You have a number of successful fix and flips under your belt, but you are looking to grow your real estate investment business in other ways. It might be time to wholesale certain deals, earning fast cash without the added time and expense of working with general contractors to repair a distressed property.
In a wholesale deal, the investor buys property at a tremendous value and flips it immediately to another investor without spending time and money on any rehab. In some cases, the buyer can purchase the contract on the property and sell it immediately, executing the deal with no money out-of-pocket.
Young investors often wholesale properties as they learn the business and try to earn cash for their first fix and flip investment property. But wholesaling is also a good way for experienced investors to manage cash flow and generate additional income in between larger projects.
“Wholesaling may provide a better return on investment than some fix and flip ventures,” says Steven Davis, CIO/CFO of 5 Arch. “When you find a property you know you can sell fast, there are fewer unknown variables than there are when rehabbing a property.”
What You Need to Know Before Becoming a Wholesale Pro
When you wholesale properties to other investors, you can either sell the property or you can sell the contract on the property. This is an important distinction, because it is illegal to market real estate without a broker’s license. However, if you are selling to business associates using word of mouth, you may not have to market your wholesale properties. Many successful wholesalers do very well without ever getting a broker’s license, but it is something to consider and can provide a host of advantages.
However, studying for and taking the real estate broker’s licensing exam will give you important insight into writing legally binding real estate contracts. The process can also provide connections to other real estate agents who may be willing to sell you their properties at wholesale prices if you promise a fast sale and easy closing.
Earning your broker’s license can also help you gain the trust of potential sellers, gives you access to MLS listings for more accurate comps, and can protect you against litigation, because you are backed by the Department of Real Estate.
Finding and Negotiating Deals
As you build your network of real estate agents, be sure to cultivate those who are particularly investor-friendly. This will be an ideal place to start wholesaling properties. “As long as you can find another investor willing to pay more than you did, which is easier than ever in today’s seller’s market, you can flip wholesale properties quickly and turn a fast profit,” explains Davis.
Any property you can purchase for less than its After Repair Value (ARV) is ripe for a wholesale deal. If you can flip a property for $5,000 in profit immediately, perhaps it is worthwhile to flip it instead of investing time and money in renovating the property to earn just $6,000 after rehab costs.
In addition to staying in touch with your network of realtors, you can find wholesale properties through online or roadside ads, REO (bank-owned property) lists, or through a real estate bird dog.
The Secret to Wholesale Success: Fast Access to Cash Counts
The key to successful wholesaling is simple: Find properties and close the deal before other investors. Having fast access to cash puts you ahead of other investors when you find that perfect property.
“Our common sense approach to underwriting ensures speed and certainty of closing,” says Davis. “While other investors watch deals slip away, our customers can buy and re-sell properties quickly, putting money directly in their pocket.”
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