A Great Strategy for Real Estate Rookies
If you are a real estate rookie, say hello to your new favorite strategy! We'll refer to it as wholesaling, but you may also hear people refer to it as quick-turning, assigning the contract, or flipping. Why will it be your favorite strategy? Easy. Because you: •Don't put your credit at risk. •Don't need to use any of your own money. •Don't do any repairs or rehab work. •Get paid a nice chunk of change for doing it. In fact, it's not uncommon for a wholesaler to make a profit of $5,000, $10,000, or even $15,000 per deal! Wholesaling is a great way to get started in real estate. Keep in mind that you're getting paid for doing something very important: finding good deals for others. You can help people who rehab property, people who buy and hold property, and people who rent out property. All of these people will pay you to find good deals for them. Wholesaling works with small houses, large houses, commercial property, raw land--literally every type of property. Your job is simple: put buyers and sellers together. You play the part of the middleman, the matchmaker. Below is an example to show you the simplicity of this strategy. Example of a Wholesaling Deal Let's say you find a property worth $200,000, and you can purchase it from the seller for $130,000. You have 60 days to close, contingent upon your inspection (which gives you a way out of the deal if necessary). You run an ad online and in the paper that says, "Three-bedroom, two-bath house on Second Avenue. Make an offer. Must sell." Don't mention a selling price in your ad. In negotiation, the first person to mention a number loses. In addition to the ad, send emails and flyers to all of the potential buyers you know. You can also call real estate agents in the area and say, "I've got to move this house quickly. Do you have any potential buyers?" From your marketing efforts, a buyer (it could be an investor or an owner occupant) agrees to buy the property from you for $140,000. At $140,000, the buyer is getting a good deal. And that works for you, as you are paying the seller $130,000. It's a win/win/win. The seller sold the house, the end buyer got a good deal, and you pocketed the $10,000difference. Consider it a finder's fee. It happens all the time. The Advantages of Wholesaling Many new investors need capital to get started. If this is you, get your cash flow going by wholesaling properties before trying other things. Once you do a couple wholesale deals, you can try other strategies such as rehabbing, lease options, or landlording. All you will have invested is your time. The following are some advantages of wholesaling properties: •You don't need any money or credit. •You have no tenants to deal with. •You don't need to get into rehab work. •You can wholesale any kind of property. •You have no liability if you write your contracts properly, and use the appropriate contingency clauses. •Your profit can range from $5,000 to $15,000 per house! •The profits from wholesaling can fund your other real estate investments and help you start becoming profitable in real estate very quickly. The Disadvantages of Wholesaling The following are some disadvantages of wholesaling properties: •There is no residual income. •You won't build up long-term wealth with these properties. •You have to pay taxes on your profit because they are cash transactions. Wholesaling is a good way to get started in real estate investing. And as you can see, the advantages of wholesaling far outweigh the disadvantages. If you are a real estate rookie, we encourage you to give it a try. You'll probably find wholesaling to be $5,000, $10,000, or $15,000 of the quickest bucks you've ever made!