Welcome to the topic “THE ART OF WHOLESALING”

When done properly, investing in real estate can become a very lucrative business venture. One can find plenty of ways to approach the business. One of the many ways to enter and succeed long term is to become a real estate wholesaler. As a beginner, perhaps you have been considering a career in real estate for quite some time, but you are yet to take a step.

Wholesale real estate is considered the perfect way to get involved in this business as a real estate investor. There are various benefits and a few disadvantages also, as with any new business. It is important to evaluate all of these factors before taking the plunge into real estate investing.

What is real estate wholesaling?

In the real estate wholesaling process, the wholesaler acquires a contract from the property seller and then assigns the same deal to the end buyer. Many experts consider it as one of the best short-term investment strategies. It is especially advantageous for starters looking to break into the real estate investing industry. The main reason is that wholesaling doesn’t require a significant amount of capital to get started.

Wholesaling can be very helpful for beginners looking to learn about the real estate market quickly and gain invaluable negotiation skills. A wholesaler can make a profit by identifying properties that are being sold under market value, thus creating an agreement with the property seller and then assigning this purchase contract to the other buyer.

Revenue is earned through the wholesaling fee attached to the transaction, and it is often a percentage of the overall cost of the property. Usually, the end buyers are real estate rehabbers or other investors who would prefer not to spend time identifying discounted properties or getting stuck in negotiations with the sellers. The wholesaler acts as the middleman and generates income by helping the real estate investors to find and close on potential deals.€

Wholesale real estate investment vs house flipping

There is no correct answer for the wholesaling vs house flipping debate. It is the investor that has to determine what he or she wants out of the investment and choose which strategy is best-suited to get him/her a step closer to their goal.

House flipping takes more time, costs more and comes with more risk. However, if the investor is adequately prepared, then house flipping tends to offer generous returns, which the investor can take advantage of.

On the other hand, wholesaling real estate can be completed much quicker, costs investors significantly less in terms of upfront costs and is therefore much less risky. However, as a result of this, returns are generally less than those gained from house flipping.

Whether an investor should flip or wholesale entirely depends on their experience, available time, access to capital and risk aversion. Keep in mind that there is no right or wrong answer. One can make a lucrative career out of each of the strategies. Though wholesaling usually generates less return per deal, the short-time period can make up for the lower volume returns. On the other hand, flipping will see investors complete fewer deals, but at much higher profit margins.

Advantages of wholesale real estate

If you are to make real estate a core part of your investment strategy, then wholesale real estate is a wise choice for you. Various benefits are associated with a wholesale real estate strategy.

Make money in little time

If you have educated yourself on the process and have done your due diligence, then wholesale can be a very lucrative business for you. It is great for new investors as it requires little to no money or experience. If your offer happens to be accepted, then it is quite possible to close the deal and get a check in a month or even less time.

Get an idea of the real estate market

Wholesaling is great for beginners, as it immerses them entirely into the real estate industry in a relatively short period of time. By having the right education and instruction, you will be able to learn the basics of negotiating, marketing, organizing and also acquiring proper legal documentation.

Basically, a wholesale deal combines many different aspects of other types of real estate transactions that you would be encountering throughout a career in investing. Once you have a few wholesale deals under your belt and the experience that this will bring, it will become easier to know what to look for in exchanges, and what to avoid.

No credit involved and very little cash required

If being short of cash or having a low credit score keeps you from investing in real estate, then wholesaling is the ideal route for you to take. Even if you have bad credit, you are still able to participate in a wholesale agreement because you usually don’t purchase the property.

Instead, if you are to assign the purchase contract to the end buyer, then he or she is the one who has to go through all of the credit checks and fund the purchase. However, you should be careful and keep in mind a few downsides of wholesale real estate also.

Becoming a successful real estate wholesaler

You must be wondering whether wholesale real estate investing is a good fit for you. In order to get started, you must have the traits of a successful wholesale real estate investor, and you must be able to execute a proper business plan.

A trained mindset

One can argue that many successful entrepreneurs don’t have innate abilities or talents. It is the right mindset that successful investors tend to have. An attitude that gets cultivated over the years and creates an ability to handle each and every task with dedication and consistency.

Making use of technology

People who incorporate technology into their workflows tend to be able to process more information accurately, and also to maintain organization. Several tools can be a boon to your business, including Customer Relationship Management (CRM) software and different mobile applications that help you to scan and store your documents in the cloud. It is best to learn business automation with real estate software.

Having an effective website

According to the National Association of Realtors, around 51% of homebuyers search for suitable properties on the internet. These people represent the largest proportion of consumers who choose the web when they search for goods and services. If you have a great website, it is much easier to establish your brand and encourage more custom to your business.

Have access to neighbourhood comps

The success of a real investor mainly depends on their ability to identify comparable home sales, so that they can competitively price their properties. In addition to this, neighbourhood comps allow different investors to identify properties that are being sold under market value. If you want to access reliable market transaction data, one way is to partner up with a real estate agent who has access to MLS.

Must know when to outsource or delegate

Many savvy entrepreneurs are aware of how much their own time is worth. Handling daily projects and tasks is a continuous balancing act. Investors who try to accomplish everything autonomously might end up being hurt in the long run. If you have too many tasks or activities in your schedule, it can lead to errors, sloppiness and missing some golden opportunities. It is a very good investment to know when to outsource or delegate projects or tasks.

The double close

There are cases where a wholesaler may choose to conduct a double escrow, for example when a seller is not agreeing to an assignment of the contract clause, or when local regulations do not allow it. Double close is also known as simultaneous close, and it is also a very profitable real estate wholesaling strategy.

The process of double selling sees investors purchase the property and then resell it at a later date. It depends on the particular scenario; the subject property reselling can be on the same day that it was purchased or even 60 days later.

Your company will enter a chain of title during a double close, and therefore, your company will be considered the valid owner of the property for a limited period of time. Accordingly, the transition of property ownership transfers from seller to you officially. Then it is up to you to find a buyer who is willing to pay more than you paid for the property, generating your profit margin.

Conclusion

For beginners, wholesale real estate is an excellent opportunity to enter the arena of real estate investment, as it requires little to no capital, credit, experience or license. It is a great way to learn the ropes of the real estate industry. It is very possible to maintain a full-time career in wholesale real estate. Either way, if you are driven, disciplined and organized, there is no limit to the amount of money that you can make in your wholesaling career.