If you’re looking to invest in real estate and don’t know where to begin, start with wholesale! Wholesaling properties is one of the best ways for newbies to get their feet wet buying and selling, and it can be very lucrative.
What is Wholesaling?
Wholesaling is connecting sellers who need to sell with buyers for a fee. Typically these sellers don’t have the time or money to put into rehab or property management and prefer to get rid of the property. When you find an owner eager to sell, you would add your fee to their asking price and match them with a buyer, quoting the whole amount. Ordinarily, someone looking to sell would hire an agent or list the home themselves. In this scenario, the wholesaler is the middle man and finds both parties him/herself.
How Do I Find Buyers and Sellers?
Often it’s easier finding properties than finding the owners. One way to go about this is by driving around and looking for abandoned homes and buildings. When you get a list together, you can check with the city hall to get the names of owners. There are websites like neighborwhoo.com as well, but city hall might be your best bet. After you get the owner’s information, you can send them a letter to inquire about their interest in selling. This can take time and patience, but if you consistently build your list and send out inquiries, you’ll get results.
When you find an owner ready to sell, the next step is to get them in a contract. Don’t worry, there are plenty of resources you can find to download free contract templates. The most common way to legally facilitate the deal is with an assignment of contract. The assignment stipulates the fee you’ll receive for the transaction and that the buyer you find will assume the contractual obligations- i.e., pay for the property.
Finding sellers is a little more complicated. There are various company’s that buy properties without much hassle, but you would want to be sure to negotiate your fee in the price as they typically work directly with sellers. Facebook groups and property auctions are also great options for cash buyers. As you get more familiar with the process, you can start to build up your contact list. Some buyers have preferences and specific areas they’re interested in, and you’ll begin to keep an eye out for this and be able to form relationships.
When Do I Get Paid?
When the buyer signs the contract you all are ready to move forward with the closing! It’s good practice to get a deposit after signing just in case, but as you get to know investors you may not continue to require it. If everything goes as planned at the table, you will get your check when the seller does.
As with all new projects, you’ll have to do a lot of research but with hard work, it will definitely pay off. After a few wholesale deals, you can earn enough cash to start doing flips and rehabs or purchase rental properties. There are several wholesalers who have made a living this way and don’t feel a need to explore other aspects of real estate. Regardless, if you ready to jump into real estate, start with wholesaling.