Wholesale Dealing in 3 Steps

[Rick Howell]

In property investing, “wholesaling” refers to buying properties at a discount and quickly reselling them to another investor without completing rehab work. Generally, when you buy properties to wholesale, you are in and out within 30 days. The risk is low, but the profits are usually also lower compared to fully flipped properties. Investors use wholesale deals to supplement income and build contacts. There are three steps to completing a successful wholesale deal.

Identifying Good Deals

Any deal you consider must have enough room for potential profit to make it worth your efforts. To find good options, you need motivated sellers with properties in need of enough work to purchase them well below market value. Sellers in this situation include:

• Homeowners who have had difficulty selling on their own
• Homeowners with financial difficulties like pending foreclosure that necessitate a quick deal
• Landlords ready to part with assets in disrepair
• Lenders with too many foreclosure properties on their books

Regardless of how you find them, the key is the profit potential. You need to make a cut, and the end purchaser is also looking to make a profit after rehabbing the properties.

Assessing the Property

Once you have found what you believe to be a good deal, consider what rehab work is needed. Remember, you are not the one doing the work. But the more information you can gather, the better bargaining position you will be in. Since that end buyer will be another investor looking for profit, you will be able to avoid lowball offers based on inflated repair projections.

Sealing the Deal

Now that you have the property and an estimate on repairs needed, you can close the deal with the end buyer. Do not make the mistake of waiting until you have all your information to start looking for a buyer. You will be stuck with the property for longer than you intended if you do not do the work to identify a buyer while you complete the other steps.

There are lots of buyers out there, but everyone has their own goals and characteristics they look for in distressed assets. Keep your pool of potential buyers as deep as you can. Use your networking skills to find out what each investor likes and doesn’t like. Location, severity of property condition, and types of repairs needed are all factors your buyers are considering.

Additionally, prepare yourself to answer questions about the projected repairs, your timeframe for closing, price point, and more. If you thoroughly assessed the property in step two, you should be in good shape. Use those follow-up skills to ensure you respond to potential buyers quickly.

While wholesaling profits may not be as high, the biggest benefit is the fast turnaround time frame on these properties. Once you complete a few deals, the process will become habitual, and you can look at wholesaling larger pools of properties. Following these three steps will have you on your way to another income stream.