Wholesaling 101: Your Guide to Start with Wholesale Real Estate Invest

Wholesale real estate investing translates well to virtual real estate investing. Even if you are new to wholesaling, you can start using this strategy remotely. The key with entry into wholesaling is to understand the process to avoid making common mistakes. Once you have the basics down, real estate wholesaling is an easy way to make money fast.

What is Wholesaling in Real Estate Investing?

New real estate investors often like wholesaling because it doesn’t require much start-up cash or industry experience. Plus, with wholesaling, you can make money quickly to use for other types of investment strategies that may require more money upfront.

Wholesaling is a type of real estate investment strategy where the investor enters a purchase contract with a seller but doesn’t take possession of the property. Instead, the investor works to find a different buyer to take over the contract. The seller is aware from the start of the investor’s intent and agrees to participate in a wholesale deal.

The investor makes a profit by taking a fee for connecting the seller with the buyer. Since the investor never owns the property, the costs for the investor are minimal. Wholesale deals move swiftly allowing the investor to earn cash fast.

The Roots of Wholesaling

Wholesaling is an older concept with a new name. Back in the 1990’s the concept of wholesaling was called “flipping the contract.” Today, the process is similar but more efficient. Especially with the proliferation of the internet, wholesaling is now manageable online. This makes it easier to connect with buyers and sellers locally and in different markets.

Wholesaling is now a generally accepted real estate investment strategy. New investors benefit by learning and employing wholesaling. Use our easy-to-follow guide for wholesaling to start today!

Wholesaling 101 – A How-To Guide

After you start with wholesaling, you will learn the best methods for your specific business and market. However, these steps offer a great starting point to launch into wholesaling.

Step 1 – Find the Right Area for You

Whether you want to stick to an area close to home or venture into other markets using virtual tools, location matters. In today’s competitive and saturated market, take the time to find the best areas for success. Look for areas with growth potential. Also, it often works well for virtual real estate investing to focus on a few areas where you invest in multiple properties.

Step 2 - Build a Buyers’ List

Your buyer’s list allows you to move quickly once you find a seller for a wholesale deal. The key with wholesaling is the ability to work fast. A qualified buyer’s list is essential to close wholesale deals. Your buyer’s list is what you work from to promote and grow your business. Use your list to find both sellers and buyers for wholesale and other types of deals.

Step 3 - Discover Properties

You can’t have a wholesale deal without a seller. The way wholesale works is to introduce the concept of wholesaling to sellers by explaining the benefits. Look for sellers that need to unload their property quickly. Highly motivated sellers are usually more willing to use creative investment strategies instead of following the longer timeframe of the traditional real estate sales method.

Step 4 – Determine if a Deal is a Good Fit

Not every property makes a good wholesale opportunity. You need room to make a profit on the deal. The sales price must allow for you to have the buyer take over the contract at a higher price than you agreed to with the seller. That’s your profit margin. Negotiate a fair but discounted price, and leave a margin of at least $10,000 for your profit as a wholesaler.

Step 5 – Understand Contracts

Work with a contract attorney or real estate coach to create a simple contract for wholesaling. Use a straightforward two-page sale contract with only one or two contingencies. This is a real estate deal with obligations from the buyer and seller. Make sure the contract states the details of the deal to protect your interests as a wholesaler.

Step 6 - Due Diligence

With wholesaling, due diligence on the condition of the property doesn’t matter as much because you don’t take ownership of the property. The end buyer is responsible for the level of due diligence to perform. However, you do want to understand the market conditions and give yourself room to make a profit. Also, ensure you understand the local laws concerning wholesaling to avoid fines or lost deals.

Set Yourself Up for Success

Create a system that works for you! To make wholesaling work, you need to find leads for properties and buyers for those properties. This means you need an automated process for marketing and managing each deal. Set up an organized system from the beginning. Also, use your network to connect with others in the industry that can help you learn and grow. After all, real estate is a relationship business no matter which strategy you use.

Wholesaling is fun and easy once you learn the basics! Plus, you can make money fast when you have the right tools and knowledge to build your business.