As a real estate wholesaler, your success depends on how fast you can close properties for maximum profits. Veterans in the investing business use two common real estate investing strategies: assignment closing and double closing.
Both investment strategies have pros and cons, and knowing their differences can help you choose the right plan that maximizes your returns. This post gives you a quick primer on assignment closing and double closing to help you make informed decisions.
Assignment Closing
In this real estate closing strategy, you act as the intermediary between the distressed seller and the cash buyer. Since you’re a principal in the transaction, you do not need a realtor’s license to buy and sell properties this way. You can still charge an assignment fee, similar to the commissions real estate agents charge.
Pros:
It’s a super-easy process since you only need to find a cash buyer and fill out an assignment form that legally assigns your right to the cash buyer. Plus, you get to collect the assignment fee at the time of deal closing. It also involves only one set of closing costs, paid by you to the cash buyer.
Cons:
There’s no privacy with this type of deal. Due to the nature of the contract, all the parties involved in the process can quickly determine how much money you’re making on the sale. This transparency can sometimes get a bit dicey, especially if you’re hoping to make a lot of money. We recommend using the assignment method only on sales where your profit is $10,000 or less.
Double Closing
As the name implies, in the double close method, there are two transactions involving two closings. It’s also known as the A-B and B-C strategy. Here, A is the distressed seller, B is the real estate investor, and C is the buyer. In the first transaction, B buys the property from distressed seller A. In the second transaction, B sells the property to C, the cash buyer.
Pros:
You will have your privacy. No one besides you knows how much profit you’re making from the deal. Often, real estate investors use the double-close strategy for sales, where they make a hefty profit, usually above $10,000. This method can help you avoid discomfort between the seller and the cash buyer.
Cons:
Technically, you’re closing two deals and will have to pay two closing costs. However, it is relatively easy since you’ll use the same title company for both transactions.
DoubleClose.com Specializes in Transactional Funding for Real Estate Investors
As a leading transactional lender, we help you secure the right financing to complete real estate deals using the double-close method. To learn more about our funding policies and how we can help you, connect with our team at 866-901-4046. Use this form to share information about your deal and get it funded fast!