Wholesaling real estate is a way to make money in real estate without actually owning a property. You can make money by finding good real estate deals (we call them wholesale deals), and then selling these deals to other investors for a profit.
The idea is to find distressed or undervalued properties, and then find a buyer who is willing to pay more for the property than what you have under contract with the seller. As the wholesaler, you act as a middleman between the seller and the buyer, and you make money by assigning your contract to the buyer for a fee.
Here’s how it works:
Find a property that is being sold for a low price that you believe you can sell for a higher price. This will usually be a distressed or undervalued property and could be a foreclosure, a bank owned property or a property that needs repairs. Sometimes it could be a property that has been on the market for a long time where the seller is very motivated to sell and wants to receive an offer.
Negotiate a purchase contract with the seller to buy the property at a discounted price. You will want to make sure that you’re getting a good deal at a wholesale price so that you can sell it to another investor for a profit. You get the property under contract by signing a purchase contract with the seller that gives you the right to buy the property at a certain price within a certain time frame.
Find an investor who is interested in buying the property from you. Find a buyer who is willing to pay more than the price that you have the property under contract for. This could be a rehabber who wants to fix up the property and sell it for a profit, or a landlord who wants to keep the property as a rental.
Assign the contract to the investor. This means that you’re transferring your rights to buy the property to the investor for a fee. The fee is called an assignment fee. The fee should be enough to make a decent profit for yourself. You should aim for a profit of at least $10,000 to $20,000 for your assignment fee.
The investor closes on the purchase of the property, and you get paid your assignment fee. The key thing to understand is that since you are not the one closing on the property, you don’t have to come up with any money at the closing. You simply get paid your assignment fee directly from the title company when the investor closes on the purchase of the property. So you could be making $10,000 or $20,000 when the investor buys the property even if you have very little money. The only thing you need to come up with is the escrow deposit on the purchase contract – and that could be as little as $10.
Wholesaling real estate can be a good way to make money if you’re willing to put in the effort to find good deals and to build relationships with investors. In order to know how to find good deals, you need to have a good understanding 0f what other investors would be willing to pay for a property. You should understand comparable sales, the after repair value of the property, how much it would cost to repair the property and what another investor would realistically be willing to pay you for the property.
We teach the basic fundamentals of wholesaling real estate and how wholesaling works at the Wholesaling Real Estate Boot Camp. We have one coming up next weekend. If you want to attend that boot camp click here to learn more about the boot camp.
If you want to learn more about wholesaling real estate register for my free wholesaling real estate training webinar here