact that you could be advertising a property that you do not legally own. This is a service that should only be undertaken by a licensed realtor. So you need to be very clear on the legalities in your state before entering into an agreement for a contract assignment.
- Double Closings
This process is just what it sounds like. You are purchasing a property and then reselling it to an investor just minutes later. When you meet at the closing to buy the property from the motivated seller, your buyer or investor arrives just a few minutes later to buy the property from you.
The challenge of this process is that you need to have access to the funds to make the initial purchase. You can use your own money or get a one day loan from a transactional lender to cover the purchase. Then you pay the loan back with the cash from your buyer. In some rare cases, you can have your initial purchase covered by your buyer, along with an additional amount for your fee.
The secret to pulling off a double closing is timing. You have no assurance that the deals will be completed until you have signed both contracts and closed with both the motivated seller and your buyer.
- Buying Then Selling
This process is the safest and most straightforward way to wholesale a property. You are making the purchase and then marketing the property to find a buyer. There are no legal concerns about brokering or advertising, and you are in control of both transactions.
The downside to this process is that you will need to have the cash to purchase the properties from the motivated sellers. But it does give you the necessary time to make a few updates and improvements before reselling the property.
These three processes summarize most of the wholesale deals that are going on around the country and in all types of real estate markets. While it is great to be able to complete a transaction and make some money without investing your own cash, there is still a price to be paid. You are at the mercy of the original seller and your buyer, or you could be treading in some controversial legal matters. But the choice is yours to decide which of these methods will best meet your needs as you begin your real estate wholesaling career and your path to financial freedom.
