As the real estate investment market escalates to ever greater levels of popularity, high volume transactions, high-speed transactions, and electronic property searches are becoming more popular. It’s not hard to see why. If the conventional markets are getting saturated with competition, the options are to move either faster or off-market. For some investors, the answer is both.
If you do it right, this lets you move properties in higher volume to achieve the returns you want in terms of real dollars in your pocket. In today’s market, that can also mean conducting virtual wholesaling deals that execute quickly because there is no arranging face-to-face meetings or traveling to locations.
What Is Virtual Wholesaling?
Virtual wholesaling might sound like a simulation for training or a game and not the real deal, but the deals are genuine, and the money to be made is substantial. It gets its name because the wholesaler never actually visits the property.The NAR documented 5.6 million existing-home sales in 2020 and only 822,000 new constructions sold, with prices rising in many markets. That indicates a healthy environment for an investor dedicated to finding properties and putting them in the hands of others who can make them turnkey-ready.
How Do I Start Virtual Wholesaling?
To get started with virtual wholesaling, you need to know where to find and list properties. There are a few ways to accomplish this.
- Viewing the MLS or Private Listing Network and making remote offers in bulk in the markets where you wish to invest, which requires a real estate license
- Finding potential properties that are not listed at all by using map tools and bringing them to market by tracing owner contact information and then persuading them to sell
- Using pocket listings or taking private deals directly to other investors, whether you are seeking their inventory or looking to sell your own
- Locating off-market properties and then marketing them to investors and other real estate professionals through the Private Listing Network, which requires a real estate license
Only licensed real estate professionals have access to the MLS, PLN, and other resources reserved for them. You can have a broker list for you, but that introduces new costs, and the entire point of wholesaling is to minimize your cost so you can afford to offer investors properties at prices that they find attractive.
Wholesale purchasing through the MLS is complex and not usually desirable as a primary strategy because of the level of competition and tendency of the listings to favor retail prices on turnkey properties. There are deals to be found for sure, but it is easier to find them by looking outside of traditional markets.
Is Virtual Wholesaling Legal?
There are no restrictions on virtual wholesaling that do not apply to regular wholesaling. That is the good news. The bad news is that there are restrictions to wholesaling without a real estate license, whether you do it virtually or through in-person visits. The rules differ from state to state, but it is generally true that certain types of marketing and representation of a property owner are reserved for licensed professionals in each state.
Purchasing through virtual wholesaling tactics should pretty much always be fine, but you must check your state laws before engaging in sales activity. It’s usually fine to make a private direct sale, but if you do not have a license, it might be illegal to do any promotion at all to anyone outside of your existing social network. That’s only the case in the strictest states, but the finer points of the law vary a lot from one to the next, so do your research on the local rules in each market you plan to operate in.
Pros & Cons of Virtual Wholesaling
As with any trading technique, there are upsides and downsides to engaging in virtual wholesaling. The most significant benefits are the most apparent, the ability to do more transactions in less time and the lowered costs of doing business from not visiting properties. A few other advantages might not be as apparent, though.
- Forbes points out you get to pursue multiple property types in widespread markets without driving your costs up from site visits so you can invest in the hottest neighborhoods nationally
- Minimize the labor per transaction even more than wholesaling already does when compared to other investment strategies
- Using BatchLeads for virtual wholesaling provides in-depth site photos of the exterior and neighborhood as part of the map search, making it easier to buy with confidence
So, what are the downsides? Probably nothing too surprising when you stop and think about how virtual wholesaling differs from traditional methods.
- Making offers virtually often means adopting a volume-oriented approach because finding off-market leads means convincing people to sell, and that kind of acquisition has always been about the numbers
- Wholesaling is an as-is business, but without checking out buildings in person, you may not spot the ones that are worth focusing on turning for yourself or pricing upward because of features not seen in photographs
- Extra care must be taken to stay on the right side about marketing properties if you only use digital communications and you do not have a license
As with any form of investment, there are risks involved. Generally, they aren’t greater on a per-transaction basis when virtual wholesaling, but the risk does stack as you scale up your transaction volume, and it’s worth keeping in mind.
Key Takeaways
Virtual wholesaling is a great way to conduct high-volume wholesaling activities in multiple states. Still, it would help if you understood the laws in each jurisdiction where you buy and sell a property. Suppose you plan to work in high volume in any single state. In that case, it’s worth looking into a real estate sales license to open up your opportunities by removing many of the restrictions brought on by being unlicensed. That can also help control risks by giving you a wider audience of potential buyers.
Sources:
https://www.nar.realtor/research-and-statistics/quick-real-estate-statistics
