Wholesaling real estate is something to consider, especially if you’re just starting out.
New real estate investors who don’t have a lot of capital at their disposal are forced to get creative. One enduring strategy they use is called “wholesaling.”
Wholesaling involves an investor interjecting themselves into a real estate transaction to make a profit. A wholesaler makes money by quickly assigning a property to another investor, who will turn around and sell it to an end buyer. For a wholesaler, success comes from turning over the property as fast as possible. That means a wholesaler is someone who has to be well connected and who is willing to work hard to unload the property quickly.
If you have the skills, then wholesaling real estate is a fast-track to success. You won’t need to finance projects or take too much risk endlessly. For beginners, offloading the downside is a boost to profits.
Wholesaling Real Estate Is Perfect for Beginners
When a property comes on the market, the wholesaler contacts the homeowner and gets them to assign the property to him. Once he has that document in place, he’s able to sell the property. When the property sells, the homeowner and the wholesaler both get paid. The profits are the difference between the offer price for the owner and what the other real estate investor paid. That investor will then make the necessary repairs, gaining her profit from the process. Real estate investing has different entry points, depending on where you position yourself in the value chain.
Wholesaling works well for the traditional “people person” who maintains a substantial list of interested investors. They keep their ear to the ground to discover new deals that have a significant bit of upside potential. Once they locate one, they let their selling skills handle the rest. It’s also important that a real estate investor who decides on wholesaling as a primary strategy builds a strong foundation for later profitability.
Wholesalers need sharp eyes and ears. Information is the key to their deals. When they find a real gem, they pounce on it before the competition arrives.
- A real estate wholesaler requires little or no capital.
- Wholesaling does not require a real estate license.
- Operates on a shorter timeframe than flipping.
- Repairs are not needed.
- Wholesaling is much less risky than flipping because a “contingency” in the contract allows the wholesaler to back out of the purchase without losing money.
- This technique requires substantial market knowledge and connections in the industry.
- This method requires hard work and may be stressful.
- You may need strong selling skills to succeed.
If your personality and experience support wholesaling, this real estate investing strategy offers many benefits. You can make quick and substantial profits based on your knowledge. You won’t be caught in the middle of a disastrous flip if market conditions deteriorate, which offloads lots of risks. As long as your eyes are open, and you understand you’ll need to work hard to get your deals, wholesaling is a practical entry point that has worked extremely well for many real estate investors.