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Wholesale real estate investing can be a very lucrative strategy for those looking for low-risk, high-profit returns. But what is wholesale investing? And how can someone with little prior experience get started?
This method of investing in real estate is still in its infancy stages. So, don’t worry about your lack of experience.
Wholesaling began because of the recent digital revolution. It allows individuals to easily access data and information on properties without having to leave their homes. Today, more and more people are learning the power of wholesaling to enter the market without breaking the bank.
What Is Wholesale Real Estate?
Wholesale real estate investing refers to buying properties at a discounted price, often referred to as “below market value” (BMV). This is typically achieved by negotiating with the seller for a lower cost than their original asking price. Wholesale investors then quickly resell the property for more money—either on the open market or to another investor. In return, the wholesaler generates a tidy profit.
The entire practice of real estate wholesaling begins well before you even make your first purchase. To begin, you will need to research the markets—both current and historical data. With the proper research, you will gain valuable insights into which areas may be ripe for profitable investments. Once you identify an area you think could prove lucrative, start the process of searching for “distressed” real estate. These are the properties most likely to be sold at BMV.
Wholesaling vs. Flipping
Wholesaling and flipping are both popular real estate investment strategies, but they are quite different. Flipping involves purchasing a property to resell for profit, usually after making significant upgrades or renovations. Wholesaling is about finding deals at a discount and selling them for more than you paid—without renovating the property.
In some cases, wholesale investors work in tandem with “flippers.” The wholesalers provide off-market deals so that the flipper can purchase properties at discounted prices and also make a profit. This strategy allows both parties to benefit from their respective investments without competing against each other.
10 Steps To Success In Wholesale Real Estate?
The key to success in wholesale real estate investing is understanding the market and finding good deals with great returns. This means doing thorough research on potential properties before making an offer. Use online real estate databases, public records, and government resources to assess market trends. Then, evaluate property values, identify undervalued areas, and find motivated sellers who might be open to lower offers. Here are ten steps to follow for successful and profitable real estate wholesaling.
Establish A Target Market & Location
Identify areas of interest with your city for potentially profitable wholesale investing. Once you identify these neighborhoods, you can focus your energies strictly on searching for wholesale deals.
Build Relationships
Gather more data to determine which neighborhoods may have promising investment opportunities. Then, build relationships with lenders, contractors, brokers, etc. who have access to off-market deals and other resources.
Build A Cash Buyers List
Create a list of potential buyers who are looking for wholesale real estate deals. Some common considerations when vetting prospects include:
How fast can the prospect close a deal?
How much cash can they put down?
Are they willing to finance or partner on any deals?
Do they have a history of success and profitability in purchasing from real estate wholesalers?
What is their intention for the property?
Start Networking
Reach out to potential sellers through real estate agents, cold calling, or online sources like Facebook groups or Craigslist. Clearly explain the types of properties you prefer and how much you’re willing to pay for them.
Perform Due Diligence
Before making an offer, thoroughly inspect the property and any related documents. Be sure to hire a professional property inspector, if necessary. Create a checklist for yourself that outlines each step you need to take to complete the purchase of a property. This checklist will help you stay organized and ensure that no important steps are missed.
Negotiate
Once you’ve established a fair price, make an offer. Negotiate with the seller until both parties are satisfied with the terms of the sale.
Close the Deal
Once all paperwork is in order and signed by both parties, arrange for payment and officially close on the purchase. Closing the deal might involve the following factors:
- Proof of funds: You’ll need to provide proof that you have the funds necessary for the purchase.
- Title: Make sure all title documents related to the property are in order and up-to-date.
- Insurance: Purchase any required insurance policies prior to closing the deal.
- Evaluate & improve: After each transaction, evaluate what went right, what could be improved, and how you can apply those insights moving forward.
Find a Buyer & Resell
Next, find a buyer who is willing to pay more than you did for the property—either through the open market or networking. Then, resell the property for a nice profit.
Consider a ‘Double Close’
A double close is an investment strategy that allows you to avoid paying closing costs or titling fees. It involves using an intermediary—usually a title company—to purchase the property from the seller and then quickly resell it to another buyer. Double closing can significantly reduce out-of-pocket expenses.
Wholesaling is a great way to make money by identifying and capitalizing on opportunities in your local market. By following these 10 steps, you can get started on your road to success as a wholesale investor.
One Step At A Time
Learning how to invest and profit quickly through wholesaling can be a terrific way to establish financial freedom. With the right knowledge and resources, you’ll be well-equipped to identify profitable investment opportunities and maximize profits in no time. So don’t wait—get started today and begin your journey to financial success with wholesale real estate investing.
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