One of the quickest ways to earn quick cash in the world of real estate investment comes when you become familiar with the world of wholesaling real estate, which is a way of flipping properties. The profits in this area of investing can even sometimes come from properties you don’t even own!
A typical property flip involves only one investor who obtains a property at below market value that needs major repair or where a very motivated owner is selling for reasons such as a failure to make mortgage payments. This investor makes the necessary repairs and then sells the property at or near to market value and makes a profit. This selling price must be higher than what the investor originally paid for the property plus all repairs made.
A wholesale occurs when a wholesale investor goes into contract to purchase a distressed property below market value and then makes a profit by reselling it for a higher price to a property rehabber/retailer.
How can you profit from wholesaling? What you do is find a property that meets your characteristics, place it under contract, and then assign this contract to another buyer that closes on this property in your place. You have bad credit? No problem! When wholesaling, credit is not an issue. Plus, the wholesale transaction requires little or no money down!
How can you find a property to wholesale? Create a “We Buy Houses” ad to attract properties that have equity. If you run the right ads in the appropriate locations in the city, you’ll have plenty to choose from. A lot of these prospects coming to you will be in financial distress (foreclosure, etc.) or the properties may need repair.
Let’s make an example to further illustrate wholesaling. After running ads, you come across a property that has an after-repair value of $200,000. This property is currently in foreclosure and needs $30,000 worth of repairs. The sellers of the home owe $102,000 and will need $8,000 for their relocation expenses.
In this situation, discuss with your Realtor to negotiate a purchase contract for $110,000 and then agree that you will fulfill the mortgage deficiency. Make sure to write “and/or assigns” after your name when writing the contract!
How can you find a buyer? Set up local advertising while using phrases that attract attention, such as “Great Rehabbing Deal”, “Investor Special”, or “Thousands Below Market Value”. While planning for the sale price, make sure to leave enough profit in the deal for the incoming rehabber.
In this example, you can wholesale the deal (sell/assign) to a retailer/rehabber for $124,000, thus making you $14,000 in profit!
The rehabber purchasing the property will invest $30,000 for the repairs, and will still have a $45,000 or more profit potential on the investment. It all boils down to three simple steps: Find the deal. Find the buyer. Let the title company do the rest.
A great tip to make your future investments easier is to create a “future buyers list”. This is a list of potential buyers and rehabbers that you’ve worked with in the past or have contacted you about deals. Often, you may want to rehab a property yourself but you other properties that demand immediate attention. You can then make some quick cash by selling these excess deals to another person.
A cardinal rule of investing in real estate is that whenever someone calls to inquire about one of your properties, always make sure to get their names, phone and fax numbers, and email addresses. Find out what type of properties they’re looking for and how much they’re willing to spend.
Even after you sell the property, continue to run your ads. This way you can get as many potential buyers as possible to add to your future buyer’s list. What’s great about this is that whenever you get a new deal under contract, you now have an entire list of potential buyers to fax and email!
One of the greatest parts of wholesaling real estate is that it’s a way to get quick cash without worrying about your credit score or down payments. As long as you put in the work and have the right professionals on your team, wholesaling is a great way to earn cash in the world of real estate investing!