Wholesaling Houses

August 20, 2010 in Getting Started, Wholesaling

I have been flipping houses and investing in real estate for a long time, but it is only in the last couple of years that I have been able to wrap my arms around “wholesaling houses”. The process can be somewhat bewildering if you are new at real estate investing. Wholesaling is just one of the many strategies that you can use to buy and sell property. It is by far the quickest way to make some “fast cash”.

 

What Is Wholesaling?

Most folks are familiar with the meaning of the term “wholesale”. This typically means that you are buying the item below market value.  A furniture store buys products from the manufacturer at a “wholesale price” and sells to the end buyer for a “retail price“.  The furniture store then is kind of the “middle man”.

Wholesaling houses is really no different. I buy a house from a seller significantly below market value, and sell it to another investor (still significantly below market value). This person in turn sells it to the end buyer. Typically this investor will rehab the house and sell it for profit or he may decide to keep it for a rental. In both examples, the middleman must purchase the item for a price that allows him to make a profit when he sells it. “Ugly houses” are perfect candidates for this type of real estate investing.  

 

What Is Absolutely Essential for A Wholesale Transaction?

The one thing you must have is a motivated seller! A real estate investor will typically take a lot of calls and talk to a lot of sellers to find one that is really motivated. Simply put, you will not be able to put together this type of transaction if the seller is not motivated. 

 

What Is A Motivated Seller?

A truly motivated seller will be in some type of situation where he simply must get rid of the property. He may have inherited the property and needs to sell it quickly.  The property may need a lot of work and the seller just cannot afford to make the repairs. At other times the person calling is in tough financial situation due to a divorce or other major issue in his life. If a person has had a job transfer and they originally kept the property for a rental, they have probably discovered that managing a rental property from another state is just a huge task.

Whatever the reason is, this person wants to sell badly and they want to sell now. They just want to be out of what ever situation they are in. Calling you is the first step toward solving their problem which is that they have a house they just do not want!  “I need to sell my house fast” is just what you want to hear. 

 

Is Wholesaling for You?

 I love wholesaling! Of all of the types of real estate investing it is one of my favorites, and it is definitely the least risky of all the different strategies. You do not need a lot of cash or a high credit score to be successful at this. And once you start to build your buyer’s list, these types of transactions are typically quick. I have put a house under contract and re-sold it in as little as week as you are usually selling to a buyer who is paying cash for the house.  A wholesaler can best be described as a “transaction coordinator”.

Some folks will tell you that buying these properties far below market value is taking advantage of the seller. That could not be further from the truth. All of these folks want relief. Relief from whatever situation they are in. Real estate investors provide solutions for folks that have problems they cannot solve themselves. At the end of each closing, the sellers always tell me how thankful they are to have found me and how happy they are that I was able to solve their problem. Check back later for more tips on building your buyers list.