Wholesaling Real Estate in 2020…Turn a Negative into a Positive!!

Wholesaling Real Estate in 2020…Turn a Negative into a Positive!!

It’s no secret Real Estate is an industry where people have been generating significant incomes, and building wealth, for generations. I fully understand what attracts aspiring entrepreneurs to the potential to make more income, replace their job, generate passive residual income, live a better life, retire early, and eventually maybe be able to leave generational wealth for their families. Many of those are what attracted me to start investing into real estate myself.

Lately, there are so many newbies who are getting into the business of wholesaling in the form of “assigning contracts”, and are either jumping in too fast, without learning enough about the business, or are receiving bad information from mentors or gurus, who are just looking to make money off selling opportunity. It reminds me so much of Network Marketing, which I was a big networker back in the day, so I get it...

They hear about Wholesaling from a friend, or an advertisement, social media, etc. So, they attend a Real Estate Seminar, Meetup, Summit, or another event. They get just enough information to get them excited, and motivated to get started.

Wholesaling, by definition, is technically buying a product at one price, and reselling at a higher price to collect the difference. But when it comes to real estate, most who refer to themselves as wholesalers aren’t even in the real estate business, they’re in the assigning contract business, which is legal...if done correctly.

Contract law has allowed assigning, or transferring contracts since contract laws were first written, as long as contracts do not state assigning, or transferring is not allowed. Normally though, it’s referring to a contract between multiple parties, who have the intent & ability to perform on the contract. Many wholesalers today are entering into contracts to acquire real estate, with no intent, or ability to perform, and only looking for an end buyer to purchase their rights in the contract, basically brokering real estate without a license.

There are legitimate legal reasons to cancel a contract, if they are stated within a contract. Reasons such as discovering additional repair needs during an inspection period, or funding being unapproved, etc. But not being able to find an end buyer, is not a legitimate, or legal reason to not perform on a contract. And if the contract states the purchase price is to be “cash’, funding isn’t really a legitimate reason either.

I do not blame the new wholesaler for being ambitious, but you can leave a property owner in an even worse position by misleading them into believing their property is going to sell. I’ve purchased several properties where owners told me horror stories of feeling scammed after previously contracting to sell their property to someone claiming to be an investor, or “cash buyer”, and then they could never close.

There’s already been a few states implement changes to laws, in effort to gain control of the practice. And I’m sure more states will probably make similar changes in the future.

So, how can you get started without access to funding?

Instead of operating in a negative, possibly even illegal, or unethical position, why not partner up with a more experienced investor in your area, who has access to both knowledge and access to funding to perform. You can work with them as an acquisition’s person, or even JV with them on deals, and still generate a lot of profit. Get some more experience, and continue learning, building your network, and eventually you’ll be in a much better position to step out on your own, and grow your business in a legal, ethical way…if that’s what you choose to do.

Conclusion…Education is the key!!

This business can change your life. Its an ongoing learning experience. You should be learning more, and more throughout your entire journey. Research multiple sources, and make an informed, educated decision on what’s true. If in doubt, ask more questions. And always put yourself in the property owners shoes.

Good Selling!! Keep Grinding!! Follow me on social media for daily motivation.

Disclaimer: Author is not an Accountant, Attorney, Financial Advisor, Tax Advisor, Broker, or Agent. This is for general information, and not tax or investment advice. Readers should do their own due diligence and seek professional counsel prior to making any kind of tax changes or investments.