How To Wholesale Real Estate
What does Wholesale Real Estate mean?
Before we describe how to wholesale real estate, we should briefly discuss what it means. What does Wholesale or wholesaling means in real estate terms? Is it similar to wholesaling in other business commerce terms? The answer is sorta, for the most part wholesaling real estate is similar to wholesaling other goods. Wholesaling is the process of assuming ownership of a property or buying it and quickly selling it to another investor. The term “wholesale” comes from the fact, that as the wholesaler you are between the initial provider aka the seller and the end buyer of the house (investor).
How To Wholesale Real Estate?
How do you go about wholesaling a home? We are going to give an overview of how to wholesale real estate. Before any thoughts of wholesaling you must first have a property under contract. There are 3 main steps to wholesale real estate.
- Market a property that you have under contract to prospective buyers, preferably other investors. How fast you can re-sell a property is very important in wholesaling. Your goal is to have a buyer immediately or as close to the time you get a home under contract. As a wholesaler you need to be a proficient marketer to be effective.
- In step 2, you have to prequalify interested buyers. You have to weed out investors that are not qualified. What “qualified” means may differ based on your requirements as a wholesaler and an investor on the whole. Some best practices is to ensure that they have the funding, work on your schedule and close quickly. Step 2 is where you show the qualified buyers the property you have under contract.
- The final step is the closing. There are 2 options for closing. A Wholesaler can use one of two strategies, assignment of contract or double close. An assignment of a contract is a strategy where you never really own the property or purchase it but just the rights. If you decide to use a double close strategy, you will have to buy the property and then sell it to another buyer. The specifics of the process may very depending where in the country you operate. You should verify what the rules are in your area.
Why Would I Wholesale Real Estate?
Wholesaling is a viable option of building capital quickly. The return on in investment is attractive because you do not have to put as much capital as you would in a rehab. If you use an assignment of contract you have no closing costs because you never truly own the property. Wholesaling using a double close has its own benefit. You do not have to disclose how much profit you are making on a deal to the seller.
Limitations
The Wholesaling process requires capital that beginner investors may not have readily available. Double closing requires that you purchase the property from the seller with your own funds. A double closing strategy also means you pay closing costs twice; once when you purchase it from the seller and again when you sell the property.
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