What is real estate wholesaling?
Real estate wholesaling is a term which might scare off some of some would-be real estate investors especially in these difficult times, when people are cautious about any investment. Yet, real estate wholesale is not a very complicated concept and virtually ANYONE can jump right in with just a little bit of knowhow and some guts.
So, what is real estate wholesale? The term wholesaling usually applies to manufactured goods selling. As a furniture wholesaler, you would buy some couches from a supplier and sell them to a customer, for a profit of course. This analogy perfectly translates to the real estate market.
The Process – how does real estate wholesale work?
In a phrase, you take a property from a supplier and pass it on to a buyer, while securing a margin for yourself. The supplier can be a home owner, a real estate investor, a bank looking to liquidate a foreclosure or just about any other entity which owns a piece of property. The customers are roughly the same entities, people who look to buy a property for their own use, or for a profit. You are in the middle and don’t actually need to worry about owning the properties. You just need to make the connection between the two parties.
The Suppliers – who are your sellers?
You can find hot property out there; you only need to keep your eyes open for good under-the-value deals. This means that the sellers urgently need to get rid of their property and are willing to sell it under its normal value. This is where your money will come from. Such sellers are quite common in our present context, when foreclosures threaten the financial status of many homeowners. They need to quickly get some cash on their property and will happily sign a deal with anyone who can provide it.
Other prime sources of good real estate wholesale deals are degraded properties that need some fixing done. This will usually diminish the market value of the real estate unit and provide you a healthy margin, if you can make the link between the owner and the prospective buyers.
Banks can offer foreclosed properties at a smaller price than their real estate values. This happens because banks are not real estate wholesalers. They do not want to own property; they only want the capital behind their investment. The same principle applies to other investors just like you. You can get a good deal from such investors; you just need to be sure that there is a profit to be made for you.
The Customers – who are your buyers?
Many people on the market are looking to buy property at any given time. They are looking for value for their money of course, and that is exactly what you will offer them. Buyers can be ordinary people in search of a home or even real estate wholesaling investors or rehabbers that want to resell the property at a bigger price. It doesn’t really matter what their intentions are with the property, it only matters that they are willing to pay more on the property that the amount you would pay to get it.
The Profit – the bottom line
Real estate wholesale wouldn’t make sense without the profit that drives it. When signing such deals you shouldn’t expect a substantial profit compared to the actual value of the property. It could be only a few thousand dollars, but is money which is earned smartly and relatively easily. The whole key of the real estate wholesale concept is to buy under the value and sell under the value, but at a greater price. The difference is what you’ll take home for the workday and it’s not bad at all.