Investing in real estate can be a good way to earn decent money. It is not like a stock investment where your income highly depends on what happens on the corporation you invested in or stock market ebbs and flows. In real estate, you can enter and exit as you wish and the powers that govern value are a lot more localized. However, dealing with properties is not easy. Wholesaling houses is one of the strategies in this industry that you may want to investigate.
But what does wholesaling real estate precisely mean? Many people often define it as a great short-term investment strategy that does not require huge capital. Some even claim that it is one way to get rich without any money to start with.
We at passivecashsystems.com have looked at many money making hustles and when it sounds too good to be true, it often is. And again in wholesaling properties, there’s no free lunch. You will need to take some cash out of your pocket but not as much as you would in many other businesses models.
What is Wholesaling Real Estate
It’s the process of being a middleman in a real estate deal where you acquire a contract from a seller of a property and assign it to an end buyer. You, as that middleman, are considered a wholesaler. In this article, we will find out how much can you earn from wholesaling real estate. Let’s go over the basics, income, risks, and lifestyle of those who do wholesale and see if this is right for you.
The process start with you looking for properties being sold under market value. It’s the only way to make a profit as a wholesaler. Once you find the property, you lock up (purchase) that property in a contract which has a clause that allows you to assign the contract to someone else. Then you contact an end buyer which you’ve usually built a strong relationship with and assign the contract to them for a fee. In short, you make money from the wholesaling fee added to the transaction.
End buyers are often real estate investors or rehabbers who do not want to spend their time identifying discounted properties. You would serve as a middleman if you become a wholesaler, and generate income by helping them find below market deals that fit their profile. Most wholesalers make a minimum of $5,000 per deal while some make more. The successful wholesalers are the ones with very large networks of buyers ready to make acquisition quickly this way each time they find a property they know they’ll get a sale and can confidently make the purchase.
Perks of Wholesaling Real Estate
Is wholesaling real estate worth your time? Below are some of the reasons why you should consider this idea.
Make Money in a Shorter Time Frame
Wholesaling real estate properties can be a lucrative business. It is good for investors with little to no money to start with since you never take full possession of the property therefore never need to actually shell out money. Once your offer is accepted, you can get your share within 30 to 45 days, sometimes less.
Learn More About the Industry
Starting as a wholesaler can help you understand the ins and outs of real estate market. It is a fitting job for beginners in the area. You’ll need to develop your skills in marketing, organizing, negotiating, and some of the real estate legalities. This is a great way to be connected in the local industry and build relationships that may help further your investing goals in real estate.
No Credit or Little Money Involved
If a lack of enough money for capital is what hinders you from pursuing a business, then wholesaling is for you. Since you are not technically purchasing property, you can participate in a wholesale agreement even with bad credit. You only get contracts from sellers of property that you can assign to a buyers. The buyers are the ones whose credit is being reviewed for the purchase. And often, the types of buyers (investors and flippers) will have strong banking relationships to make purchases quickly.
Risks of Wholesaling Real Estate
Just like with any endeavors or business ideas, it’s important to check all the possible angles before diving head-on. Here are some of the risks of wholesaling real estate that you should consider.
When you do wholesale, it’s like making yourself your boss. You have no employer that is responsible for your weekly or monthly income. So don’t be surprised if you don’t receive paychecks like other people. Earning is not fixed. Hence, you should learn how to manage your finances if you are going to make wholesaling a full-time career.
It is advisable that you also put some of your money into savings. This way you would not have to worry about money in weeks where you fail to close deals.
Difficulty in Finding a Buyer
When you wholesale real estate, no buyers translates to no deal.
You would only succeed in the field if you have a solid buyers list. Otherwise, this is where your job gets risky. A contract between a seller and a wholesaler is usually written with conditions when you fail to assign the purchase. Sometimes, there is a contractual penalty that is owed to the seller if you fail to close a deal with a buyer. Moreover, if other sellers heard of your failed deals, they might not want to do business with you.
For a more secure transaction, it is better to find potential buyers first before you approach the seller of the property. It can help you lessen the risk of you losing money substantially.
The Lifestyle of a Wholesaler
To be a good wholesaler, you have to familiarize yourself with processes in the real estate industry. You can do that by establishing a network. You have to adjust how you get by the day and focus on finding potential buyers. If you are wondering how a successful wholesaler’s day goes, here is an example of a great routine.
Engaging in a Curated Morning Routine
Successful wholesalers or other entrepreneurs know the importance of being productive as you start your day. It will dictate how much you can make for 24 hours. If you start all lazy, it can continue until night. Wholesalers’ morning routine includes exercise, writing, planning monthly, quarterly, or yearly goals, eating, meditation, etc.
Doing Market Research
Of course, it is recommended to start doing market research after you’ve done activities that help you concentrate. This is where you keep yourself updated about price points of specific neighborhoods. You also study the competition during this time. Moreover, you can trace market inventory and understand zoning laws.
Working on your Brand
You can only be a successful wholesaler if you are a good marketer. Consider having numerous lead-generation strategies to help you establish your career.
Evaluating to Closing Deals
You have to be careful of scams and be meticulous about the offers you take. To make sure you don’t get tricked, consider gathering information about the seller of the property and the property itself. And then come up with a resale pricing strategy.
Afterwhich, you attend networking events to look to make your buyers list more active. You make an offer to those who you can talk to and close a deal.
If you wish to know more about wholesaling in general, check out this book from Amazon. It is entitled Real Estate Wholesaling: How to Start with Real Estate Wholesaling, From 0 to $100,000 per month.