Wholesaling for quick cash is rapidly becoming a popular real estate investment strategy. In essence, wholesaling involves locating properties under market value and quickly reselling them for profit.
Wholesaling for quick cash is a relatively easy way to get started as a real estate investor. Anyone aged 18 and up can participate in wholesaling real estate. All that is required is to become educated about the process, develop a marketing strategy, and create a network of prospects.
There are four basic steps involved with wholesaling real estate:
- Locate property owners motivated to sell their real estate
- Negotiate the purchase price
- Place the property under contract
- Resell the contract to a real estate rehabber or investor
Wholesaling real estate is similar to house flipping. When investors purchase distressed properties for flipping, they usually buy the property significantly under market value and invest money in making repairs or renovations.
Oftentimes, repair costs go over budget and take longer than anticipated. Every missed deadline and added expense costs the investor money. With today’s housing and lending crisis, investors find themselves sitting on property they can’t sell.
Wholesaling eliminates many of the headaches associated with house flipping. There is no need to invest money into repairs or wait to find a qualified buyer. Instead, you become a real estate matchmaker and locate sellers who have what buyers want.
For Sale by Owner real estate is a perfect match for wholesaling real estate opportunities. Many homeowners engage in FSBO to avoid costly Realtor fees and commissions. Others place their homes up for sale to avoid foreclosure. Some FSBO homes are second homes which Sellers need to liquidate quickly. In other words, there are numerous properties to choose from.
The cherry on top is when homeowners offer seller carry back financing. In this type of real estate transaction, Sellers carry all or part of the financing. When seller carry back financing is involved, the property can be sold to a rehabber or investor without owning the real estate.
Homeowners facing foreclosure can benefit from engaging in wholesaling. Let’s say your home has an after-repair value of $190,000. You currently owe $120,000 on your mortgage note and are $3,500 behind on payments. You need $10,000 for moving expenses.
You sell your home to a real estate wholesaler for $135,000. This pays off your mortgage deficiency, mortgage note balance, and provides you with funds to relocate. Although you have to move out of your home, you have saved your credit and have money in your pocket to make a fresh start.
The real estate wholesaler now owns a home with $55,000 in equity. However, the house requires $10,000 in repairs in order to fetch the full purchase price of $190,000. Instead of spending money on repairs, the wholesaler locates a rehabber.
If the wholesaler sells the property to a rehabber for $165,000, he earns a profit of $30,000 with no out-of-pocket expense. The rehabber owns a property with $15,000 instant equity. It’s a win-win-win situation.
There are numerous resources available online which discuss wholesaling strategies. Although the real estate market is in a slump, there is a strong need for wholesaling. By learning the ropes, you can create a solid real estate investing business that offers much-needed relief to struggling homeowners.
