When done correctly, wholesaling can be more profitable than other real estate enterprises and requires less initial capital (read also: Why should you choose real estate wholesaling in 2024?). But how can you develop the confidence to close while just starting? More importantly, how do you spot a solid offer and ensure the person on the other end has ready cash?
These questions often hold people back from diving into real estate. But one solution is reverse wholesaling. It’s one of the best, most risk-free ways to kickstart your real estate investing journey. Here’s our guide to reverse wholesaling!
What Is Reverse Wholesaling?
When you reverse the wholesaling process, you look for buyers first rather than sellers. You find these deals and take those deals to your cash buyers. The only way reverse wholesaling varies from wholesaling is that instead of locating a property and matching it with a buyer, you know what your buyer pool is searching for, and you find it. You ask these investors what kinds of transactions they’re looking for, their ideal deal, and how much they would be ready to pay once you’ve located a few cash buyers. Next, you start looking for offers that meet the requirements of the cash buyer.
Why Reverse Wholesaling is Great for Beginners
This method is ideal for beginners because you work alongside an experienced cash buyer. If your buyer is reliable, honest, and knowledgeable, reverse wholesaling can kickstart your investing career. Plus, there’s less risk of getting stuck with a deal you can’t sell, which often happens to new wholesalers.
How to Reverse Wholesale
1. Network and Build a Buyer List
Networking helps you meet cash buyers, realtors, rehabbers, and more. Use resources like Meetup.com, Google searches, Craigslist, and Airbnb listings to build your buyers list.
2. Find Qualified Buyers
From your network, choose buyers you want to work with. Build rapport and let them know you’ll bring them deals. Ask them questions like:
- What types of properties do you buy?
- How many houses can you buy monthly?
- What ROI are you looking for?
- What’s your business model?
- How quickly can you close on a house?
3. Find the Property
With your buyer’s criteria in mind, find a property to put under contract. Consider their target locations, price ranges, and property features. Use resources like the MLS, driving for dollars, bandit signs, direct mail, and REOs to find deals.
4. Connect the Buyer and Seller
Get the property under contract at a great price. Use the formula:
Maximum Allowable Offer = (ARV x 70%) – Rehab Cost – Your Desired Wholesale Fee
You can assign the contract to your cash buyer or double close the deal. An assignment is quicker and cheaper, while double closing may involve a fee but offers more flexibility.
5. Close the Deal
After assigning the contract or double closing, finalize the deal! Make sure to negotiate your fee upfront. If your first buyer backs out, keep your list of cash purchasers nearby.
What Is the Potential Profit From Reverse Wholesaling?
Generally, you won’t make as much on a reverse whole deal as you would with a conventional wholesale transaction. Reverse wholesaling is different, yet experienced wholesalers can earn $10,000 to $20,000 per contract. A smaller percentage is reasonable as you’re picking up tips from the cash buyer. The average profit on a reverse wholesale deal is between $2,000 and $7,000.
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