Wholesaling real estate involves finding a motivated seller, securing a property under contract, and then assigning that contract to a buyer. It’s a great way to break into the world of real estate investing and can be a lucrative business if done correctly.
In this article, we’ll share 9 actionable and effective steps on how to wholesale real estate to help you get started with wholesaling.
But before we get into the nitty-gritty, let’s first take a look at the definition of wholesale real estate and what it’s about.
What Does Wholesale Real Estate Mean?
Wholesale real estate refers to the practice of finding a property, securing it under contract, and then assigning that contract to a buyer.
The wholesaler, who is typically an investor, does not intend to hold onto the property or to rehab and sell it. Instead, their goal is to secure the property at a discount and then quickly sell the contract to another buyer, often at a higher price.
This allows the wholesaler to make an assignment fee i.e. profit, which is the difference between the contracted price with the seller and the amount paid by the end buyer (typically, a cash investor).
Because you’re not investing any of your own money in the property, there is very little risk involved when using this real estate investing strategy.
How to Wholesale Real Estate in 9 Actionable Steps
Now that you know what wholesaling real estate is, let’s present how to put this creative real estate investor’s tactic into practice.
Here are 9 actionable and effective steps to help you get started with wholesaling real estate:
1. Research Your Market
Before you begin searching for potential properties, it’s important to understand the real estate market in your local area.
Even though you can basically wholesale real estate remotely in any area, you need to research that specific market.
Look for properties that are likely to be in high demand, and try to find motivated sellers who are willing to sell at a discount.
By motivated sellers, we mean distressed sellers who may soon face foreclosure and get their credit ruined if they don’t find a buyer in time. Or, they may have to relocate quickly because of a new job or divorce.
2. Build Your Network
Wholesaling real estate relies on having a strong network of buyers and sellers. Start building your network by attending real estate investment meetings, joining online forums, and networking with other investors.
It’s always good to team up with a real estate investor mentor when you start out who can help to overlook the deals you’re making and can give you tips on where to find distressed properties.
Generally, they take a share of your profit when closing a deal, which can be well worth it when starting out.
3. Find Motivated Sellers
Finding motivated sellers is the key to successful wholesaling. Look for sellers who are facing financial difficulties, foreclosure, going through a divorce, or relocating.
These sellers are often willing to sell at a discount, making them perfect candidates for wholesaling.
You can find these sellers in pre-foreclosure lists. For example, you can find these listings for free in the public records section at your county recorder’s office or online.
Additionally, you can also subscribe to different services that provide you with these lists.
4. Secure a Property Under Contract
Once you’ve found a motivated seller, it’s time to secure the property under contract. This typically involves negotiating a purchase agreement and then placing a deposit on the property.
The purchase agreement should include the purchase price, the terms of the sale, and any contingencies that need to be met before the contract can be assigned to a buyer.
And the deposit, which is typically a small percentage of the purchase price, demonstrates the wholesaler’s commitment to the deal and binds the seller to the contract.
Once the contract is signed and the deposit has been paid, the property is considered to be under contract. It’s important to note that the wholesaler is not actually buying the property at this point; they are simply securing the right to buy it and then sell the contract to a buyer.
5. Perform Due Diligence
Before you can assign the contract to a buyer, you need to make sure the property is a good investment.
This means conducting a thorough inspection, reviewing the property’s title, and checking for any potential issues that could affect its value. This is an important process in order to not get any unpleasant surprises, so don’t skip this step.
It’s also good if you can bring a contractor to look at the property and give you an estimate of the repair costs, so you can provide the buyer (often a Fix & Flipper) with the cost estimate.
These types of buyers often want to make sure they make a profit of at least 20% to 30% when selling.
6. Find a Buyer
Once you have a property under contract, it’s time to find a buyer. Your biggest change in building a cash buyer list fast is by attending your local REI club and starting networking with other investors.
You should also advertise the property on online platforms, or using a real estate agent. Even Facebook groups and platforms like Craigslist are good to advertise on.
Overall, good real estate marketing will help to differentiate your properties from those of your competitors. By highlighting the unique features and benefits of your listings, you can make them stand out in a crowded market and appeal to the right buyers or renters.
PhotoUp offers real estate marketing services that will help you create captivating images for your listing and help you stand out from the competition:
- Real estate photo editing
- Virtual staging
- Single property websites
- Property flyers
- Custom house portraits
- Video editing
- And virtual assistants
7. Negotiate the Sale
Once you’ve found a buyer, it’s time to negotiate the sale. This will typically involve determining the purchase price, setting a closing date, and agreeing on any other terms of the sale.
If you can’t sell the property for the given asking price, you can always go back to the seller and try to renegotiate the price. And if it is more time you need, you can also ask the seller for an extension.
However, when asking for an extension, you should always consider that you are holding up the property during this period.
This means that the seller can’t sell their home to anybody else during this time, and if you still did not manage to find a buyer, it may leave you with an angry seller who can give you a bad reputation.
8. Assign the Contract
Once you and the seller have agreed upon the terms of the sale, it’s time to assign the contract to the buyer.
This involves transferring the rights to the property from you to the buyer and typically requires the assistance of a real estate attorney.
9. Close the Deal
The final step in the process is closing the deal. First, it’s important to make sure that all necessary paperwork is completed and that all parties have signed the appropriate documents.
This typically includes the purchase agreement, any disclosures required by law, and any other documents necessary to transfer ownership of the property. It’s also important to ensure that the buyer has secured financing or has the funds necessary to complete the purchase.
Additionally, the wholesaler should confirm that the property has been properly inspected and that any issues that were discovered during the inspection have been addressed.
Finally, the wholesaler should also coordinate with the seller, the buyer, and any other parties involved in the transaction to ensure that the closing goes smoothly and that the property is transferred to the buyer in a timely manner.
Wholesaling real estate can be a lucrative business, but it’s also highly competitive. To be successful, you’ll need to continuously find motivated sellers, secure properties under contract, and find buyers.
By repeating this process, you can build a successful wholesaling business and achieve your real estate investing goals.
To get help with all your real estate marketing needs, sign up for a free PhotoUp account and try our services out!
You won’t regret it!
We hope this blog post helped you understand how to wholesale real estate. If you enjoyed reading this post, you may also want to check out the following resources: