Investing in real estate is one of the best ways to build wealth. You can invest via strategies like fix-and-flip, house hacking, BRRRR investing, REITs, buy and hold, and rental properties. Another real estate investment strategy worth considering is selling wholesale properties.
So, what is real estate wholesaling?
Wholesaling is simply the process of getting an investment property under contract, and then assigning the contract to the final buyer at a higher price. In other words, wholesalers act as middlemen between homeowners and buyers. Here is how the process looks like:
- The real estate investor (wholesaler) identifies a home that is distressed or abandoned.
- The wholesaler contacts the homeowner and offers to buy the property below market value.
- Once an agreement has been reached, the wholesaler and the homeowner sign a purchase contract. To show seriousness, the wholesaler is required to pay earnest money to the property seller.
- The wholesaler then looks for a cash buyer and assigns the contract at a higher price.
Let’s says the wholesaler signed a purchase contract for $60,000, and then assigned it for $68,000. He will pay the seller $60,000 and keep the difference of $8,000 as his profit.
Is wholesaling real estate a good idea?
If done right, real estate wholesaling can be a very lucrative venture. However, before we look at how to find wholesale properties, let us consider some of the pros and cons.
Benefits of real estate wholesaling
- Make money in less time – Wholesaling is one of the fastest ways of making money in real estate. If you are able to find a buyer quickly, you can close the deal and get paid within 30-45 days, or less.
- No credit involved – If you’ve been unable to invest in real estate due to limited access to capital or a poor credit score, then wholesaling would be a great option for you. Even with a low credit score, you can get involved in a wholesale agreement since you are not actually buying the property.
- Learn about the housing market – For beginner real estate investors, wholesaling allows them to learn about the real estate industry in a short time. You will learn how to find motivated sellers, negotiate the price, do due diligence on a home, estimate the after repair value (ARV) of the home, and find buyers.
Downsides of real estate wholesaling
- Difficulties finding buyers – Usually, a purchase contract includes a date by which the wholesaler should find a buyer to close. Failure to find a buyer means losing the earnest money that had been paid to the homeowner.
- No guaranteed income – Wholesaling is not the typical 9-to-5 job that guarantees a paycheck at the end of the month. You could go for months without closing a single deal.
- Negative stigma – The unethical practices by some wholesalers often shed a bad light on wholesalers in general.
How to find wholesale properties
Here is how you can find wholesale properties in your area:
Check the MLS
The multiple listing service (MLS) is one of the best places to find wholesale properties for sale. Since accessing the MLS requires a real estate license, you will need to work with a real estate agent. When browsing through the listings, look for properties that have been listed for more than 90 days. The longer a home remains in the market, the more desperate or motivated the seller will become.
Mashvisor Property Marketplace
In case you don’t have a license yourself and prefer to work without an agent, you should check out the Mashvisor Property Marketplace. On this online marketplace, you will find all sorts of off market properties including pre-foreclosure homes, foreclosed homes, short sales, REO homes, and tenant-occupied rentals. Moreover, with Mashvisor you also get access to MLS listings across the US housing market.
You can find wholesale properties that fit your requirements using the following filters:
- Location
- Distance from location (in miles)
- Budget
- Type of property
- Number of bathrooms
- Number of bedrooms
If you’re thinking of keeping the property for yourself and rent it out to make income from it, you can also search by:
Mashvisor Property Marketplace
What makes Mashvisor a great tool is that you can also analyze wholesale properties quickly on the platform. Once you have narrowed down your option, you can then analyze them within minutes using the Investment Property Calculator. This real estate investment software will show you what return you can expect from wholesale properties in terms of cash flow, cap rate, and cash on cash return.
To get access to our real estate investment tools, click here to sign up for Mashvisor today and enjoy 15% off.
Drive for dollars
This is a traditional, yet very effective method you can use to find good real estate wholesale deals. All you need to do is to drive around the target neighborhood and look for income properties that are neglected or abandoned. Check for signs such as peeling or faded paint, uncollected newspapers, broken shutters and windows, and notices posted on the doors. When you come across such homes, write down the address and get the homeowner data from Mashboard. The Mashboard supports filters like state, city, address, zip code, property type, year built, and sale date. With Professional Plan subscription to Mashvisor, you can even send emails to homeowners right from our platform to enquire about their interest in selling.
Family and probate attorneys
Due to life events like a death in the family, separation, or divorce, properties are often left behind. Family and probate attorneys are usually aware of such properties that are likely to be for sale soon. Visit law firms or the probate court to learn about such opportunities. You could also find some leads on usprobateleads.com and successorsdata.com.
Direct mail
Also known as admail or junk mail, direct mail involves sending marketing material directly to the mailbox of a prospect. It includes sending letters, brochures, postcards, flyers, or even catalogs. Direct mail is personal and tangible, thus helping you build trust with the recipients. With this strategy, you can target owners in pre-foreclosure, absentee owners, and properties in probate.
Other places you can find wholesale real estate properties for sale include government agencies, lender websites, and property auctions.
Conclusion
With all the options listed above, you cannot fail to find wholesale properties in any real estate market. And don’t forget to check the potential profitability of wholesale properties using Mashvisor’s Investment Property Calculator.