So you want to get into real estate and you've heard about this great thing they call "wholesaling". But what is wholesaling? Is it good? Is it legal? How hard is it, exactly? While some questions may be easier to ask than others, it is important to remember that each situation is different and I am no layer. Before we even get started, let's go over a few ground rules when it comes to wholesaling real estate.
- Get your license. Seem simple enough? Always have the correct paperwork and knowledge to do what you do at the drop of a hat. It is always better to not need it and have it than to not have it and need it so be on the up and up!
Buy and sale. Of course, we'll cover this more a bit later, but before we even get started let's just make this up front right now you do not want to hold on to these types of properties for long. In order to avoid any mishaps or misunderstandings, rather just assign a contract it really is better to just turn it right around even if you just purchased it yesterday.
Well now that we got those out of the way, let's take a look at what it means to wholesale in real estate!
The basic definition of real estate wholesaling is to find real estate deals that no one else can beat and to bring them to the attention of real estate investors all for a fee. You may think it's sort of a "finder's fee" and that is not a bad way to look at it, however, there is a bit more paperwork and legal jargon involved.
For example if you knew someone who wanted to sell a home that wasn't exactly in the best shape and they wanted to get rid of it quickly you could come in and buy the home from there for say ten grand then turn around and sell it for fifteen thousand to a real estate agent thus, making you a five thousand dollar profit without ever having actually owned the property.
There is nothing inherently evil or illegal in wholesaling, though there have been some discussions on the morality of the process. What some people would call wholesaling, some would call "brokering" which is no a good term. While each state may have its own definition of what and who a broker is. If you are "brokering", you are essentially going behind a broker's back to get the money they would have made just by doing what they are literally paid to do.
The difference between a "wholesaler" and a "broker" is that a broker typically has an actual business which thrives on pretty much this exact interaction. What this means is that through your actions, you are taking business away from a business without having a business yourself. Sound complicated? Just imagine trying to sell your own ice cream in front of an ice cream store in the middle of summer. Sure you may have your own business license and it's completely legal for you to sell said ice cream but should you? That is the dilemma faced by many a wholesaler today. The truth is, if you mind your p's and q's and never oversteps your bounds, there is nothing wrong with a little friends competition. Just make you're sure you follow all state laws. Dot all your I's and cross all your T's, take the two steps we covered at the start and you should be fine.
Now let's go over a little bit more on actually purchasing a property in order to wholesale. What makes the wholesale so difficult for most is the numbers. You have got to know the numbers forwards backwards inside and out. You have to calculate just how much you are going to pay versus how much profit you will make in the sale. You have to factor in legal fees, repair cost, even sometimes insurance before you make your final deal.
Once that deal is made, you have to know just how much in return you will get once you turn the house around. Again, this is not your home but someone else so it is entirely up to you to do that research and know in full detail exactly what it is you are getting into. Once can make a good deal of money in wholesaling, but it does take some determination and a little know-how to get things done. After all, you are never going to find a home to wholesale in the first place if you don't make that effort.
You have to put in the time and energy to find these particular homes AND the real estate agents willing and able to buy them. This will not be done sitting around using your phone to crush candies and not to follow up leads and make important phone calls. Use your time wisely and put in the leg work. Try using tools such as directly mailing "for sale by owner" homes, driving around town and physically finding potential clients, use social media such as Facebook, Twitter, or even Craiglist to find home listings, and even use the national local real estate database itself. The MLS may be a bit tricky beings that is already list homes with real estate agents attached but it does ensure you will be working directly with the agents and that is just a bonus in the long run for you.
So there you have some very basic tips and tools to use as a beginner wholesaler. Just remember to be kind, smart, and never take advantage of a bad situation. Wholesaler is an art and if not careful could be used to give real estate agents a bad name so whatever you do don't be "that guy" Over all just be sure you have fun with it, really put in the effort, and never fail to follow your dreams as far as they can take you. Good luck and happy wholesaling!
Thank You For Reading!