Wholesaling - getting started

What is wholesaling real estate?

Ever since the great economic recession of 2007-2008, the world of real estate has never been the same. Getting financing for real estate investments has become harder than passing a bill in the House of Representatives, and that is saying something. People wanting to get into the lucrative real estate market have had to use other innovative ways of getting money to finance their deals. The traditional method of obtaining credit from a lending institution has long since been overtaken by faster and more accessible means of getting money to bank roll real estate investment projects.

One of the fastest and most assured ways of getting quick money in real estate is through wholesaling real estate properties. The art of wholesaling really kicked off after the economic recession of 2008, when people were forced to come up with creative ways of selling real estate properties quickly.

What wholesaling real estate entails

This is where a real estate investor buys multiple houses or properties at very low prices and subsequently sells them to individual (or retail) investors at a more affordable cost than what is being asked for other standard properties on the market. As such, the wholesaler will get a nice little mark up from their original purchase, while leaving the end investor with enough room to make a handsome profit as well. This operation is only successful because of the scale in which it is done. Making three to five thousand dollars for one property might not sound like a lot of money to make wholesaling real estate sound viable. However, if this is done multiple times a month or with multiple properties at once, then the math will start making sense very quickly.

In most cases, the properties that are originally purchased by the wholesale real estate investor are properties in a sad state of affairs, often needing a lot of repair and renovation so that they can be used by the end buyer without putting them in any danger. Therefore, the wholesale investor is targeting a transactional flip with the homes that he will buy. Flipping homes is one of the quickest ways of making a lot of money in real estate.

Some investors have gone a notch higher and have even come up with ingenious ways of buying real estate properties on wholesale without using their own money to do it. This limits their exposure and maximizes their earning potential, provided that the way in which they are conducting this business is legal and accepted in the state of their operation. One of the ways of doing this is through the use of contracts. What happens in this scenario is that a wholesale real estate investor signs a legally binding agreement with the seller of a property and pays a token deposit amount called EMD or earnest money deposit, that in fact could be as little as ten dollars. The wholesale investor will then bring an interested buyer to the table in order to assign them the contract for the property, therefore transferring the burden of paying for the property to the end buyer, getting a nice profit for finding the deal, while basically putting down close to zero in hard monetary terms.