Wholesale Real Estate Explained

Posted on September 08, 2009 by Torrey

Wholesaling real estate is a general term used to define real estate that is owned by motivated sellers looking to unload their properties. It is one of the most profitable and simplest strategies of real estate investing. Wholesale real estate investing strategies work in all types of neighborhoods with properties in all price ranges. We are no longer in the times of just wholesaling old run down, boarded up houses, even though they work just as well. One should focus on vacant properties to wholesale as occupied properties require more experience and knowledge.

When you do wholesale investing, you have some very clear advantages. The most important is that you can do it without cash (except for the nominal deposit you may have to put up when you sign the contract and that’s usually just $100 or so). You’ll make your profits quickly, usually within a few weeks. You do, however, need to know how to buy at a discount and turn the deal fast.

Basically, wholesale properties have a seriously motivated seller who often needs to get rid of the house yesterday. The property may be in poor condition, which means the average home buyer doesn’t want it nor can get it financed. Most real estate agents insist that the owner fix up the property before they’ll accept the listing: when the owner doesn’t have either the cash or the interest in doing the fix-up, the property is a great opportunity for a wholesale real estate investor.

When you find a great wholesale deal, don’t buy it. Instead, get it under contract and assign that contract to another investor for a fee.

Here’s what that strategy would look like:

You find a vacant house that needs a little bit of repair.
You locate the owner and determine that he is willing to sell.
Based on your knowledge of the area, you make an offer contingent on an inspection of the property
If the seller is willing to accept your offer, you arrange to meet him/her at a neutral place to sign the contract.
You could go look at the property now, but it’s not necessary.
You contact other investors with the basic information about the deal and offer to assign the contract for a fee.
When an investor indicates interest, you arrange to either show them the property or tell them to go look at it on their own.
If they want to do the deal, you assign your purchase contract to them and collect your fee.

I wholesale nearly 90% of my current deals. My minimum profit on each deal is $3,000. This isn’t a lot of money, but if you close 5 – 6 of these per month, that $3,000 adds up.

Once you’ve assigned the contract and the buyer becomes the new owner, you have just made all parties a winner. The seller of the house is happy because they’re rid of a problem and didn’t have to do any work nor worry about getting it listed. The investor is happy cause they didn’t have t spend time looking for a great investment, and now they have a property that they purchased under market value. And you just made a few thousand dollars, not a bad rate for a day’s work, is it?

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