Three Ways to Wholesale Real Estate with No Equity

Wholesale real estate creates a powerful opportunity for both new and seasoned investors. In fact, it’s a great tool to grow a real estate investing portfolio and produce a profit to use to invest in other real estate strategies, like fix and flip or buy and hold.

Can You Wholesale Real Estate with No Equity?

Yes! In fact, understanding how to wholesale real estate without equity offers a competitive advantage. Few real estate wholesalers know how to do this, which leads to limited opportunities.

During the housing crisis that began in 2007, the wholesaling market shifted. As a wholesale investor, I had to adjust my approach to the business. Instead of simply walking away from wholesaling, I recognized the new opportunities available. This is an example of how consistency, creativity and persistence pay off in real estate investing.

Don’t be scared to reinvent yourself and your business. Even in a strong real estate market, seek new knowledge and strategies to keep you competitive and growing your business. In this case, I started thinking about how to structure my wholesaling strategy to meet current market conditions and demands.

Three Main Wholesale Real Estate Strategies with No Equity

I researched the current market trends and reactions to the real estate crisis. The combination of my experience and knowledge with the research presented new ways to wholesale.

Short Sales

From 2007 until just a few years ago, short sales were hot. Today, you’ll still find a few short sale prospects. What is a short sale? Essentially, a short sale generates equity from a property because the bank agrees to accept a lower payoff of the mortgage. The bank does this to avoid a foreclosure.

In many markets, like Miami, houses lost value. In these cases, the mortgage loan amount was greater than the value of the property. For example, a property worth $200,000 has a mortgage of $240,000. You can negotiate with the bank to accept a lower payoff amount so that you can make a profit during a resell.

One of the best ways to successfully negotiate a short sale is to show the level of distress for the area or property. The greater the distress, the higher the discount the bank can allow on the mortgage balance. This discount creates room for equity.

Liens and Judgments Mitigation

A lien or judgement is the over leveraging of a property. Many investors do not know about or understand how to effectively work liens and judgements to the investor’s advantage. This strategy works for properties with either no mortgage or a small mortgage balance.

The property cannot be sold until the liens or judgments are cleared. However, the seller can negotiate with the lienholders to receive a discount on the lien amounts. In some cases, the lienholder will release the lien altogether. The investor finds equity by reducing the owed amount.

Work with a trusted title company to perform a full title search. Either the title company or a specialized attorney can negotiate the liens with the lienholders. In some cases, it is possible to file for a “quiet title” on outstanding liens. The goal is to reduce the debt owed to receive a clear title for the property.

The important point with this strategy is to have a third party manage the negotiations. As the buyer, you should not negotiate yourself. You are an interested party in the deal. The lien holders won’t usually discount much when dealing with an interested party, like the seller or the buyer.

The job of the third party is to communicate that the lienholder may lose out on recovering any funds if a foreclosure occurs. The mortgage takes precedence over other liens. The lienholder may help satisfy the lien or judgment based on these circumstances. Work with the right third party to ensure representation of your interests. Also, make sure they understand the nuances of the real estate laws and regulations.

Wholesaling Lease Options

Of the three, wholesaling lease option holds the most power. A wholesale lease option combines the concept of lease options with the wholesaling strategy. With this method, you create a lease option with the seller and then assign it to either a buyer or a tenant. You collect a fee for your effort.

The wholesaling lease option strategy works for investors with little to no cash available for the deal. In its basic form, the investor acts as a connector for the lease option.

Creative Wholesale Real Estate Solutions

To be a successful real estate investor you must find creative solutions. The market shifts and changes over time. To stay in the business and continue to grow, look for new ways to invest to construct a win-win situation.

Don’t be scared to think outside the box or learn from other investors. Real estate investing is a relationship business for creative entrepreneurs. If you don’t have equity, try one of these three ways to wholesale real estate without the benefit of equity.