Real estate wholesaling is a trendy investment approach, especially for those who want to dip their toes into the real estate market without deep pockets or vast experience. In short, it’s a way to make money quickly without hefty property makeovers or long-term commitments.
In this post, we’ll dig into the wonderful world of real estate wholesaling, focusing on how it works and what’s needed to be successful.
What Is Real Estate Wholesaling?
Real estate wholesaling is a popular and dynamic method of real estate investing. Essentially, you find distressed properties, put them under contract, and then transfer the contracts to end buyers for a fee.
Wholesalers act as intermediaries. Therefore, in a wholesale real estate double-closing situation, the wholesaler never owns the property. Instead, they work with the motivated seller first and then find a buyer afterward.
Wholesaling is also known as a “quick flip” in real estate investing. The goal is to get a property for a discounted rate before selling it to investors who want to renovate or rent the place out.
Wholesalers make their money by charging an assignment fee, which is usually the difference between the contracted price and the price paid by the end buyer.
How The Real Estate Wholesaling Process Works
Finding Distressed Properties
The first step is to identify distressed properties with profit potential. These properties usually need repair, or their owners may face financial difficulties.
Evaluating Potential Deals
After identifying a potential property, a wholesaler must evaluate its viability as a deal. Several factors come into play during this evaluation:
- Determining the After Repair Value (ARV)
- Calculating the Maximum Allowable Offer (MAO)
- Estimating repair costs
Building A Buyers List
To excel in wholesaling, wholesalers need a pool of potential buyers who are always ready to make a deal. Their buyers are usually investors who are actively seeking investment opportunities. Building a buyers list involves:
- Identifying investor-buyers
- Creating a network of cash buyers
Negotiating & Getting Properties Under Contract
When a potential deal is found, the wholesaler will negotiate with the seller to secure the property under contract. This involves:
- Making an offer
- Signing a purchase agreement
Assigning The Contract
Once the property is under contract, the wholesaler will try to find an end buyer interested in getting the contract. The end buyer will have to agree with the rights and obligations outlined in the contract.
Closing The Deal
To complete the transaction, the wholesaler will work with a title company or a real estate attorney to ensure a smooth closing process. The title company will conduct a title search, prepare necessary documents, and handle the funds transfer. After closing, the wholesaler receives their assignment fee, and the property is transferred to the end buyer.
Utilizing Transactional Funding In Real Estate Wholesaling
Transactional funding is a financing option commonly used for real estate wholesaling. With this, a wholesaler can double close without using their funds, especially when the end buyer requires temporary property ownership.
The wholesaler purchases the property using transactional funding and then promptly sells it to the end buyer. The funds from the end buyer’s purchase are then used to repay the transactional funding lender. This process is known as a double closing with transactional funding.
Transactional funding allows wholesalers to complete the buying and selling processes on the same day.
Get Reliable & Hassle-Free Transactional Funding Near You
Although it’s used all the time, getting transactional funding can be a headache sometimes. Some lenders have strict, hard-to-meet requirements, and others aren’t there when you need them to be on the closing day. And if your funding doesn’t show up when you need it, many serious problems could be on the horizon.
But at DoubleClose.com, we’re not strangers to the real estate investing game. We understand what wholesalers go through, so we’re proud to provide the best transactional funding. Check us out to learn more about what we’re offering now!