If you’re interested in getting into real estate investing, there are a lot of places you can start. However, beginning your new career by buying a rental property may not be the best strategy. Instead, there are a host of shorter-term options that are great entry points for hopeful investors.
One such option is wholetailing real estate, which is a solution that’s quickly growing in popularity among new investors. In this guide, we’ll explore what the strategy involves and how you can start wholetailing real estate.
What is wholetailing?
Wholetailing is a combination of wholesaling and fix and flipping. Like wholesale real estate, it involves buying properties at below-market values. But instead of assigning the contract to a cash buyer, you purchase the property yourself and identify select improvements to make to it.
On the surface, this sounds exactly like the method investors use to flip a property. However, fix and flippers usually do a complete renovation of a house, making the house look relatively new before listing it on the MLS for full value. Wholetailers only fix projects they can accomplish relatively quickly and then they sell the property to a buyer at below market value.
The difference between wholetailing and wholesaling is that you’ll actually close on the property instead of assigning the real estate contract. However, the improvements you make should significantly increase what a buyer is willing to pay.
How to find wholetail real estate deals
There are a few ways to find houses that need small improvements before being sold to cash buyers. The first is to use real estate lead generation software to identify motivated sellers. This is a classic way to find wholesale deals because it lets you easily identify properties that have to sell at below-market value.
Motivated sellers are homeowners who are experiencing some kind of financial distress factor that’s forcing them to sell within a short time frame. These distress factors can range from pre-foreclosure to inheriting a house they can’t afford. Whatever the situation, the owner needs to offload it and will usually be willing to do so at a discount.
Homes owned by motivated sellers are often in need of minor repairs that the owner either can’t afford or doesn’t have time to address. If you can get this kind of property under contract, you may not even have to sell it to a cash buyer after doing repairs. If the renovation needs are minor enough, you may be able to sell it on the MLS for full price and make a significant profit off of the house.
Another great way to find houses in need of improvement is to look for distressed properties. Distressed properties are homes that have unfixed damage or are simply being neglected to the point that they can’t sell on-market for anywhere close to full value. These properties can be much harder to find because there aren’t any public records that announce a house is neglected unless the house has been condemned.
As a result, driving for dollars and networking with local real estate agents and property contractors are the most reliable ways to find these houses. Unlike homes owned by motivated sellers, these properties usually need enough renovations that you won’t be able to list them after wholetailing them.
However, you can still make a profit by tackling a few quick projects and then selling them to cash buyers. In fact, by taking on these projects, you may significantly increase your net profit compared to the assignment fee you would earn simply by wholesaling the property.
Selling wholetail real estate
Once you buy a property and make small improvements to it, you need to sell it as quickly as possible to minimize ownership expenses and maximize ROI. Thankfully, by taking the time to rehab the property, finding a buyer will become much easier.
As with wholesale real estate, wholetailing involves finding real estate investors who will pay cash for a property. There are a few strategies you can use to find these buyers.
First, you can follow the traditional wholesaling approach of finding a deal before you worry about finding a buyer. This strategy works best if you have a larger pool of buyers that you can rely on every time you have a deal.
However, this strategy has grown more difficult as the economy and real estate market have shifted during the second half of 2022. Because of the economic downturn, there are fewer cash buyers actively buying any deal that comes their way.
Instead, many are now looking for houses with specific criteria and are working with wholesalers who can find matching deals. This is known as reverse wholesaling, and it works perfectly with wholetailing as well. All you have to do is establish a buyer’s list and work with investors to identify and buy the kinds of properties they’re looking for.
Conclusion
Wholesaling and house flipping aren’t the only short-term real estate investing strategies you can use. You can also wholetail, which is a great mix of the two if you’re interested in flipping a home but you don’t want to renovate the entire house.
The most important thing to remember with this strategy is that you need a strong cash buyers list before you buy. Otherwise, you could saddle yourself with a house you don’t want to keep and all of the expenses that come with it. However, if you have cash on hand and the experience and willingness to tackle a few projects, wholetailing can be the perfect way to make more profit on that run-down house you’ve been eyeing.
