Want to dive into real estate and learn how to start making money quickly? Wholesaling is the answer! The journey of learning how to wholesale houses is unique, but once you understand the steps, you’ll be closing deals with confidence. Let’s break down how to wholesale real estate step by step.
What is Real Estate Wholesaling?
Wholesaling is distinct because the investor never owns the property. This might sound odd, but it becomes clear when you break down how to wholesale real estate. As a wholesale investor, you’re a mix of a marketer and a networker. You’ll forge relationships with professionals, creating a list of potential buyers. With strong marketing, you locate prime properties and, once secured, you connect with your buyer list. You then assign that property’s contract to a chosen buyer. Wholesalers earn through an “assignment fee,” a percentage of the property’s value, received when the contract is handed to the end buyer.
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Real Estate Wholesaling Example
Sarah identifies a property owner, Mr. Turner, who wants to sell his old house quickly without listing it. After some negotiation, she secures a contract to purchase the property for $100,000. However, instead of buying it herself, Sarah decides to wholesale the deal. She connects with an investor, James, who is interested in the property. Sarah offers to assign her contract to James for $110,000, which he accepts.
When the deal closes, Mr. Turner gets his $100,000, James acquires the property, and Sarah earns a $10,000 profit from the assignment fee without ever officially owning the property. This transaction exemplifies real estate wholesaling, where a wholesaler secures a property under contract and then assigns that contract to an end buyer for a markup.
How to Wholesale Houses Step by Step
Now that you understand the various benefits of becoming a wholesaler, you may be wondering exactly how the wholesaling process works, and what kind of skills and resources are required to successfully complete your first deal. The following wholesaling real estate step by step guide will help answer your questions:
Mind your due diligence
Build a buyers list
Market to motivated sellers
Get a property under contract
Find your end buyer
Assign the contract
Close the deal and cash your check
1. Mind Your Due Diligence
Wholesaling real estate is not just about identifying properties and connecting buyers and sellers; it starts with thorough research. This means understanding the local real estate market trends, identifying neighborhoods with potential, and even understanding property values. Begin with online research, engage in community forums, attend local real estate meetings, and maybe even partner with a real estate agent who can provide insights. This foundational step ensures that your wholesale ventures are grounded in reality and data.
2. Build A Buyer’s List
Before even securing a property, you’ll want to have a strong list of potential buyers. Start networking by attending real estate investor meetings, joining online forums, and engaging with local property management companies. Your buyer’s list should comprise rehabbers, rental property owners, and other wholesalers. Remember, the more extensive and diverse your list, the easier it’ll be to find a buyer when you have a property under contract.
3. Market To Motivated Sellers
The most important part of learning how to wholesale real estate? Finding properties. And the best deals come from motivated sellers. These are individuals who, for various reasons, want or need to sell their property quickly. Your job is to find them. Utilize methods like direct mail campaigns targeting distressed properties, bandit signs, or even digital marketing. Advertising “We Buy Houses for Cash” can often attract these sellers. Also, explore foreclosures, tax liens, and estate sales, as these can be goldmines for motivated seller leads.
[ If you want to learn more about the best way to contact motivated sellers, check out this script. ]
4. Get A Property Under Contract
Once you’ve identified a motivated seller and negotiated a deal, it’s time to secure that property under a contract. This doesn’t mean you’re buying the property, but rather securing the right to purchase it. Your contract should clearly stipulate that you have the right to “assign” the contract to another buyer. Ensure that your agreement has favorable terms and conditions, ideally with an extended closing date, giving you ample time to find an end buyer.
5. Find Your End Buyer
With a property secured under contract, turn to your buyer’s list. Blast out the property details, host a property walkthrough or showcase detailed photos and descriptions online. Engage with interested parties and gauge their interest level, ensuring they are aware of the assignment fee that comes with the deal.
6. Assign The Contract
Once you’ve found your end buyer, the next step is assigning your contract to them. This process transfers your rights to purchase the property to this new buyer. Ensure that you draft a clear and legally sound assignment agreement that outlines the terms, especially your assignment fee, which is your profit in the deal.
7. Close The Deal & Cash Your Check
With the contract assigned, your role in the transaction is essentially done. The end buyer will proceed to close the deal with the original seller. Once closing is complete, you’ll receive your assignment fee. This entire process can happen quickly, sometimes in as little as a few days, making wholesaling an attractive real estate strategy for many.
Bonus: Building A Backup Plan
As you learn how to start wholesaling real estate, you’ll find that it is appealing for both beginners and seasoned investors alike. That being said, always have a Plan B. While wholesaling is relatively low-risk, unpredictables exist. In unforeseen circumstances, you might consider buying and rehabbing the property yourself. This way, you’re covered, come what may.
Wholesaling With No Money
Believe it or not, wholesaling real estate doesn’t demand a hefty wallet or perfect credit. As contracts are directly assigned from sellers to buyers, wholesalers don’t buy properties. So, credit scores and income levels aren’t barriers. Wholesaling offers a platform to hone real estate skills, all while saving money and improving your credit.
Wholesaling Vs. Flipping
Both wholesaling and flipping are profitable real estate strategies, differing in profit potential, costs, and time. Wholesaling is about networking and communication, while flipping involves property purchase, renovation, and resale. Each strategy has its unique commitments and rewards.
At the end of the day, both wholesaling and flipping are two relatively beginner-friendly ways to break into real estate investing and turn a profit.
By understanding how to wholesale real estate step by step, you position yourself for success. Proper research and due diligence are foundational. As you grow in wholesaling, you’ll appreciate the benefits and potential it brings to your real estate investing journey.
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