With the real estate market being so hot right now and interest rates remaining low, the real estate opportunities abound.
In this series, we’ve been looking at multiple ways you can jump into real estate investing to make money and build wealth. Now, we’ll look at another way that many people forget about.
Real Estate Wholesaling
Real estate wholesaling involves finding a bargain property, getting it under contract, and then selling it to a bargain buyer. That buyer will either buy the property to rehab and sell or buy the property to rehab and use as a rental. By learning how to wholesale, the new investor will learn many essential skills that are crucial to building a successful real estate investing business.
Yes, this is a more involved process than passively investing in a REIT or crowdfunding. Property wholesaling is on par with buying and flipping properties and rental property investing. It’s an ‘active’ not passive role.
Definition of a Real Estate Wholesaler
A wholesaler is an investor that buys properties at a discount and who sells these properties quickly (within 5 to 45 days) to other investors (rehabbers and landlords) making a profit from either an assignment fee or the spread between the price they paid and the price they receive for a particular piece of property. Most beginning wholesalers learn the business by assigning contracts to an end buyer for a small fee.
Role of a Real Estate Wholesaler
Real estate wholesaling is perfect for you then if you’re looking for a full-time, low cost and low risk way to jump into the lucrative real estate investing world. Since your job mainly involves finding and getting good properties under contract, you don’t have to worry about all the high- cost, risk, and stress issues that come with rehabbing properties or landlording.
You will aim to connect with real estate investors who are looking to rehab, landlord, or for whatever reason take over the properties you sell to them. You are a middleman between motivated sellers and bargain buyers.
That means that you will need to purchase bonafide deals – which should be purchased at a price that is 40 to 70 percent below the property’s after market value (ARV).
How Wholesalers Are Paid
According to one expert, real estate wholesalers can expect to be paid on average anywhere from $5,000 to $15,000 per transaction. Count on making about 10-20% of the value of the property you are wholesaling. Of course, this depends on your market and the quality of the deal.
As you can see, wholesaling properties can bring in some serious money for the serious wholesaler. The numbers add up quickly, and if you put the right system into place, you can easily get multiple deals competed month after month.
Here’s an example of how this can be done:
- Wholesale 3 properties per month
- Make $5,000 per property
- Gross $15,000 per month before expenses
- Expenses equal $3,500 for marketing
- Net profits equal 11,500 per month!
Investors who focus on selling wholesale properties do so for any number of reasons.
For one, it’s a great way to learn about real estate investing while building a business that will lead into doing more sophisticated and lucrative deals. It’s also the best way to make fast cash in real estate.
Depending on your buyers, you might be able to close transactions in as little as seven to 45 days.
Benefits of Wholesaling Real Estate
The following are the prime benefits of becoming a wholesaler:
- Limited amount of cash needed to get started
- Limited risk exposure since a wholesaler’s ultimate goal is to sell to another
- investor who will then take on the risk of taking on the property
- The ability to make a quick sale to a group of regular buyers
- No tenant issues or headaches because a wholesaler is not keeping the property
- No contractor issues because the wholesaler is not making repairs
- No credit needed, but wholesalers do need to have access to enough cash to tie up the property
As you can see, becoming a real estate wholesaler is a great new business you can launch, in general, and a great way to actively jump into the real estate business with very little money, experience or risk.
If you’re looking for the best real estate investing help in the Baltimore, Maryland area, you should learn more about Utz Property Management.
Utz Property Management offers a full-suite of real estate services for a fully automated experience for investors. If you want help finding, rehabbing and managing properties, don’t wait, schedule a free turnkey discovery session with Jenni Utz today.
Or, you may contact Utz Property Management today at 410.332.4432.
