Wholesaling real estate has been one of the best entry points for those who wishes to begin a career in real estate. It requires the smallest amount of financial investment and the real estate wholesaler does not need to exert an extreme amount of effort into marketing the property. Moreover, the risk involved in wholesale real estate is not as substantial. However, potential real estate wholesalers do not know where to begin finding properties and they do not know where to wholesale real estate.
Wholesale Real Estate Defined
In general, wholesale real estate is when a real estate wholesaler finds a property and he/she helps the seller find that property an end buyer. A wholesale real estate property is usually sold below the market value and the real estate wholesaler usually adds a certain amount on top of the seller’s asking price which will then be considered as their profit.
Wholesale real estate is appealing to those who wishes to immediately sell their house at a lower price and does not want to go through the trouble of hiring a real estate agent. The seller and the real estate wholesaler will sign a contract that enables the wholesaler to assign the sales contract of the house to an unrelated party. The unrelated party will then be considered the final buyer of the aforementioned property.
The Wholesale Real Estate Process
Wholesale Real Estate Process Step 1: Finding a Property
Since you are new to the wholesale real estate business, it can be quite tough to find your first wholesale house. There are various ways to find a property that is sold below its market value. First, the real estate wholesaler can advertise around their local area. Finding a property that is priced well below its market value might seem as though the buyer is finding a needle in a haystack. However, it is not an impossible act, but it would not be as difficult if they would just happen to know where to look.
If the real estate wholesaler is seeking to find one of their first wholesale houses, they can begin by looking at foreclosure deals. Since foreclosure deals are always offered at a discount, they are appealing to several other potential investors, so there are many competitors vying for the property. The key to a successful purchase of a foreclosure deal is getting through to the homeowner and their needs as quickly as one can, since a foreclosure is of public knowledge.
There are also other unique ways to find bargain properties such as taking note of death notices since the heirs of a deceased person usually disposes of the estate. Moreover, befriending those whose job is to go around town, such as your local mailman, can be of immense benefit for a person looking for bargain properties since their job is to go around from house to house and they could be well informed of the state of a property.
In addition to this, the technology afforded to us nowadays has also proven to be extremely beneficial for those seeking for lower priced houses, since there are online listings for properties that are priced below market value. For those interested in properties that are for wholesale houses, you can browse through this link and search for bargain properties that appeal to you.
Wholesale Real Estate Process Step 2: Computing Possible Offer
When it comes to wholesale real estate contracts, there are various costs that are needed to be taken into account. The real estate wholesaler should factor in the potential repair cost of the distressed property and the after repair value. The state of the property will have an effect on the price that the buyer will be willing to shell out.
There are also potential professional expenses, especially if it is your first time to embark in the wholesale real estate. There are also other miscellaneous costs involved when it comes to the sale of wholesale real estate such as the property taxes, utility costs, advertising cost, and other miscellaneous payments
The key to a successful wholesale real estate transaction is to ensure that the final investor can also reap immense benefit from this deal. Since the wholesaler would not be the final buyer, it is rather vital that there is room for the end buyer to earn profit from this purchase and the only way to guarantee this is to sell the property at a significantly low price.
Wholesale Real Estate Process Step 3: Marketing the Property
Once you have a property on hand, it is now time to advertise the actual property. Each real estate wholesaler should have a buyer’s list because this will be the easiest way to pinpoint the potential buyers of wholesale real estate.
When the real estate wholesaler finds a wholesale house, it is vital to send out a message to clients about the existence of such property. This makes it easier for the clients to make an offer on the property. Most experienced real estate wholesalers already have a system on how to categorize and personalize the e-mail and text blasts that they send to the people on their buyer’s list.
It is essential to categorize the buyer’s list because you do not want the messages to come across as a spam e-mail. Otherwise, your clients would just immediately discard the messages they receive from you. There are several other reasons why you can’t find a buyer for your wholesale real estate. For more details on this matter, you can refer to this article by clicking this article: Reasons You Can't Find A Buyer For Your Wholesale Deal.
Wholesale Real Estate Process Step 4: Deal Negotiation and Closing
Once you find a willing buyer, you have to quickly make a move on the property since wholesale deals are founded on the immediate transaction process. There are many forms of wholesaling that is available within this kind of business, but the most common way to wholesale real estate is by assigning the contract to the end buyer. The real estate wholesaler would usually have some kind of contract from the seller that authorizes them to sell the property or to assign ownership of the property to someone else.
The potential buyer and seller is then ready to begin the negotiation process which can involve haggling or price negotiations. Once a sale has been made, the closing process is set to begin. The wholesaler can just keep in contact with a title company and have the title company close the deal for them.
The Legality of Wholesale Real Estate
The wholesale real estate involves brokering a deal, but a real estate wholesaler does not have an actual license to function as a broker. Depending on the state where the transaction has been made, the wholesale real estate transaction can be considered illegal since the real estate wholesaler does not have the actual ownership of the property.
However, the argument that it is illegal can be defended by saying that this is technically an assignment of the property. The real estate wholesaler is not selling the actual property, but they are selling the wholesale real estate contract. If you want to begin a career in wholesaling, it is extremely wise to get a license as a broker and work on the legalities of the ownership of the property.
The Problem with Wholesale Real Estate
When it comes to wholesale real estate, it might appear too good to be true. To be honest, wholesale real estate does have several advantages, but it is not as infallible as you think. Wholesale real estate is not as profitable, especially since your profit is only based off the difference from the seller’s asking price and the price that the buyer is willing to pay.
Real estate wholesalers are also expected to know the numbers behind the computation of the offers they receive. They are also expected to take into account all the factors that can affect these numbers such as the costs and expenses related to the transaction.
In conclusion, beginning work on wholesale real estate will not be as easy, but as we have said, it is the perfect entry point to the real estate business since it requires the least amount of financial capital and the risk involved is not as great. However, the legalities and the disadvantages involved with being a real estate wholesaler will also require immense preparation.