Wholesaling Real Estate 101 – Part 1 (How Wholesaling Works)

Getting Started in Real Estate Wholesaling:  What is Wholesaling and How it Works:

If you’re getting started in real estate but have limited capital or credit, or simply want to explore a path that avoids, rehabbing or tenants and toilets, wholesaling properties is an excellent opportunity for you.

Wholesaling real estate will require some ambition and a bit of specialized knowledge, but is one of the most tried and true methods for generating cash quickly. Learn more with this Wholesaling Real Estate 101 article.

In the real estate market of 2015-2016, where demand from investors for good real estate deals continues to grow, effective wholesalers who can bring these deals to investors are in high demand and can make a lot of money in almost every market in the US.

Here’s real estate wholesaling explained…

What Is Wholesaling Real Estate?

To put it simply, wholesaling real estate occurs when a property is available to be bought for less than it’s worth—often because it’s in bad condition or because the seller is motivated to drop their price.

Your job is to get it under contract at that “wholesale” price. Then, you sell it “as-is” for a little bit more to a cash buyer, who makes a substantial profit when they resell it again someday, or by keeping it in their portfolio as a rental property.

How do you make money? Simple…you make the difference between the contract price (between you and seller) and what your buyer agrees to pay for it. This usually means $3,000-$10,000 or more!

How Does Wholesaling Work?

As a wholesaler, you’re focused on finding two things – a good deal and an investor to buy it. Finding a great deal often means looking at distressed properties that require a significant investment to renovate or improve, and making offers to buy them, typically for around 70% of their future value, minus any repair costs.

Watch this Max Offer tutorial video to learn more about calculating the cost of your real estate rehab projects.

Think of all the boarded-up, junky houses you might have seen in your city or county while driving around. If the price is low enough that an investor feels he or she can make a healthy profit, the property’s condition becomes irrelevant.

I think there are six great reasons why you should consider wholesaling real estate especially if you are new to real estate investing.

First, there is little or no cash required to wholesale real estate. While you can begin your wholesaling real estate career with absolutely no money, it does help to have a little money to use as earnest money (less than $100 in most cases) and some money for marketing to help find motivated sellers. Can you start wholesaling with a promissory note and do all no cost marketing, yes. Is it harder to do that, yes. Anyway you look at it though, you will not need tens of thousands of dollars for down payments or holding costs for mortgages when wholesaling.

Second, you can learn your market and the business while you earn some money. I wonder why some people get involved with rental real estate with very little knowledge of the business and especially their market when you can easily learn the market and the business by scouting out deals and wholesaling them to an experienced investor as they learn. With wholesaling you can begin to earn money and learn the business and your local real estate market at the same time.

Third, you can build up your dream team members and network in advance. Having key team members in place can make the difference between success and failure. If you tried to wait to find a great real estate account or lawyer when you really needed one, it could be too late. That’s why wholesaling is great; you can build your key dream team members and your network of professionals that will help you in your business as you start wholesaling.

Fourth, you can build your buyers list. It is crazy talk to think you can get involved with real estate investing and not build a buyers list in advance. Why would you ever wait to find a property and are making payments on it before starting to look for buyers. With wholesaling, you can build your buyers list, make contacts with other investors and bargain hunter owner occupant buyers while you are looking for wholesale properties.

Fifth, you can settle into your niche. There are lots of niches in real estate investing from single family homes to multi-units, from residential to commercial, from buy and rent to fix and flip and lots of variations in between. Wholesaling allows you to see what other investors are doing, learn the pros and cons of various niches and decide on what niche you will ultimately focus on. You may find you are attracted to only wholesaling in the end.

And sixth, you can learn how to generate immediate cash flow with confidence. Depending on the niche you focus on, cash flow challenges will very likely become an issue at some point. You need a way to be able to generate quick chunks of cash to keep your investments and business running. That’s where wholesaling comes in for many investors and having the confidence of having wholesaled a bunch of deals for big pay days can ease the stress of the cash flow crunch.

In conclusion, the six reasons above are why I strongly recommend that everyone who is interested in real estate investing learn how to wholesale property–especially if you are just getting started.

James Orr is a professional real estate investor, marketing expert and founder of the LearnToBeRich.com on-line investment game.

You can get a free real estate course and fully analyzed real estate deals and his blog by e-mailing him at freerecourse@learntoberich.com or visit the Learn To Be Rich Blog [http://LearnToBeRich.info] for more great articles and information.

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