Real Estate Wholesaling is similar to fix and flips except that the time frame is a lot shorter and no repairs are made to the home before the wholesaler sells it. A Real Estate Wholesaler contracts with a home seller, markets the home to his potential buyers, and then assigns the contract to the buyer.
The Real Estate Wholesaler then makes a profit, which is the difference between the contracted price with the seller and the amount paid by the buyer. The ultimate goal in Real Estate Wholesaling is to sell the home before the contract with the original seller closes.
Real Estate Wholesaling gives anyone an opportunity to build income with little capital or credit. All it requires is ambition and some specialized knowledge. The more ambition you have, the more money you will make. Real Estate Wholesaling does not require a real estate license either.
A license is not required to buy or sell any property that you have an equitable interest in. That interest can be a contractual interest (you have the property under contract) or you actually own or have title to the property.
What A Usual Real Estate Wholesaling Scenario Looks Like This:
- The wholesaler has a house under contract for $90,000 that he estimates needs $20,000 in repairs but will sell for $150,000 once the repairs are made.
- Using his/her network of investors, he finds an eager buyer at $100,000.
- He/she assigns the contract to his investor, who then has a profitable fixer-upper project, and the wholesaler made a $10,000 profit without ever owning the home.
The key to Real Estate Wholesaling is to add a contingency to the purchase contract that allows the wholesaler to back out if he is unable to find a buyer before the expected closing date. This limits the wholesaler’s risk. As the wholesaler never actually purchases a home, real estate wholesaling is much less risky than flipping, which cannot only involve renovation costs but also carrying costs.
Additionally, Real Estate Wholesaling also involves much less capital than fix and flips. Generally, only enough to make earnest money payments on a few properties is sufficient for wholesaling. Success depends on the wholesaler’s knowledge of the market and connection to investors for quick sales.
Real Estate Wholesaling in a nutshell puts property (normally distressed property) under contract and assigns or resells the property to another Real Estate Investor. The Real Estate Investor then sells to either use cash, lines of credit, or hard money loans. This allows quick closings on properties that sometimes need extensive repairs.
Real Estate Wholesaling is mainly based off of the idea that price overcomes all objections. If you can sell a property for a low enough price it does not matter what is wrong with it, somebody will eventually buy it. Overall, a Real Estate Wholesaler focuses on developing two things:
- Finding deals
- Their network of investors to sell to
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