If you want to begin making profits as a real estate investor, there are different real estate investment strategies you could
consider. These include long-term rentals, short-term rentals, fix and flip, buy and hold, REITs, and real estate crowdfunding. However, if you want to make money super fast, wholesaling real estate is the ideal real estate investing strategy for you.
In this article we are going to take a look at the steps you need to take in order to start making money with this strategy:
Wholesale meaning
But first, let’s answer the question: “What is wholesaling real estate?“
Real estate wholesaling is a strategy where investors find a home selling below market rates, acquire it under contract, and then sell it to a buyer for a profit. This means that a wholesaling real estate investor doesn’t actually own the home. Instead, he/she acts as a middleman between the home seller and the home buyer.
Benefits of the wholesale business
- Instant cash – Unlike other investment strategies, you don’t have to wait for a long time before making money with real estate wholesaling. You can get a home under contract and find buyers within a few days. In fact, some investors have wholesaled income properties within less than 24 hours.
- Easy to learn – Wholesaling real estate for beginners is very easy to learn and implement. It is, therefore, a great entry point into investing, especially for those that have no prior knowledge of real estate. Since you are simply connecting sellers and buyers, you don’t even need a license for wholesaling.
- Not limited on cash, credit, or location – Unlike other investment strategies, you don’t need cash or a good credit to start your wholesaling real estate business. Neither do you need to have an office space for meeting buyers. You can simply close a deal on your phone or laptop.
- Higher returns – With wholesaling real estate, you can make more money upfront than with other real estate investment strategies. And unlike real estate agents and property manager, wholesalers don’t have a cap on their ROI. Real estate wholesalers can mark up homes by even 60% and can close multiple deals in a single month.
- Minimal risk – Since you are not directly selling or buying anything, there is little risk involved in real estate wholesaling.
How to become a wholesaler
Now that you are familiar with the advantages of wholesaling real estate, let us look at the steps to becoming a wholesaler.
Step #1: Educate yourself
The more informed you are about how wholesaling real estate works, the better. Before you start looking for properties, take time to learn as much about how to wholesale real estate as possible. Visit wholesale real estate websites to read content on the subject matter. Consult someone in your area that has experience in how to buy wholesale. Attend local real estate events and network with other investors.
Step #2: Compile your buyers list
Before acquiring a home under contract, you need to know where to find buyers. Building a comprehensive buyers list will ensure that you have a ready audience to target with your deals. You can build a buyers list through social media, email marketing, attending industry events, and networking with real estate professionals. Some investors even use bandit signs like ‘We Buy Cash Houses for Sale’ with their contact details to attract potential buyers.
Step #3: Find real estate wholesale deals
Once you have a list of potential buyers, it’s time to look for wholesale properties in your area. You can start your search by visiting Craigslist or real estate sites like Realtor.com and Zillow. Searching public records in your locality could also be a great source of leads. You could even choose to drive around the neighborhood looking for distressed homes.
However, the best one-stop-shop for all kind of off market properties in the Mashvisor Property Marketplace. On this platform, you will find foreclosed homes, short sales, tenant-occupied rentals, auction homes, and bank owned homes. You can find property that matches your criteria using filters like the type of property, budget, market, and others. If you want to reach out to home owners, contact details are readily provided.
Step #4: Get the wholesale real estate contract
When you find a motivated seller, negotiate a favorable price for the wholesale house. When making an offer, consider the repair costs, closing costs, holding costs, and your wholesale profit. If you don’t have any prior experience in wholesaling real estate, it would be advisable to work with an experienced real estate agent during the negotiation process. Once the negotiations are finalized, you can then sign the contract. This legal document should contain details such as:
- The legal address and description of the home
- Line items like ‘Deed is made out to’ and ‘Purchaser’ that include ‘and assigns’
- The purchase price
- The earnest money deposit (EMD)
- The due diligence period
- Right to terminate
Step #5: Find an end buyer
If things go according to plan, you will find a buyer from the list you created earlier. Besides promoting to your buyers list, advertise your deals through digital marketing, direct mail, real estate meetings, auctions, and REI clubs.
Keep in mind that different kinds of homes will attract different kinds of buyers. Properties that require little or no repairs are likely to attract rental property investors, while those in a very bad shape might attract rehabbers.
If you target real estate investors, you can increase your chances of finding a qualified buyer in a timely manner exponentially by helping potential buyers conduct efficient and accurate investment property analysis. Mashvisor’s real estate investment software has all the tools that you need to evaluate the investment potential of any residential property in the US housing market. In this way, you can highlight the high rate of return which an investor will get by renting out the property traditionally or on Airbnb.
Step #6: Assign the contract
The last stage of the wholesaling real estate process is signing the assignment of contract agreement. The document should simply mention that you are assigning the contract for a specific amount of money. On the day of the closing, the buyer should show up with the required paperwork and money to buy the home, including your assignment fee.
If you’d like to further enrich your knowledge of the real estate wholesaling business, you should watch our video below:
Conclusion: Wholesaling real estate in 2021
Though the process of wholesaling houses might appear complex, it is not that difficult. If you educate yourself about how wholesale real estate works, you will enhance your chances of success in 2021.
To find the best investment properties for sale to get started with wholesaling in 2021, sign up for a 7-day free trial of Mashvsor followed by a 15% discount for life.