Wholesaling as a Way to Flip Your Real Estate Investment Business

Thursday, February 11th, 2010 | Uncategorized

Property wholesaling is one of the more fundamental ways to get involved with real estate investing. Wholesaling can be defined as contracting a property with the intention of selling it quickly at a higher price. Basically, an investor buys a property at below market value and then resells it for a profit. Sellers are motivated to sell because for some reason (financial strain, divorce, inheritance, costly repairs, etc.), the property has become a burden.

As someone involved in wholesale real estate investing, your objective is to get a house under contract and find a buyer as quickly as possible. You want to “flip” the house. A speedy turnaround is the key here. A wholesale buyer accepts that they are buying a property in “as is” condition, and are often rehabbers who will fix up the property themselves to sell to the retail market. For you, the investor, there is little if any risk and fast profits. While profit margins are not as big as with some other investment strategies, it’s still easy money in your pocket, generally $4,000 – $15,000.

Your job is to connect a buyer and a seller – very simple in the real estate wholesaling equation. You never actually take ownership of the property. When you work with a seller, you get the property under contract, so you have control over it. You then assign the property to the buyer. This type of investment works because you know you can sell a property before you even buy it.

Finding wholesale properties can be done through the MLS, with local FSBO listings or your bird dog. But how do you find the right buyer? Start with your own buyers list, and then work with your local REI club or your centers of influence. If you choose to advertise for a buyer, consider placing an ad in the Investment Property section, offering the property as a “Handyman Special” or a “Fixer Upper.”

Your target buyer will be a rehabber or someone who will rent the property, so you won’t necessarily be the one doing the fixing up. However, you still want to consider staging the house and making it look livable. The amount of money you want to put into the property will be determined by the amount of money you already have in the house (the ratio). Often a simple, good clean-out and improved curb appeal will do the trick. Leave the big repairs and changes to the rehabber.

There is no one “hot spot” for wholesaling – it can be done in any neighborhood, in any state, whether it’s Virginia, Ohio, Washington or anywhere in between. However, it is generally successful in transitional neighborhoods – those that are up and coming in the community, therefore gaining in demand.

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1 Comment to Wholesaling as a Way to Flip Your Real Estate Investment Business

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