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What Is Real Estate Wholesaling?

by | Feb 7, 2019

Most people have heard of real estate wholesaling in passing yet few know what this approach to real estate is really all about.  This real estate strategy involves becoming a middle man of sorts who pairs undervalued or neglected properties with buyers.  The buyer in such a situation is typically an investor looking to flip the home.   However, a number of other parties are interested in these properties.  Those who find a way to consistently sell high after buying low can make a bundle of cash as a real estate wholesaler. 

 

 

How to Make Money With Real Estate Wholesaling 

You can make good money real estate wholesaling as there is no need to plunk down a ton of cash buying a collection of properties in large quantities.  Nor is there any need to bother with equipment, employees or insurance.  Rather, you are investing in a location that stays in a single place.  If you master the art of property valuation and negotiating, you will make good money while satisfying home-seekers.  

 

The most important component of real estate wholesaling is purchasing properties below market value.  Uncover properties for sale for less than the current value and you will have a profit in-hand as soon as you sign the paperwork.  The trick is to pinpoint coveted properties that suit buyer needs and desires.  It might take some significant repairs and renovations to make the home attractive to potential buyers.  As long as the after repair value, referred to as ARV, is high enough to ensure a sizable profit, the home is well worth the money, time and effort.

 

 

Selling to Rental Investors 

If the buyer is a rental investor, it is imperative you develop a thorough understanding of your real estate market including the local demographics, average rent and the prospects of renting.  Do your homework beforehand to ensure the numbers will work out.  Figure out what the buyer can get in terms of monthly rent, the property’s costs, whether there is a mortgage, if it is an all-cash purchase and so on.  

 

 

You Don’t need to be Rich to be a Real Estate Wholesaler 

Real estate wholesaling is possible without a sizable cash investment.  The prudent use of assignment contracts gives you control over the property all the way through the closing with the buyer.  Nothing more than a modest deposit is necessary.  You will make that much more money by contracting to purchase the property and performing a double-close through assignment contracts  Transactional funding is available to provide the money necessary to close the deal.  The lender is paid back soon thereafter upon the property’s sale to the new buyer.

 

 

Why Real Estate Wholesaling is so Effective

Real estate wholesaling proves mutually beneficial for all parties involved.    Wholesalers obtain discounted real estate properties, pass on the savings to new buyers and rake in the cash for their services.  As noted above, everyone from long-tern rental investors to the public seeking homes, real estate flippers and beyond, all sorts of parties are interested in doing business with real estate wholesalers.  Those who abide by the mantra of buying low and selling at a fair price will succeed with this unique approach to real estate.

 

A large part of the appeal of real estate wholesaling is there is no cap to the amount of money you can make.  Your return on investment is at your own discretion based on your work ethic, relationships and opportunities.  This is a stark contrast to real estate agents and property managers who have a cap on their return on investment.  As a wholesaler, you can mark up you property by the percentage you choose, be it 40 percent, 20 percent or 2 percent.  The sky is the limit if you are willing to put in the work.  Even if you tie up the majority of your cash, your real estate wholesaling will almost certainly beat the average return rate of nearly every other asset class.

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