Real estate wholesaling is a topic that can be confusing to newcomers. It can be tough to know where to begin. Even an experienced real estate investor can struggle from time to time. Take Brett Snodgrass, for instance.
When he first graduated with his early education degree, he was only making $10,000 per year as a substitute teacher. He did not like his circumstances one bit. After deciding that he wanted to go the entrepreneurial route, he found a property in Ohio that was selling for just $9,000.
His father was kind enough to match his $5,000 investment and he was off and running. Instead of putting work into the property, they attempted to sell it for slightly more than what they had paid. The property was then sold for $15,000, allowing him and his father to take home a tidy profit.
Readers are going to be amazed by this story. After all, if this man can do it, why can’t they? Fortunately, this helpful guide for beginner wholesalers is here to help.
The 3 Best Methods of Wholesale Real Estate
A wholesaler essentially functions as a middleman in these instances. They are simply looking to turn a quick profit on a property before turning it over to the true buyer. Wholesalers are also doing business with actual companies, as opposed to fellow investors.
Consider the wholesaler a matchmaker of sorts. In order to fully understand the concept of wholesaling, a would be investor will need to make sure that they are aware of the most common strategies. The time has come to take a closer look….
This is a common method because the barrier of entry is simply not that high. Anyone can get started. No money is needed either. A motivated seller will meet with the wholesaler to come to an agreement before closing. Once the wholesaler has this agreement in hand, they are then able to find a buyer to sell off their rights to.
The middleman takes home the assignment fee. Let’s say that the seller is looking to sell their property for $15,000. A wholesaler can then speak to their contacts and assign the contract for a fee. Once the buyer/investor completes the transaction, the wholesaler pockets their fee, free and clear.
Have a legal professional take a closer look at the contracts, to make sure that no fraud is taking place. In order to ensure a smoother transaction process, the wholesaler should take the time to obtain their real estate license.
2. Double Closing
Wholesalers who obtain a property and sell it to another investor within minutes are actually utilizing the double closing method. Meeting with the motivated seller during closing and signing over the documents to a motivated investor allows the wholesaler to reap the benefits of timing.
This is a delicate dance. If either party does not show up during closing, the wholesaler could be left with nothing. Anyone who selects this method is taking the power out of their own hands. It is a solid method but it is not for the faint of heart.
3. Simple Closing
Last but not least, simple closing is the strategy that most envision when they consider the benefits of real estate wholesaling. The property is purchased from the motivated buyer and closed on. Once the wholesaler has possession of the property, they have the ability to start the marketing process. Some may elect to invest even further, in an effort to rehabilitate the property.
This method is legal, safe and relied upon in most instances. No one who utilizes this strategy ever has to worry about other parties. The deals can go through without incident. Working capital is needed. This can be a drawback. While raising capital is always a frightening process, anyone can do it. Anything is possible.
Each method is going to come with its own pros and cons. That’s why the real estate wholesaler must choose the method that works best for their needs. Choosing the path that aligns with the needs of the specific investor is what its all about. There are numerous ways to get started but the real estate investor must also consider their personal endgame before diving in.