How to Successfully Form a Joint Venture Real Estate Wholesaling

When it comes to real estate investing, the consensus is that there is no cheaper or easier way to break into the industry and start making money than by venturing into real estate wholesaling.

Wholesaling involves an investor purchasing a property or getting it under contract and then selling it or assigning the contract as soon as possible. The basis of a good real estate wholesaling deal involves finding properties cheap enough that there is room for the end buyer to turn a profit.

For all its benefits, however, wholesaling real estate has its share of challenges.

For one, you may be a newbie with all the time in the world to find good off-market properties but don’t have the money or a reliable buyers list. OK, we said wholesaling is the cheapest (which is true), but you may need what is known as transactional funding before doing any deals.

Established industry players, on the other hand, may have relationships and a solid cash-buyers list, but they may not have the time to find great deals.

Enter wholesaling joint ventures.

The Basics of Real Estate Wholesale Joint Ventures

Also known as co-wholesaling, joint ventures (JVs) in real estate wholesale transactions are designed to eliminate such pain points by having investors partner with one another.

The ideal partner is one who has what you don’t (probably the finances or a powerful buyers list). You, in turn, should have what they don’t (probably time to unearth good deals). In such cases, forming a tag team can only be mutually beneficial.

In a type of investing that sometimes depends on the ability to close a deal faster than other forms of real estate investing, the importance of having a good partner to call upon cannot be underestimated.

Finding a Good Joint-Venture Partner

Forming real estate wholesaling alliances is not the hardest task in real estate wholesaling. What it does call for is due diligence when finding partners and maintaining those relationships.

One of the best places to find a good partner is at your local real estate investment club, where you are likely to find a horde of other successful investors.

Inquire around, and you should be able to find one or more investors who might be willing to partner up depending on the type of arrangement you have in mind. Are you looking for a partner to finance the deals or investors to bring the deals to you?

Whichever, it pays to know a little more about your potential partner to make sure he or she is who they say they are. Also make sure they know what they are doing, that they have the right paperwork, and that they are folks who will honor all obligations.

The level of due diligence you need to do will depend on the role you intend to play — putting up the cash or bringing deals.

If you are having trouble finding partners at your local investment club, you can decide to take your search further by researching local wholesalers. A search on Google, narrowed down by city, is a good starting point. Ao are bandit signs (in the area you want to focus on) bearing messages in the vein of, “We buy houses”.

Sites like Craiglist can also unearth good partners, so check the listings containing “for sale by owner”.

The problem with this latter approach is that you can never be sure whom you are forming an alliance with — unless they have a solid portfolio to back them up.

Regardless, don’t fall into the pitfall of teaming up with someone without knowing enough about them.

Wholesaling Joint Venture Advice that Matters

Again, choosing the right person to do wholesale joint ventures with is a critical part of the process. Right, in this case, means a professional and ethical person whom you can rely on. This world is full of dubious characters, and you are sure to run into a few in real estate investment circles.

Many investors tend to place their trust on a gentleman’s word, but where business and money are involved, it is always wise to protect yourself with paperwork. The paperwork you will need in co-wholesaling includes:

Purchasing or selling agreement
Assignment contract
Option or flex contracts

To further curb your risk, you may want to record an affidavit of equitable rights.

Speaking of which, since this is a partnership like any other, you also need to agree on how you will share the profits. There are two methods of profit sharing commonly used in co-wholesaling: mark-up or splitting the profit down the middle. This will be on you and your partner(s) to agree.

Ideally, your joint venture partner should be willing to split the profits and work with you on a fair level. Otherwise, they are not the right wholesalers to partner with.

Have you done a joint venture wholesale deal?

What advice do you have to add?

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.