Guide to Real Estate Wholesaling
Real estate wholesaling has become extremely popular recently and is a great introduction to Real Estate Investing. It allows investors who may lack capital to get involved in their local real estate market.
Our Experience and Expertise
Many investment properties are now bought on a secondary market, the Wholesale Market. We have direct and personal relationships with wholesalers in Virginia and facilitate deals directly with our buyers. We also have examples of wholesale contracts and information about other real estate investing strategies we are happy to share. We believe that wholesaling, and the Real Estate investment world, is a team sport!
What is Wholesaling?
Real Estate Wholesaling can be thought of as the buying and selling of an already executed real estate contract. A real estate wholesaler will put a house under contract by getting an offer accepted at an agreed upon price with a seller below market value. The wholesaler, who is now acting as a middle man, will then market the property to another group of buyers at a higher price. An end buyer will sign an Assignment Contract to purchase the executed contract at a premium. The difference between the Seller-to-Wholesaler purchase price and the Wholesaler-to-End Buyer purchase price is called the Assignment Fee.
​
So why does real estate wholesaling exist? It’s the perfect way to for investors to find houses that produce the best cash flow and most lucrative house flipping opportunities. Most houses that are wholesaled can be considered “Distressed Properties.” This phrase is commonly used to describe dilapidated homes that need a lot of work. Many investor real estate businesses are built entirely on buying off market real estate deals.
​
Real estate wholesaling has become extremely popular recently and is a great introduction to Real Estate Investing. It allows investors who may be lacking the large amounts of capital required to purchase real property to get involved in their local real estate market.
How Do I Start Wholesaling?
To begin wholesaling, you will need to focus on forming relationships with two different groups of people.
1. Individuals who are looking to sell their houses FAST and are HIGHLY MOTIVATED
2. Investors who want to purchase real estate deals (known as your Buyers List)
There are many ways to find Motivated Sellers; some of the most popular are listed below. Many wholesaling guides or personal mentors conveniently leave out a very important part of succeeding in wholesaling. You will do a ton of cold calling. That’s right, the most successful businesses are built around cold calling. Good phone skills are essential, and the only way to get good is to practice. Some Motivated Seller sources are:
​
o High Equity, Out of State Owners
o Pre-Foreclosure/Bankruptcy owners
o Owners of inherited property
o FSBOS
o Bandit Signs, Bandit Signs, Bandit Signs!
o Email and Text Marketing
A note on Bandit Signs. This can be a simple way to both build your buyers list and meet motivated sellers. Bandit signs get you direct exposure in the neighborhood you may be targeting as it will display your real estate company’s contact information. Make sure to put your sign in high traffic areas around the distressed properties you are targeting.
The Property, the Offer, and Under Contract
After you’ve found a motivated seller, it’s your job to come up with an offer price. Generally, your offer will want to be around 50% of After Repair Value (ARV). You can use online tools to pull comps to help you determine this. Your offer needs to be low enough that you will be able to assign the contract at a profit, but also reasonable enough that they seller doesn’t balk. It should be known that only about 1% of all of your offers will get accepted. How many people do you really know who would want to sell their house at 50%value?? This is why finding truly motivated sellers is of utmost importance. This step takes time, so don’t get discouraged! Don’t deviate from your formula for making offers and put yourself into a bind by putting a house under contract that does not meet your criteria. A good wholesaler is not judged by the number of houses they put under contract, but the number of houses they can successfully assign for a profit. Getting a distressed property under contract by finding motivated sellers is essential to your success.
Marketing and Assigning the Contract
Once your purchase agreement is ratified, you only have a finite amount of time to assign it. Specifically, you must assign the contract before the agreed upon closing date. Because of this, it is usually wise to negotiate a longer closing period if possible (60 days). Hopefully you have been networking with local investors in your area and colleting their contact information, because now is a great time to start marketing your contract. Ideally, if you put the target property under contract at below market value and do not add an exorbitant assignment fee, it should be easier for you to find a buyer in a couple of weeks. Using websites that allow free listing of items such as Craigslist and Facebook can be a great way to market your properties.
When you find a buyer that has agreed to purchase your contract rights you will present them with an Assignment Contract. This is another legal contract that transfers your rights and liability to uphold the contract to a new buyer. You act as the Assignor and the new buyer acts as the Assignee. The assignment will remedy your outstanding obligations, and transfer any further obligation to the Assignee. Though we do provide example of assignment contracts, it’s best to speak to a real estate attorney to ensure your contract is bulletproof.
Closing and Payment
​Now all that’s left to do is coordinate the closing of the deal. You will want to submit the original ratified Purchase Agreement and the singed Assignment Contract. Chabal Real Estate can suggest a title company that is familiar with this closing process. The end buyer will go on to complete the transaction and pay the original purchase price and your additional assignment fee. Your relationship with a good title company can make or break a deal.
Summary
Wholesaling real estate presents itself as an excellent opportunity for beginners to enter the real estate investing space, as it is a great way to learn the ropes of the real estate industry and can require little to no capital. Not can it be a great way to make money, but will also expose you to the different investing strategies in real estate, such as establishing rental properties, BRRR, Driving for Dollars, and flipping. Some individuals like wholesaling so much that they make it their full-time careers. Either way, if you are driven, disciplined, and organized, there is no limit to how much money you can make in your wholesaling career.