When buying an investment property, people typically go the traditional route and purchase from a brokerage and go through a real estate agent. Real estate agents use a Multiple List Service (MLS) to list houses that they have for sale. This is the traditional route to take when buying a house.. A second option however, is to buy from a wholesaler. If you’re looking to buy an investment property, buying from a wholesaler is a great way to find the best deal for you. Wholesaling is different from going through a traditional approach and can be confusing if you’re not familiar with the process. Here’s how anyone interested in purchasing from a wholesaler should approach the process.
What is a wholesaler?
Before you can buy from a wholesaler it’s important to know what wholesaling is and how it differs from the traditional home buying process. One major difference between a wholesaler and an investor is that one does not need a license to be a wholesaler, anyone can do it. Wholesalers also do not work for a broker like agents do.
In simplest terms, a wholesaler finds great deals on homes and sells the deal to investors. In most cases the wholesaler is not actually buying the house but instead buys it under contract and then sells the contract. Wholesalers simply find deals on properties using direct mailing methods and then purchases the contract with the intent of selling the deal to their list of investors. The money in wholesaling comes from selling the contract to an investor at a higher price than the wholesaler paid for it originally.
Act quickly when buying from a wholesaler
When buying from a wholesaler, it’s important to act quickly. While different wholesalers handle business differently the underlying goal is to sell quickly. Some wholesalers sell to the first investor who offers the asking price. Others will set up online forms to fill out and submit and whoever submits the highest price gets the property. Thus, it’s imperative when buying from a wholesaler to move quickly if you are interested in a particular property.
Where to find a good wholesaler
When finding a good wholesaler it’s important to look around. Like with a typical real estate agent you want to make sure you find the right one. As with most things it can be hard to find a good one at first, but finding one that works for you takes diligence.
One obvious place to begin your search is online. Many wholesalers have websites set up for prospective investors to browse properties. A simple google search of ‘real estate wholesalers in’ your area may yield fruitful results. Online searches can also be hit or miss.
Wholesaler marketing materials
Sometimes finding a good wholesaler is as simple as looking around for their marketing materials. Look for flyers in coffee shops and other public places as well as billboards, online ads, and other Craigslist posts and social media posts. If you come across their marketing then you know they are looking for buyers.
Real estate investors groups
Many areas have meet up events for real estate investors to get together. Often times, wholesalers will show up at these meetings looking to present deals to investors. If you’re looking to get a good deal this way on an investment property, it certainly does not hurt to show up to these events.
Like with most things, sometimes the best way to find the right service is to ask around. Contacting investors can sometimes yield positive results, though they may not want to divulge their own secret to getting good deals. Posting on online real estate message boards is one option as well. Real estate agents, title companies, and even banks are good places to look as well as wholesalers often contact them for lists of people looking to buy.
Things to keep in mind when buying from a wholesaler
Buying a house from a wholesaler can be great if you find a truly great deal. However, there are certain things you should always look out for to ensure you’re actually getting a good deal on the property. Three major things to make certain you pay attention to when dealing with a wholesaler are; inspection clauses, making sure the numbers are right, and understanding the contract.
With most wholesalers, there is no escape clause. Normally in transactions, once the contract is prepared you have time to do your inspections and make certain everything is right. With a lot of wholesalers however, often times this process must be done before the deal goes under contract. If you don’t do this process early and quickly you could risk losing all your earnest money.
Check the numbers
Secondly, always make sure the numbers add up. One of the single biggest mistakes people make when purchasing from a wholesaler is not checking the numbers. The sellers are looking for deals too, so it’s important to take time to run the numbers yourself, possibly with the help of a realtor or an advisor. It’s key that you run through the after repair value as well as the repair costs to make sure you’re actually getting a deal.
Understand the contract
The third thing to keep in mind is the contract itself. Typically there will be two contracts, one between the owner and the wholesaler and then a second one between the wholesaler and you. The contract will include all the specific details regarding earnest money, closing costs, and deadlines. Have an advisor assist you so that you are well versed in the contract.
When purchasing an investment property from a wholesaler there are a number of factors to consider. Firstly, you want to make sure that you find a good and reputable wholesaler to buy from. Like with buying anything from anyone it will be a process to find the right one. You’ll want to do your research to make the one you buy from is right for you. Not everyone who does wholesale real state is good at it either, so you’ll want to thoroughly evaluate everyone and make sure that the one you are purchasing from has actual deals.
You also need to understand the process. Wholesale real estate is different from traditional real estate and wholesalers are different from regular real estate agents. Make sure that you fully understand the contract from every angle and that the numbers you independently produce match the numbers provided to you. At the end of the day, when done right, buying an investment property this way can be highly rewarding as you find great deals on homes. This method of buying is a great way to go since you’re essentially paying for someone else to do all the heavy lifting of finding a great deal on a property for you. The process begins by simply looking around to find the best deal for you. Then, be smart and diligent, act quickly and efficiently, and don’t be afraid to have someone assist you through the deal.