WHOLESALING REAL ESTATE | HOW TO WHOLESALE HOUSES FROM ONLINE AUCTION SITES LIKE HUBZU
If you are interested in real estate investing and you are thinking about wholesaling real estate or being a real estate wholesaler, then you will need to learn how to wholesale real estate by finding houses in many different ways. One great way to find houses is on online real estate auction sites like Hubzu.com, Auction.com and Xome.com. And yes, you can wholesale and flip houses from online auction sites.
One of the number one questions I am asked by students is “how do you find houses to wholesale and flip”. It seems like everyone wants to learn how to flip houses but most people have no idea how to find the houses to flip.
In this video about bidding on online auction sites I show you how I find houses to wholesale (and fix and flip) on online auction sites like Hubzu.
In this example the online auction site is Hubzu.com, but I have also purchased homes this week from HUD, and on 2 other online auction sites as well (Xome.com and Auction.com) so this technique works on all online real estate auction platforms.
In addition to buying houses from online auction sites, I also buy a lot of houses from wholesalers. I probably purchase 50% of my houses from wholesalers and the other 50% are a combination from online auction sites, direct mail marketing and purchasing by making offers directly off the MLS. Inventory is changing though, and as inventory tightens, the direct to seller model is still a great way to acquire properties. Many wholesalers utilize this strategy, and if a wholesaler has a good deal under contract that I could fix and flip then I am going to buy it regardless of their fee. Int this video the fee was $10,000. That is the essence of wholesaling. Make sure you understand that.
In this video, I am standing in front of a house that I purchased from a wholesaler (who bid on Hubzu to get the house). I was bidding on the same house on Hubzu (which is how I know what he paid for it). The wholesaler bid higher than me and he won the auction. Now that he had the contract to buy the house he was able to start marketing the house to investors.
He sent me an email with a picture of the house and asked if I was interested in purchasing the house. I said yes.
I agreed to buy it from him for $110,000 which is $10,000 more than what he bid for the house. The way the transaction works, in order for it to be kosher he first has to buy the house and pay for it before he can sell it to me.
The way this is done is by “double closing” meaning he pays for the house and owns it and then turns around and sells it to me – and walks away with the profit of $10,000.There are transactional funding companies out there that can fund these deals so you don’t need to have any cash to wholesale them. Let me say that again. You can bid on these houses and flip them to other investors without having any cash at all. Learn how to do this. I personally spend 3 days with new real estate investors teaching this at the Wholesaling Real Estate Boot Camp.
So he flipped this house to me for $110,000 and he made a nice $10,000 profit without taking any risk at all. That is wholesaling. I wanted to rehab the house and $110,000 was a decent price for me to purchase the house. And he wanted to wholesale the house and $10,000 was a decent profit for him. So everyone is happy.
Since I wanted to fix and flip this house, my intention was different that his. He wanted to wholesale and I wanted to rehab. That is why I buy so many houses from wholesalers – since most wholesalers do not want to rehab the houses and just want to wholesale the house for a quick profit (in this case $10,000). So wholesalers can be an excellent source of deals if you are fixing and flipping. And if you are a rehabber then wholesalers can be your best friend. Wholesalers love rehabbers since they buy their houses from them and make their life easy (tip go to real estate investment club meetings religiously).
However don’t rely only on wholesalers as a source of deals or your deal flow might dry up. Make sure you are also bidding on properties online, making offers on properties that are on the MLS and marketing directly to motivated sellers with direct mail. You should also get a website and have a steady source of leads being generated from that website.
So back to the house in this video. I purchased the house for $110,000 and I borrowed $125,000 from a private lender. I borrowed more than the purchase price which means that I had enough funds left over to pay for most of the rehab using the lenders money. I paid the private lender 10% interest. So my interest cost was a little over $1,000 per month. Since it took 5 months to fix and sell the house I paid the private lender $5,000 for the privilege of using their money. (tip be a private lender)
The repairs on this house were around $23,000. When the house was fixed and ready for sale, I listed the house for $179,900. I sold it for $175,000 to a first time home buyer with an FHA mortgage.
Since I was the listing agent, I only paid the buyer’s agent commission of 3% and saved the 3% listing agent fee. (tip – get your real estate license)
The profit on this fix and flip was a little over $30,000. This is after paying all commissions, fees, interest payments, repairs and holding costs.
I calculate the profit potential on all fix and flip deals using my Rehab Property Calculator which I personally developed. I recently made this tool available for my students at this link: https://www.lexlevinrad.com/rehab-property-calculator/ (I also had an app developed for your smart phone for both Google Play and iTunes which you can find on that same page by clicking on the link above)
So that is wholesaling. The wholesaler made his $10,000 with zero risk, and I made a little over $30,000 on the fix and flip. It took him 2 weeks to get his $10,000. It took me 5 months to get my $30,000. So which is better? Wholesaling or Fixing and Flipping? Well from a return of capital over time, wholesaling is better. He made $10,000 for 2 weeks of work. However one thing you need to remember is he needed to find that house in order to flip it to me. That took effort and time. I needed to do absolutely nothing to find the house (other than open my email). And I have 6 crews ready to rehab houses so I need to keep them busy.
So which is better? Wholesaling or Fixing and Flipping? Or buying and holding? I suggest you learn how to do both. But if I had to pick one skill to know well first, or if you are an absolute beginner and are a little strapped for cash then start by learning how to wholesale. Once you know how to wholesale a few houses and you can flip these houses to investors like me for small profits of $5,000 or $10,000 then save up that money and build up your cash reserves and then when the right house comes along you can fix and flip it. I believe that you should wholesale and fix and flip and buy rental properties. That is what I do. You can’t fix and flip every house and wholesaling brings money in the door. But buying a property and holding it long term makes a ton of money. I have houses I purchased for $35,000 that are now worth $175,000 and I still own them. That is where the really big money (think millions) comes in to play.