Sorry Newbie, what exactly is wholesaling?

Question

Hi all,

Can someone please explain wholesaling to me? I have very little info on the concept. I have purchased 5 properties in the last 2 weeks and I am thinking I may want to flip 2 or 3 or them to another investor. Is this where wholesaling would come in? Any info/education on this topic would be greatly appreciated.

Michael Quarles · Answer

First most of us are not "Normal Investors". The "Normal Investor" looks in the Sunday newspaper home section and calls the best looking agent to sell them a rental house, duplex, etc. That agent shows them property at 95-105 value and tells them that they have to offer more than asking price because they are in a bidding war. Therefore wouldn’t it be smarter to sell to that buyer than sell to an Investor who buys property at 70% and pays you 10% of the potential profit? Reality is that you should find an agent who has a large investor buyers list and let them know you have an opportunity and then list it on the MLS where 92 % of all homes are sold. Keep in mind that Realtors have brain washed the buyer into thinking that the seller is paying the commission therefore buyers think agent are a free expense to them. Worst case scenario you’ll sell it for less than 100 of AS IS value and still make more. Certainly there are issues of seasoning and such however that knowledge and the work around is expressed all over this forum..

Michael Quarles · Answer

Okay this isnt going to be popular however Wholesaling is the most expensive form of marketing... People wholesale because they dont yet understand where money comes from... Once you learn that youll wholesale fewer deals. Why not advertise them for sale at retail AS IS value and make all of the money

Chris Colvard · Answer

Did you pay cash for these properties? Tell us more about the purchases? REO, Cash, Short Sale, it makes a difference. They will also have to qualify as a wholesale deal. 70% ARV or less. If they are under contract, they must be assignable or you will need to do a double closing to wholesale them. Without knowing more specifics though, it's pretty hard to say how you can do it. Search wholesaling on this site for hours of free education.

Rob Gillespie · Answer

Sherry, Congrats on buying so many properties! I think that what you want to do is instead of closing on all of these, you lock them in contract and sell your contract on them at a profit. This way you are not out any of your cash. This is what I have done for years, and I love it! You should sell it cheap enough for the next buyer to make a buck. That is the whole concept. I hope that helps a little! :mrgreen:

Stinson Bland · Answer

Michael is dead on... if you've already bought the homes. I'd try to FSBO at an as-is price or sale via the MLS for a "discounted" handyman price. We call this a Wholetail sale. I'd also advertise the house for sale using bandit signs around the neighborhood and consider handing out flyers if the home is in a lower-end neighborhood. Try to locate ta buyer without the MLS first (this will save you realtor fees).

Joe O · Answer

Please elaborate.

Sherry Lewis · Answer

Thank you for your help Darren!

Darren McAfee · Answer

Your situation is perfect for wholesaling. First off, wholesaling is simply-buy low, sell low. Since you didn't have the time or resources for your "extra" deals, then wholesaling would come in handy. Here it is: You buy one house too many, right. The last acquisition was purchase at $45k. It has an ARV of $110k. You simply advertise or network with a few other investors that actually have the time and want to do the repairs, and gain the equity. You'd simply agree on a slightly higher purchase price than your original price. Ex- your price was $45k, your new price is now $55k. The new buyer buy your "over-flow" and you've just made 10 grand, or more on a wholesale flip. In a perfect world, a normal person (no experience) would find a property that's priced below FMV. They'd contract this property at an exceptional discount and basically "assign" or sell their equitalble interest to another investor for an "assignment fee". Basically, it's just FIND, CONTRACT and ASSIGN.

Sherry Lewis · Answer

Thank you both. I actually purchased all with cash. Two were at auction with investors and 3 were county foreclosed on properties. All previous liens etc against property extinguished when county foreclosed them. Only thing that could hold is IRS. Full deed ownership. The other 2 title searches were good, no suprises just the county taxes as expected. I don't know that I was asking for these particular properties on wholesaling, but wanted to understand the concept to see if that was an avenue I may check out as a branch of what I plan to do in the upcoming months. I am working at building equity at this point to be able to fund fix and flip and rentals. Great deal I believe on all properties. Have local realtors looking at the properties for me now, securing, estimates, comps etc.