Wholesaling involves finding an available property from a willing seller, placing it under contract with the seller and finding a buyer for that property and either assigning the contract to your buyer taking a fee for your service of finding and negotiating a price with the buyer, or doing a “double close” with the original seller and turning around immediately and selling that property to your buyer at a higher price.
Wholesaling is often a starting point for those getting into the real estate investment business due to the low cost of entry. That low financial cost of entry, however, is often offset by significant amount of time and effort to find deals, find buyers, and manage the transactions through completion.
Wholesalers spend much of their time finding sellers that are highly motivated or in a distressed situation and the wholesaler provides the benefit of not having to pay agent commissions.
Who Would Sell to a Wholesaler?
- Owners that don’t want to list their house and have others know about it
- Owners facing foreclosure
- Divorce situations
- Properties that have been inherited by family member due to a death
- Landlords that are tired of managing properties and tenant problems and are looking to get out of the business
- Owners with properties that need significant repairs they can’t afford, or just don’t want to deal with
- Sudden and unexpected loss of a job making the home unaffordable
The possibilities and situations can vary widely.
What Are the Benefits to Sellers?
Potential benefits to sellers include:
- The ability to sell a property and solve their problem very quickly
- Not having to pay realtor commissions
- Selling the home “as is” and not having to make any repairs or renovations
- Not having to list and show the property to potential buyers or the general public
- Avoiding bankruptcy and bad credit
What Are the Benefits to Buyers?
Most real estate investors have specific strategies they use to leverage their personal (or their business’) strengths. Taking the time and effort to find motivated sellers may not be a strength. These investors gain significant benefit by having wholesalers finding deals that they can turn into investments that fit their strategy. This might include fixing and flipping, operating long term or short-term rentals, etc. The wholesaler can be a valuable partner for these types of investors.
What Are the Benefits to the Wholesaler?
Wholesaling requires very little, and in some cases no funds to get started. Opportunities for significant income in very short amount of time exist with this strategy. It’s not uncommon to make $5,000 to $10,000 in a deal that can take less than a couple of weeks to put together. It is also not unrealistic to make significantly more than that.
The downside for wholesalers is that if they aren’t out hustling – finding and making deals, then they will have no income. In many ways, wholesaling is trading time for money – similar to a job, albeit with more control of how much or how little time you put into it and when you want to work.
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