Are you ready to make some money in real estate without having to flip a house or be a landlord? Then learning how to wholesale real estate properties may be for you. It’s a tactic many investors take advantage of, and for a good reason.
Wholesaling real estate is an excellent way to make money without having to invest a ton of cash or flat out buy a property. But there are also risks.
But don’t worry; we’re not here to pull punches and keep any tips to ourselves. We’re here to share with you the ins and outs of getting started so that you can begin to grow your portfolio and your bank account.
What You Need to Get Started
Wholesale real estate can be tricky. The whole process takes a keen eye, understanding the process and the market, and some connections.
While it is low-risk compared to other forms of entering into real estate investing, not being prepared is a surefire way to end up with a property you didn’t expect to purchase. So, before we get into the process steps, we should cover the groundwork.
The first question to cross your mind is likely going to be whether or not you need a license. The short answer is no. While it’s certainly helpful, it is not necessary.
However, a license will give you access to the MLS that shows listings before reaching the public. Considering you are looking for properties listed below market value, that’s a powerful tool to have.
Regardless of whether you have a license, networking is also an essential tool. Your goal here is to establish connections with industry professionals whereas a Realtor would want to make these connections in addition to home buyers and sellers.
Lawyers, lenders, title companies, other agents, and even movers are sources from which you can gather information on homes going up for sale. They can also help point you in the direction of buyers who are just as essential to building connections.
But networking will only get you so far. You also need to develop a comprehensive understanding of the market. It is important to know what properties are desirable, what the average prices are, and who the buyer is to ensure your success.
How to Wholesale Real Estate with No Money
You do not have to have money to wholesale real estate, but only if you can move the contract before payment comes due. This is a very risky strategy even if you have a large network, so proceed with caution.
The amount of money you can expect to invest in wholesaling real estate is almost always the next most significant concern. The good news is that the process requires little of your own money, if any at all. But there could be fees outside of the property itself if you don’t know what to look for. Negotiating is key!
Without negotiating, you will be expected to cover earnest money, appraisal, and title company fees. However, you may be able to persuade the seller to cover these fees. Your role in the process is aiding along the transaction and securing a buyer. Make sure you remind the seller of this and that you do not necessarily intend to be the buyer; but instead your job is to work out a deal that eliminates you from making any investment of your own by helping them find a buyer more quickly. The seller won’t get as much, but they won’t have to go through the hassle of marketing and negotiations.
How to Wholesale Real Estate Step-by-Step
The entire process relies on the research and connections you establish, and you can expect that to take up more of your time than anything else.
After that, all that’s left is a simple process of creating and fulfilling the contract.
Below is a list of the steps you need to take to wholesale real estate, along with some pointers to help increase your success rates.
Find a Property.
Finding a property is simple on paper, but you shouldn’t jump on the first lead you come across. While developing a list of buyers, you must understand the criteria they require a property to meet. Once you know who the buyers are for what, you want to wait for properties that you know are both desirable and below market value to ensure your likelihood of success.
Build your Backup Plan
Between finding a seller and entering a contract, it pays to build a backup plan. While these opportunities are considered low-risk, there’s a chance for things to go wrong. If they do, you need to ensure you have the means and willingness to purchase the property. Whether it’s to rehab the home and flip it or rent it, you need to make sure you have a “Plan B” that you can execute with confidence.
Negotiate and Sign
Upon finding a seller, it’s time to draw up the contract. By default, the agreement will determine how much money you tie up in the process. Because the seller knows that you intend to keep the difference between the originally agreed to price, and what the buyer agrees to pay, you can expect to bring your best negotiation skills to the table.
Connect and Negotiate with a Buyer
With the property under contract, you’re ready to refer to your list of buyers interested in the offer you’re prepared to extend. Creating a comps list will help you come up with a fair price to present to buyers. Do keep in mind that the buyer, much like the seller, knows your role in the process. That means your negotiation skills may be tested once again.
Assign the Contract
After agreeing on a price with the buyer, it’s time to assign the contract to them. When setting the contract, you and the buyer must agree to the assignment fee and deposit amount. Essentially, this stage states that the buyer is purchasing the home, and you are collecting the difference between what they agreed to pay and what the selling price to you is.
Close and Collect
At closing, you just need to be present to make sure the deal goes smoothly. Once the title company wraps up the transfer, you will receive your property purchase payment.
Wholesale real estate offers investors a ton of great opportunities. The most obvious is that it’s a way to make a quick profit.
But don’t forget about the connections you need to establish and how each person in your network and each property serves as a learning opportunity. The most successful real estate wholesalers are organized professionals with large networks that also know the buyers’ specific needs, wants and what makes them decide to take the property.
