Wholesale newbie!!!!

[Mikey Cas]

hey guys, I was recently told to get into wholesaling to save up some extra cash reserves before I jump into real estate investing. I read through the forums and posts on this to get an idea of this field..... but im still a little confused. Can someone tell me the process in a very short simple way. It seems to me that someone is locating a property that has potential for a rehab and a great profit, attaining the rights to the contract, and then selling the contract to a buyer who is interested in taking on the project of rehabing the home. AM I as a wholesaler taking out a mortgage and owning the home with the hopes that someone will take the home off my hands and rehab it??? Or am I just buying the 'rights'to the contract(if thats possible i dont know)? Sorry for the confusion I am just a little confused because how could I get a loan for this method, if i couldnt get a loan for a home as an investment in the first place? I just want to see the whole picture because this seems interesting to me.

[Ryan Webber]

Wholesaling is selling discounted property to other investors who use cash or non-conventional financing (hard money, commercial loans, or lines of credit) to buy them. Normally a wholesaler does no repairs to the property and sells them as-is.

There are pretty much three ways to wholesale. Assignments, double closings, and actually purchasing the property and then reselling it.

An assignment is where you secure the property with an assignable contract and then sell your contract for an assignment fee. The buyer takes your place in the original contract by signing an assignment of contract with you. The assignment fee is specified in the assignment of contract, and you will be paid the assignment fee at closing minus any funds you collected upfront from the buyer. No financing for the wholesaler is necessary.

A double closing or simultaneous closing is where you secure the property with a normal contract and before you close you sign another normal contract with a buyer who will close on the same day that you buy the property from the seller. Normally the funds that the buyer uses to buy the property will be used to pay the original seller, and you will make the difference between the two prices on the contracts minus any closing costs. Again, normally, no financing is required on the wholesaler's part.

When you actually purchase the property with financing you then would just do a normal contract to resell it with a normal closing, and you would get paid whatever the difference is between what you sell it for and what you owe on it minus any closing costs. Obviously if you are buying the property you would need financing.

Wholesaling is selling to other CASH buyers or non-conventional buyers because FHA and most conventional financing lenders will not accept assignments, and FHA and most conventional lenders will require seasoning, which means the seller on the contract will have to be in title for a certain period of time (normally at least 90 days and up to 6 months with certain stipulations). This prevents doing an assignment or double closing and even buying it and reselling it quickly.

Starting out, most wholesalers will put the property under contract with a 30+ day close with one or more contingencies in the contract that will allow them to back out of the contract. This protects the wholesaler if they can not find a buyer before closing and/or if they are unable to get financing for the property.

A wholesaler's customers do include investors that are going to rehab to resell the property, but they also include investors who do rentals, who carry notes, and who do lease options. Pretty much anyone who buys property for profit purposes and who use cash or non-conventional financing is your customer.