Wholesaling for quick cash is quickly becoming a popular real estate investment strategy. Essentially, wholesaling involves finding real estate below market value and quickly reselling it for a profit.
Wholesaling for quick cash is a relatively easy way to get started as a real estate investor. Anyone over the age of 18 can participate in the wholesale sale of real estate. All that is required is to familiarize yourself with the process, develop a marketing strategy and build a network of potential customers.
Wholesale real estate consists of four main stages:
- Find property owners motivated to sell their property
- Negotiate the purchase price
- Place the property according to the contract
- Resell the contract to a real estate developer or investor
Wholesaling real estate is like flipping a house. When investors purchase distressed properties to flip, they typically buy the property well below market value and invest in repairs or renovations.
Often times, repairs cost over budget and take longer than expected. Every missed deadline and extra cost costs the investor money. In today’s housing and lending crisis, investors have found themselves on property that they cannot sell.
Wholesaling eliminates many of the headaches associated with house flipping. There is no need to invest in renovations or wait for a qualified buyer to be found. Instead, you become real estate matchmakers and find sellers who have what buyers want.
For sale by owner The property is ideal for wholesale real estate. Many homeowners participate in FSBOs to avoid expensive realtor fees and commissions. Others are putting their homes up for sale to avoid foreclosure. Some FSBO homes are second homes that sellers need to liquidate quickly. In other words, there are many properties to choose from.
The cherry on top is when the homeowners offer the seller refinancing. In this type of real estate transaction, the sellers are responsible for all or part of the financing. If the seller participates in refinancing, the property can be sold to a rehabber or an investor without real estate ownership.
Homeowners facing foreclosure can benefit from wholesaling. Let’s say your home is worth $190,000 after renovations. You currently owe $120,000 on your mortgage and are $3,500 behind on your payments. You need $10,000 to move.
You are selling your home to a real estate wholesaler for $135,000. It pays off your mortgage deficiency, mortgage note balance and provides you with the funds to move. Even though you have to move out of your home, you’ve saved your credit and have money in your pocket to start over.
A real estate wholesaler now owns a home with an equity of $55,000. However, the home needs $10,000 in renovations to get the full purchase price of $190,000. Instead of spending money on repairs, wholesalers find rehabilitation.
If the wholesaler sells the property to the rehabber for $165,000, it makes a profit of $30,000 net of out-of-pocket costs. A rehabber owns a property with $15,000 in immediate equity. It’s a win-win situation.
There are many resources online that discuss wholesaling strategies. Although the real estate market is in a slump, there is a strong need for wholesale. By learning the ropes, you can build a solid real estate investment business that offers much-needed help to struggling homeowners.