What is Real Estate Wholesaling?
In simple terms, real estate wholesaling is when you find a real estate deal, get that deal under contract with the seller but then sell that contract onto another party. It is a short-term investment which doesn’t require a lot of capital.
You act as the wholesaler and scour the market for a great deal. The key takeaway is that you’re not the one that is selling the property; instead, you’re selling your place in the contract. You then collect your fee and allow the person purchasing the contract to go ahead and purchase the property.
What will make you successful?
To be a good wholesaler you need to know which properties are being sold at under market value. This is an ability that comes from knowing what the true value is as well as using your experience to be able to know how to earn money and maximize profit.
In terms of making money, a wholesaler will be able to get this from their fee which is going to be earned from the buyer gaining your place in the contract. This fee is often a percentage of the property cost rather than being a flat fee.
The people who usually buy these types of properties are usually real estate developers or long-term investors who are happy to let you do the hard work for them rather than having to do it themselves. They will be happy to give you your percentage as they are the ones with the capital.
What makes a good real estate wholesaler?
There are a few important traits which make up a good real estate wholesaler which includes having the right mindset. They need to be dedicated to their task and also to take the losses on the chin if they have any.
You’ll also have to be up to date with the latest technology, including having a good website. Utilizing the likes of CRM software and organizing your data and documents using on the go devices can also help you be a step ahead.
Knowing the local market is also a great idea, if you know neighborhood comps then it becomes very easy to know which properties are great investments. That can be the hardest part of the job and having as much information as you can get will make it a lot easier.
Why should you wholesale properties?
Wholesaling properties can be a brilliant investment for those who don’t have huge amounts of capital but want to be able to build their wealth. You can earn great profits in only a short amount of time which can add up to something significant.
If you want to earn longer-term and larger profits in the future, it also helps to give you a brilliant grounding in the real estate industry. That knowledge can help you to earn even more money when you eventually leave the world of wholesaling.
One of the most tempting aspects of the career in real estate wholesaling is that it doesn’t matter if you have a bad credit score or don’t have a lot of cash. Putting homes under contract requires very little risk and you won’t have to go through a credit check.
Why you shouldn’t be a wholesaler?
While it sounds great so far, there are a few key downsides to being a wholesaler. One of the worst is that the income can be quite unpredictable and therefore it can be hard to know exactly what is coming in each month.
As with a lot of industries, at the start, it can be difficult to get anything consistent. This is not in terms of income but also trying to find buyers and maintaining a buyers list. Developing a good relationship can be hard when you don’t have much experience behind you.
You should be under no illusions that it isn’t an easy job. When you get good at it you can end up earning a lot of money but it takes consistent effort and winning attitude to get there. You need to be smart and save your money for the bad weeks and also not let unfavorable results get you down.
Avoiding a bad reputation
An important aspect of being a good real estate wholesaler is being able to maintain a good reputation. If you can’t find a buyer then not only can you lose money but it will also affect your reputation. Buyers don’t want to be seen working with anyone who is making it worse for homeowners.
Finding the right buyers is critically important and it’s a good idea to have a good idea who you plan to sell too before making an offer to a seller. This is harder at the start but getting an organized buying list will help to make your life a lot easier.
When you get more experienced, you’ll be able to deal with buyers as confidently as you’ll be able to deal with sellers. You need to have the confidence and the connections to be able to make the process as smooth as possible and keep your reputation high.
The morality of wholesaling
Some people will like to try and point and say that wholesaling is illegal since they are not licensed brokers but they aren’t actually selling the property and therefore don’t need to be. All they are selling is the real estate contract and this is completely separate.
The law can change from state-to-state and therefore you want to know exactly what you’re doing. While some may see them as clogging up the process for a quick profit, wholesalers can actually move properties much quicker than a typical listing transaction due to their contacts.
A great career?
As we have seen here, there are some big advantages to wholesaling as well as a few downsides. If you go into it with the right attitude then there is plenty of money to be made. After a while, you’ll get the experience and knowledge you need to be a huge success in the industry.
Want to learn a few more ways you can dive into real estate investing with no money?
Discover simple, highly effective techniques you can use to buy property & Become a successful Real Estate Investor with No Money in the Bank! Written by Me, Annetta Powell.