Wholesaling: Getting Your Contracts Right

While wholesaling and flipping houses can be an extremely profitable form of real estate investing it also requires that you pay extra attention to your offers and contracts.

Perhaps the most important factor for those new to real estate investing is making sure that your contracts are assignable. Not only does this make it easier to just flip contracts without having to close but gives you a back up plan should you run into problems getting financing. Some sellers are wary of doing business with real estate investing companies and will turn down offers that include addendums that state the contract is assignable. You will find it much easier if you use contracts that have an assignable clause already built into to body of the contract where it is less noticeable.

Even if you resell the property immediately you still should include a reasonable time to inspect the property in all contracts. You do not want to get stuck with a property that has hidden structural issues and could prevent you from reselling the property, becoming an illiquid asset for your real estate investing business.

If you plan to turn around a property immediately you may also need to include a specific clause or addendum in your offer giving you permission to market and show the property even before you close on it. This will shorten your cash cycle resulting in larger profits and lower operating costs for your real estate investing company.

Finally always make sure that you have as many outs from the contract as possible just in case you change your mind or unable to close so that you do not lose any deposits made. In addition to inspection contingencies this includes financing and valuation. One of the most common mistakes made by those new to real estate investing is stating they will be paying cash when they are not. This means if you fail to get financing you will lose your earnest money deposit and do not have any reasons for extending the closing date. Even if you do plan to pay cash you may be best served by including a contingency for financing approval just to keep your options open.