New York state has been a draw for new residents from across the country and internationally for centuries. Today, New York is the fourth most populous state in the US, with more than 19.8 million residents. While most people hear “New York” and think of Manhattan, New York is actually an extremely diverse state consisting of global commerce centers, farming communities, industrial cities, beaches, and mountains.
Similarly, there is a wide variety in the real estate markets across the state. While New York City is home to some of the most expensive housing in the country, the average home price in New York state is $405,000, which is 2.7% percent lower than the average home price in the United States.
New York state offers a mixture of hot and cooling real estate markets. While New York City has seen a net decrease in population since 2020, other parts of the state are continuing to lure new residents and are still experiencing rapid home appreciation.
Unlike some states which have experienced uniform appreciation in all of their submarkets, it’s important for investors to do their homework first when wholesaling real estate in New York.
Is wholesaling real estate legal in New York?
Wholesaling real estate in New York is legal as long as wholesalers operate within the state laws and guidelines. There are three different strategies that wholesalers can use to legally operate in New York.
Contract assignment
The most common disposition strategy for wholesalers is a contract assignment. In this scenario, the investor signs a contract with a motivated seller and then sells the contract to a cash buyer. The sale of the contract must occur before the agreed upon closing date.
With a contract assignment, the wholesaler never personally purchases the property. Instead, they negotiate an option to purchase the property and the wholesaler turns it over to the buyer.
Buy-sell agreement
In a buy-sell agreement, the wholesaler buys a property and holds it for a period of time before reselling it. This is a common deal structure in situations where the buyer needs some time to secure the funds to buy the property.
Double closing deals
In a double close, the wholesaler actually buys the property at closing, then sells it to a cash buyer immediately at a second closing. The main advantage of a double closing is that the wholesaler is able to keep their assignment fee confidential. Double closings appeal to the seller because it frees the seller from having to wait for the wholesaler to find a buyer. Additionally, both the seller and the buyer are able to maintain their anonymity.
Unlicensed wholesalers can conduct any of the above transaction types in New York. Wholesalers have more freedom when doing a buy-sell agreement or double closing because they are operating as a traditional buyer and seller in both situations, even though the transactions are part of a wholesaling strategy.
Getting started wholesaling real estate in New York
Wholesaling real estate in New York generally consists of two essential components: a distressed property owner and a cash buyer. Wholesalers who are just getting started should start pursuing both as soon as possible.
Finding cash buyers before you have a property under contract may seem like the wrong order, but the last thing you want to do as a new wholesaler is to enter an agreement with the homeowner and then struggle to find a cash buyer. If you’re unable to find a buyer, the deal can easily fall apart and you won’t make any money after going through the trouble of finding a property.
Learn how you can use BatchLeads to simplify the wholesale real estate process.
While you’re doing this, keep your eyes open for distressed properties in your area. Your firsthand observations will only reveal properties with physical distress factors. In order to identify properties with financial distress factors, consider a real estate software subscription that will give you information about properties with financial distress factors, such as pre-foreclosures, properties in probate, or abandoned properties.
Another important step when you’re getting started is creating a limited liability company, or LLC, for your wholesaling business. LLCs are relatively simple and straightforward to form. You can create a New York-based LLC online for a $200 filing fee.
Conducting your wholesaling business through an LLC will protect your personal assets in the event of a lawsuit or business bankruptcy. Once you’ve conducted multiple deals through your LLC, you can use your LLC’s credit history to apply for financing.
Finally, you’ll want to be prepared to approach homeowners. Practicing your pitch to homeowners will allow you to communicate with homeowners calmly and effectively. Bear in mind that you’ll be approaching homeowners out of the blue to sell their home, so it’s up to the wholesaler to persuade the homeowner that this is actually an opportunity that can help them sell their distressed property. Similarly, once you have a property under contract, develop your pitch to potential buyers.
Where to find cash buyers in New York
In order to find cash buyers, new wholesalers should network as much as possible. One of the best places to start is by joining a real estate investing club, which can be found in most markets. If there isn’t already an organization like this in your area, you should consider starting one.
You could also join online real estate groups to start learning more about the industry and networking with your peers. Not only will these in-person and virtual groups put you in proximity to cash buyers, they’re also a great way to learn from your peers.
Many investors find cash buyers by partnering with real estate agents. There are more than 82,000 real estate agents in New York, and many of them could connect you with cash buyers in their databases. Of course, you’ll probably need to give them a financial incentive to do so, but partnering with an agent can still be worth the expense.
Finally, wholesalers can find cash buyers by utilizing real estate investing software. Some products allow you to search specifically for cash buyers and identify which of those buyers have purchased multiple properties, helping you differentiate between someone who paid cash for their home and someone who’s a serious investor. With the cash buyers quick filter in BatchLeads, you can build a cash buyers list with a few clicks.
Do you need a license for wholesaling real estate in New York?
Wholesalers don’t need a license to operate in New York, but there are some restrictions that unlicensed wholesalers need to be aware of.
Like many other states, wholesalers in New York cannot represent a buyer or seller in any real estate transactions if they do not have a real estate license. Fortunately, wholesalers don’t need a real estate license as long as they use assignment contracts or personally buy the property in a double closing or buy-sell agreement.
The other guideline that New York wholesalers need to be mindful of pertains to marketing. Unlicensed wholesalers in New York cannot legally market their property, but they can market the assignment contract.
Unlicensed wholesalers can sidestep these marketing restrictions by doing double closings or buy-sell agreements. In each of those scenarios, the wholesaler is personally buying and selling the property, so it’s not subject to the same regulations as a contract assignment.
Although a wholesaler can do deals without a real estate license, there are some advantages to having a license. The first benefit is that it allows you to freely market properties that are under contract. The other advantage is that if a home could sell for more in a traditional sale, the wholesaler can represent the buyer in that type of sale if the homeowner is amenable to the idea.
Legal tips for wholesaling real estate in New York
In New York, unlicensed wholesalers can market their contract assignment, but not the property itself. Given this restriction, unlicensed wholesalers must depend on their network of private contacts and known buyers to make deals. While this may sound like a major hurdle, this is the typical buyer pool for most wholesalers. Even licensed wholesalers look to their professional networks first when looking for potential investors.
Wholesalers in New York can ensure that they’re staying on the right side of the law by adhering to contract assignments, buy-sell agreements, and double closings because:
- Contract assignment deals are a legal strategy of securing a sales contract and offering it to a buyer privately.
- Buy-sell agreements work because you hold the property for an assigned period of time before reselling it as the owner.
- Double closings work for similar reasons, passing the property through your hands, so you’re selling it to the end owner.
Where to Wholesale in New York
While the overall population of New York state has dropped, the majority of the exodus has been from New York City. Today, New York City’s outbound migration has returned to approximately the same rate as pre-pandemic, and cities such as Albany and New Rochelle have seen their populations increase since 2022.
In the second quarter of 2023, nearly half of the counties in New York state saw home values rise. New York state is also home to real estate submarkets that continue to see stark increases in home values.
The state has competing trends with population growth and home value appreciation occurring in different parts of the state. This is why it’s important to do your due diligence when choosing a submarket for wholesaling real estate in New York.
Key Takeaways
Wholesaling real estate in New York is rich in opportunities for investors. While it’s true that the state population has declined in recent years, there hasn’t been a severe drop in demand for housing. Motivated wholesalers will still find opportunities in New York state as long as they understand the market.
Unlicensed wholesalers in New York need to heed regulations around property marketing, but that still allows wholesalers plenty of room to operate and flourish. Wholesalers who are willing to follow state regulations, learn about the market, and keep reaching out to homeowners and buyers can thrive in the Empire State.
