Last week we went over the most well known of all real estate investing techniques; Long Term Buy and Hold. This week we will look at a technique that has been a stepping stone for many successful investors but can also be used for a full-time real estate career. One of the reasons that wholesaling is a great place to start is because if done correctly, it requires very little up front capital and rewards those that are willing to "hustle" and put in some hard work.
Wholesaling - In real estate wholesaling, a wholesaler contracts a home with a seller, then finds an interested party (usually an investor) to buy it. The wholesaler contracts the home with a buyer at a higher price than with the seller, and keeps the difference as profit. Real estate wholesalers generally find and contract distressed properties but do not perform any rehab themselves.
Wholetaling - Wholetaling is very similar to Wholesaling but the wholetaler may do some very light rehab just to get the property presentable and then sells it on the retail market to an interested buyer (usually someone that wants to live in the home).
Simultaneous or Concurrent Close - A simultaneous or concurrent close is where the wholesaler or wholetaler closes on the property completing their purchase transaction with the seller and immediately closes with the investor or buyer to complete their sale transaction with the purchaser. This creates a situation where the wholesaler never really takes possession of the property and is able to profit instantly by keeping the difference between their purchase and sale price.
How it works: A wholesaler gets a property under contract (generally distressed) and then immediately finds a buyer for a higher price, profiting from the difference in sale prices. Wholesalers spend the majority of their time scouring their market for under-priced properties that they can sell quickly at a profit. Some sources for acquiring these properties include:
How to invest:
Wholesaling is not something that you really "invest" in per se. You just get out there and do it. Of course, there is some investment in education and the time of putting a team together. Good wholesalers are willing to work hard looking for deals and not afraid of some rejection as many or most of the offers you make will not be accepted. While wholesaling can be perceived as a dishonest practice of trying to screw someone out of their property, the good ones that I know focus more on solving a sellers problems in a way that is beneficial to all. Maybe that is offering a quick close, or some other type of terms that help everyone feel that they got a decent deal. Wholesalers also need to spend some time building a Buyers List. Once you have a property under a contract, you want to have a network of interested buyers so you can dispose of it quickly.
Where to get more information:
Wholesale Real Estate for Beginners: Understanding the Process and How to Get Started
What is Real Estate Wholesaling?
Next week we will go over another very common technique known as Fix and Flip. This is the stuff that popular TV shows are made of but we'll look at the more realistic way it works and list some pros and cons.
Please reach out to me with any questions or comments using the comments button or through the contact page on my web site. If you would like to talk more about any of these investment methods or discuss how we can partner together, please contact me.