July 21, 2010

What is Real Estate Wholesaling?

Real estate investing is an excellent way to earn profits or earn a living, but before you start wholesaling houses for a living you should take a little time to learn what it’s all about.

Wholesaling is in essence a business-to-business trade. You, as the wholesaler seek out a product for a certain ‘low cost’ price and then place that product in the hands of your buyer who is often a hard money lender or another investor.

You seek out affordable properties and put them in the hands of other investors or buyers. For your trouble you get paid a nice profit that is almost like a finder’s fee. The process of wholesaling houses is one of the most simple and straightforward investing practices out there. The time from find to closing is also one of the shortest periods out of all the other niches in real estate investing.

Don’t Buyers Search Out Property Themselves?

On the surface it may appear as if real estate wholesaling is a little redundant. It seems like the buyer could easily search out cheap properties on his or her own with no need for a middleman. These buyers do seek out properties on their own, but they can’t find all of the great deals. The kind of buyer that seeks out wholesale deals is usually always on the lookout for more properties. These buyers are also very busy. Wholesaling buyers are constantly working on properties, rehabbing them and selling them on the traditional home market.

Plus, who wouldn’t jump at a property that’s still offered to them at way below the market value?

Real estate wholesaling and house flipping often confused in real estate, but they are slightly different practices.

When you wholesale property you act as the middleman seeking out cheap properties and connecting them with buyers for a slightly higher price or a kind of finder’s fee, either way it depends on how you arrange the closing. Very little time is spent fixing up the houses or even placing them on the traditional housing market.

House flipping usually involves rehabbing a house with the homeowner or fixing it up enough to make it very ‘market ready’. There are also a lot of open houses and attempts to bring in a more traditional buyer who is looking to live in the home after purchase. House flipping can provide larger pay offs than wholesaling houses for a living as these cheap houses now sell for full market value. It also involves a lot of extra work and it’s harder to sell a house at full value.

Real estate wholesaling is really a very simple business. You develop a process for bringing in wholesale leads, develop a buyer list and start assigning contracts to your buyers. It really is easy once you get the process started.

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