In our world we often get asked the question, “how do I know if investing in wholesale real estate is right for me”? To answer this question, we like to first explain the ins and outs of wholesaling.
Wholesaling is a process that is similar to house flipping with one major exception. The wholesaler or investor is not looking to do any of the fixes. Typically, a seller will sell their home to a buyer quickly and for cash. Typically, the wholesaler is looking for a deal that is based on the value of the home after repairs are completed.
For example, if the homeowner owns a home that will be worth $100,000 after the repairs and renovation, the wholesaler will work to negotiate a deal that is below that. This deal will also need to have room for a rehabber to make money. The key with signing the purchase contract for a wholesaler is including their name and the words, “and/or assigns” on the buyer’s line. This allows the wholesaler to “assign” over the property to another buyer (rehabber).
It is the job of the wholesaler to have developed a buyers list so they know people who are interested in purchasing the house. Remember, they are looking to turn around the house fast! This list often contains other investors who are looking to repair the damages and turn it around for a profit. These buyers are what we call house flippers or rehabbers.
If we use the same example above regarding the transaction with the seller when it comes to your rehabber, we will get the following. Let’s say your buyer is willing to pay 70% of the home’s value once it is fixed up (in this case it is $100,000). You create a deal that will sell the home to them for $70,000 minus estimated repairs. This means that you pocket as much as $15,000 for being the person to set up the deal. On top of that, your rehabber makes money on the home project and your seller doesn’t have to do any of the repairs.
Are you still interested in learning more about real estate investing wholesaling? We have a few keys to keep in mind when looking for your first deal.
We want to help you achieve your goals when it comes to becoming a real estate investor. Have a home you wish to wholesale? Give us a call today to find out if it meets our criteria!