What is real estate wholesaling? Is it right for you? If so, how do you get started?
Real estate wholesaling may be one of the lessor understood and leveraged investment strategies, but it is continuing to prove the strong hold of leading investors. So what is so magnetic and powerful about this system of investing? What are the benefits? How can you get started swiftly, and be successful at it?
Wholesaling 101
The easiest way to understand the concept of wholesaling real estate is to look at wholesaling in general. Property wholesaling is promoted as the “no money down, no credit, fastest way to get paid,” in real estate. It can be all those things. But that image can also fool investors into underestimating how big and powerful it can really be.
Wholesaling is essentially just acquiring product at a discount and reselling it for a profit.
That’s it. Often this is done in larger quantities, and sold on to resellers or distributors, but doesn’t have to be.
A classic example of wholesaling at work is in the grocery business. Wholesale distributors use their contacts to acquire product at substantial discounts. Then they deliver them to the stores who buy and resell the product at an additional mark up.
Variations of this are responsible for creating many of the wealthiest families and enterprises we know. Think Costco, Walmart, Amazon, the oil and gas industry, and even Warren Buffett and Berkshire Hathaway. They get the product cheap and serve it up to those that need the product, with a fee for their service.
What Is Real Estate Wholesaling?
Real estate wholesaling follows the same concept as above. Wholesalers secure discounted real estate deals, and then pass them on to other buyers, and get paid well for the service they provide.
In some cases this may be selling to the public who are looking for homes, but is more often reselling to other investors who need properties and deal flow to fuel their rental property portfolios or fix and flip businesses.
You buy low, sell at a fair price, and get paid.
The Benefits of Wholesaling Real Estate
In addition to the regular benefits of investing in property the advantages of wholesaling include:
Time – Getting Started Fast
While equally as profitable and powerful as other strategies wholesaling can be far simpler to get. While it still only makes sense to educate yourself; wholesaling does not require a college degree, a license, or learning how to physically remodel and fix up properties. There are fewer working parts and expenses. That means you can hit the ground rolling far sooner.
Time – Get Paid in Days Not Months or Years
Not only does real estate wholesaling offer a fast entry point for aspiring investors, it also offers the advantage of being able to get paid faster. Building new construction or holding land might take years to pay off. Buying and holding rentals can offer some cash flow each month while you wait to sell for the real money. Even becoming a real estate agent can mean 3 to 6 months before you see a paycheck. These are all good ways to engage in real estate, but in comparison wholesaling can deliver paydays in just days. Would you rather get paid in a few days or a few months or years?
Larger Paychecks
Exact earnings will always vary depending on the type of properties being dealt with, and how much the individual investor charges. Yet, compared to collecting a rent check or a property management fee, or a salary check from a 9-5, wholesaling can deliver some pretty appetizing lump sum checks.
High ROI
Real estate wholesalers control their own ROI. They are not capped like real estate agents or property managers, or even to some extent landlords. Not only can wholesalers choose whether they markup up their properties by 1%, 10%, or 50%, they also get to flip multiple houses each month and year. Even if you do use all your own cash this sure beats the average returns of most asset classes. If you don’t use any of your own cash your ROI is almost infinite.
Demand
All other real estate investors, end buyers, the government, and banks, and even the neighbors of distressed properties rely on wholesalers to do their job. It’s great to be in a field with demand. That’s job security.
It Always Works
It may be a big claim, but it’s true. You can wholesale houses in the heart of New York City, in Miami, in Memphis, in Atlanta, in Dallas, in San Diego, in Portland, and everywhere in between. You can wholesale real estate during any phase of the market cycle.
Volume Potential
You can wholesale just one property a year if you like, or you can wholesale multiple properties a week. There are wholesalers out there who have turned 10 or more properties a month. That’s a lot more volume than the majority of rehabbers can handle, or than DIY landlords could handle in rentals.
Low Risk
Some would argue that wholesaling real estate is a zero risk strategy when you are fully leveraged. While no investment may be 110% risk free; when you use 100% financing, don’t hold onto properties, and are in and out of deals in a matter of days the risks are as low as you could ask for, and the upside potential is massive.
You’ll find that the benefits of real estate are so powerful that while real estate speakers, trainers, and business owners may promote other strategies, they often maintain wholesaling as an essential revenue channel for feeding and sustaining their other efforts.
HOW DOES WHOLESALING REAL ESTATE WORK?
The beautiful thing about wholesaling is its simplicity.
1. Find Properties
Find the properties which can be acquired at enough of a discount to leave a profit margin (sometimes from highly motivated sellers) for you as the wholesale, and the next buyer.
2. Secure Your Contract
Secure your profit by obtaining a written contract executed by all parties. If you are new to real estate one of the best moves you can make is to get your hands on some real estate contracts and disclosures and re-read them until you know them inside and out. You’ll eventually be able to write offers in just a few minutes, and get out many offers each day. Note that typical contract forms, disclosures, and contingencies can vary depending on the county you are working in and the type of property you are dealing with. Get familiar with those.
3. Resell for a Profit
Present your inventory to your buyers’ list at a fair markup for your services, and get it converted back into cash quickly.
There can be several variations of wholesaling. Some may simply assign and ‘flip’ their contracts. Others may buy and resell immediately with back to back closings. Others may go as far as ‘prehabbing’ or cleaning the slate for the next buyer.
This simplicity brings even more benefits compared to other real estate investment strategies. There is no need to swing a hammer or fix anything, and no dealing with the ongoing property management aspects of dealing with tenants.
HOW TO START REAL ESTATE WHOLESALING
There are 3 key parts to getting started in wholesaling real estate:
1. Finding the Sellers
The key to wholesaling is really all about finding the properties. This is really all about finding undervalued and distressed situations and properties where you can provide your service.
2. Financing Your Deals
Wholesale deals can be funded in a variety of ways from using your own money, to using transactional lenders, hard money lenders and private money lenders, to having the end buyer put up the cash. The early you establish these sources the more confident you will be in sourcing the deals and the faster you’ll be able to move on them, and turn them into cash.
3. Finding the End Buyers
Ultimately everything comes down to turning your properties over to new buyers. Successful wholesalers are those that get to work building a buyers’ list. The more eager, qualified, and ready buyers you have on your list the faster you can flip properties, and the most deals you can do.
If you find the deals, you’ll find lenders and cash buyers eager to finance and buy your product. This may still require some marketing skill and tools, negotiating, navigating paperwork, and learning how to value and present properties.
If you are new to real estate then the more you can learn the better. Whether you are new or experienced having the right tools, a system, and access to a coach can streamline your success and achieving your goals.
Wherever you are on your journey right now, none of these things should hold you back from getting started. Right now is always the best moment to get started. Each day you are either moving closer to your goals, or are losing another day. Get started, earn and learn as you go.
The Time Is Now!
