{"id":81847,"date":"2016-10-24T05:00:59","date_gmt":"2016-10-24T11:00:59","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=81847"},"modified":"2021-03-16T12:12:41","modified_gmt":"2021-03-16T18:12:41","slug":"assignments-vs-double-closing-vs-buying-and-selling","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/assignments-vs-double-closing-vs-buying-and-selling","title":{"rendered":"The 3 Ways to Wholesale Real Estate (& Why I Prefer One Over the Others)"},"content":{"rendered":"

When you hear the term \u201creal estate wholesaling<\/a>,\u201d what automatically comes to mind?<\/p>\n

Yep. You\u2019ve guessed it\u00a0—\u00a0assigning contracts.<\/span><\/p>\n

Assigning contracts is the most popular method in real estate wholesaling, and some even think it\u2019s the only form of wholesaling. But did you know that\u2019s only <\/span>one<\/b> of the many real estate wholesaling strategies out there?<\/span><\/p>\n

Today, I wanted to take the opportunity in this post to dive into all that real estate wholesaling is and what different types are available. So let\u2019s jump into it!<\/span><\/p>\n

What is Real Estate Wholesaling?<\/h2>\n

Wholesalers are essentially \u201cmatch-makers\u201d in real estate. They are the middleman between a motivated seller and an investor-buyer. <\/span><\/p>\n

Here\u2019s how it works. <\/span><\/p>\n

Wholesalers find a cheap property and sell it to real estate investors at a steep discount. \u00a0<\/span><\/p>\n

The most important aspect in this is finding an \u201coff-market\u201d property, which is a property not listed on the MLS. Then once you\u2019ve found a property, you sell it\u00a0at a discount to an investor, leaving enough margin for the investor to make a nice return. <\/span><\/p>\n

So, guys, your ultimate job is to serve others!<\/p>\n

You serve motivated sellers by helping them sell their property during a catastrophic event that has taken place in their life, and you serve investor-buyers by feeding them off-market deals. \u00a0<\/span><\/p>\n

It\u2019s that simple!<\/span><\/p>\n

Now let\u2019s discuss the different types of real estate wholesaling methods out there.<\/span><\/p>\n

\"honest-wholesale\"<\/p>\n

Related:<\/strong> How I Made $5,000 on My First Wholesaling Deal \u2014 & Why You Should Consider This Strategy<\/a><\/em><\/p>\n

The 3 Ways to Wholesale Real Estate<\/h2>\n

Assignments<\/h3>\n

There\u2019s a reason why assigning contracts are the first thing that comes to mind when you think of real estate wholesaling. It\u2019s the most common practice, it\u2019s the easiest way to break into wholesaling, and it doesn\u2019t cost you a penny!<\/span><\/p>\n

This method is quite simple — you get the property under contract with the motivated seller and then sell \u201crights\u201d of the contract to an investor.<\/span><\/p>\n

Take a look at this scenario:<\/span><\/p>\n

You find a motivated seller who\u2019s desperate and willing to sell their home for $20,000. After analyzing the deal<\/a> and running the comps in the area, you determine the property will need $20,000 in rehab costs and has the potential to sell for $90,000 at retail price, leaving the investor with a $50,000 profit margin. <\/span><\/p>\n

So, you draft a purchase agreement with the seller for $20,000, once you find a buyer, you offer the buyer rights to your contract for a fee of $5,000.<\/span><\/p>\n

In return, you pocket the $5,000 earned from the contract fee and that\u2019s it! <\/span><\/p>\n

Sounds pretty simple, doesn\u2019t it?<\/span><\/p>\n

Now, although this method sounds easy, affordable, and simple, I personally dislike using this method for these reasons:<\/span><\/p>\n

1. You\u2019re on thin ice legally!<\/strong><\/em><\/p>\n

There\u2019s been a lot of debate on whether assigning contracts is illegal or not. The debate stems from the fact that you are marketing a property you don\u2019t technically own, and you\u2019re acting like a real estate agent<\/a> by overseeing a transaction between the seller and the investor, which could potentially lead you into some legal trouble.<\/span><\/p>\n

2. There\u2019s too much room for dishonesty.<\/strong><\/em><\/p>\n

Guys, let’s be honest — when assigning contracts, some wholesalers are not fully honest about who\u2019s really purchasing the property. If you enter into a purchase agreement under the impression that you\u2019re buying the property but the contract is actually for someone else to purchase it, that sounds a bit dishonest to me. <\/span><\/p>\n

I would highly recommend seeking legal advice to ensure you\u2019re going about assigning contracts the right way.<\/p>\n

Double Closings<\/h3>\n

The double close method is used when you purchase a property and then sell it to an investor immediately — within minutes!<\/span><\/p>\n

So at closing, you first sign the documents with the motivated seller, and then a few minutes later, you meet with the buyer and then sign the closing documents with them. <\/span><\/p>\n

In terms of funding, you can use your own funds to first buy the property, or you could use a transactional lender who provides a one-day-only loan, just to cover the purchase. Another way is to have the end buyer pay for the closing with the motivated seller, as well as include an extra \u201cfee\u201d for you. <\/span><\/p>\n

The success of double closing ultimately depends on timing! The biggest risk using this method is that you have no control of the transaction. <\/span><\/p>\n

So if either the motivated seller or the buyer pulls a no show, then things could get hectic and your reputation could suffer.<\/span><\/p>\n

\"first-down-payment\"<\/p>\n

Related:<\/strong> How to Stand Out From Other Wholesalers by Developing a 5-Star Reputation<\/a><\/em><\/p>\n

Buying and Then Selling<\/h3>\n

This is the method used by my company. In my opinion, it\u2019s legally the most safe and the easiest way to wholesale real estate!<\/span><\/p>\n

You don\u2019t have to worry about breaking any laws, you fully own the property so you can market it\u00a0however you want, and you have full control of the transaction so the fate of the deal doesn\u2019t depend on anyone else. <\/span><\/p>\n

In this method, all I am doing is simply selling a property I own, and everything just runs a lot more smoothly because of it.<\/span><\/p>\n

Now, on the downside, buying and selling requires a lot of working capital, which can become quite expensive if you\u2019re looking to wholesale full-time. <\/span><\/p>\n

For instance, my company buys roughly 12 to 15 properties a month at $15,000-$30,000 per property. As you can see, this can be quite expensive!<\/span><\/p>\n

Conclusion<\/h2>\n

These are the basics of real estate of wholesaling! <\/span><\/p>\n

I hope this blog post encourages and provides some insight on the ins and outs of real estate wholesaling.<\/p>\n

Which method do you use to wholesale properties? Why do you prefer this strategy?<\/em><\/p>\n

Let me know your thoughts with a comment.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Many think assigning contracts is synonymous with wholesaling — but actually, there are 3 major ways to wholesale (& one may be better than the others!).<\/p>\n","protected":false},"author":12142,"featured_media":78427,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5526],"tags":[],"class_list":["post-81847","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-wholesaling"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/81847","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/12142"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=81847"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/81847\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/78427"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=81847"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=81847"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=81847"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}