What is Wholesale Real Estate?
So, you have begun the deep dive into real estate investment and cannot believe the different types of sales and strategies that exist when it comes to buying and selling properties. What are they talking about when they refer to real estate wholesaling?
There are a couple of different camps when it comes to the debate of real estate wholesaling being legal. The answer is yes. It is very legal. The law states that anyone selling property that they have an equitable interest in does not need to be licensed. If the wholesaler has contracted with the seller in any way, the wholesaler has said equitable interest.
I Want To Be a Wholesaler...Now What?
Let’s start by taking a look at the different types of wholesale real estate…
- Traditional Wholesaling
- Double Closings
Traditional real estate wholesaling is a form of wholesale real estate when a wholesaler buys the property outright and sells it for a higher price. Unlike a flip, the wholesaler does not hold the contract for long and has made the purchase because they are confident a buyer will be interested soon. This is a traditional form of wholesaling and does require some capital up front in order to make the purchases.
Double closings are exactly that. Generally, there are two closings happening within the same day. The wholesaler has found a property that they have placed under contract with the seller and has also found a buyer willing to take the property at a higher price than the wholesaler is paying in the first closing. So, technically, the wholesaler buys the property and closes on deal the same day that they sell it and closer with another buyer at a higher price.
Assignment is the sticky widget that makes people raise an eyebrow at the legality of wholesale real estate. This is when a wholesale places a property under contract and then “assigns” the contract to a new buyer, at a higher price. Ordinarily, when one enters a contract it is with the intent to purchase for themselves, not assign the contract to someone else.
Making the Most of Wholesale Real Estate Investing
Knowing what wholesale real estate is can dramatically change the direction of your real estate business. This is often one of the first niches of real estate investing that new investors venture into. It is a way to generate some start up capital to move into building your real estate portfolio, as you often do not need to put any money up front in a wholesale transaction.
Wholesale real estate requires current and accurate analysis of the real estate market you are buying and selling in. Knowing which homes the seller is willing to let go of for less than market value is key to making a profit in wholesale real estate.
Staying present and active in your community will also help connect you with other local wholesalers, buyers, and sellers. Women are generally, by nature, more nurturing and have a stronger tendency to foster those connections we make in life. From spending time in your local coffee shop, to watching a child play a ball game, to standing in line at the grocery store, the possibilities of clients are everywhere.
If you are interested in real estate, pay attention to when friends are talking about selling a property they own. You would be surprised how quickly you then hear another friend say they are looking for that exact piece of real estate. It could be your first wholesale transaction!
The easiest way to creating money out of nothing is believing that you can. Wholesale real estates gives that promise. All it takes is some sweat equity in the form of time and paperwork and a considerable profit could be made.