Real Estate Investing Blog - DiscountedProperties.com

You may be familiar with the term “wholesale real estate,” which is used to describe distressed properties that are bought, rehabbed and then sold. However, what exactly is wholesale real estate, and how can you find these properties?

Wholesale Real Estate 101

Wholesale real estate is a general term used to define real estate that is owned by motivated sellers looking to unload their properties. A wholesale property may need extensive repairs, may have a notice of default, or may be REO or bank-owned.

Examples of wholesale property include:

* The homeowner misses several mortgage payments and wants to sell quickly before the bank sends him a notice of default.

* The property is in a state of disrepair, and the seller wants to move without performing any of the repairs.

* The homeowner is motivated to sell because of a move or job transfer.

As a real estate wholesaler, your job would be to locate these wholesale properties via various networking tools. If you want to wholesale real estate, you will likely need to become involved in real estate investing clubs and online sources, just to name a few.

Wholesale real estate may provide a great opportunity for many investors in today’s tough housing market, provided they have a good working knowledge of real estate laws, trends and finances, and can successfully market and sell wholesale property.

Important Elements of Wholesale Real Estate to Understand

However, before you can successfully find, purchase, and sell wholesale property, it is important to keep the following in mind:

* You will need to understand the local and regional markets and be willing to spend the time searching for properties with motivated or distressed sellers.

* You will need to be able to negotiate deals with sellers that are looking to move quickly but still want a fair price for their home.

* You will want to assemble a list of investors willing to purchase wholesale property from you (there are many investors interested in purchasing wholesale real estate but do not want to take the time looking for the properties – this may prove to be very lucrative to you!).

* You will want to network and work together with other wholesalers. This is often the key to wholesaling real estate, as the larger the network of buyers and sellers, the better off you will be when it comes time to selling your wholesale property.

Now may be the ideal time to take advantage of the wholesale real estate market. It is important, however, to educate yourself on how to wholesale property before embarking upon this real estate investing journey.

Real estate wholesaling is where you take a property you own and sell it to an investor for a profit in order for that particular buyer to sell it, also at a profit. Sound complicated? It’s not really, just think about wholesale retail which most of us are familiar with. You have a product. You sell it to a retailer at a small profit. The retailer then sells it to the consumer for an even greater markup. The same principal applies to real estate wholesaling. You have a property; you sell it to a buyer who in turn sells it at a greater markup. You get a profit; the buyer gets an even greater profit.

So, why not just cut out the middleman and sell it at a higher profit yourself? There are many reasons why real estate wholesaling can be beneficial.

The primary reason for real estate wholesaling is to get fast, easy money. You are selling at a bargain so some established investors may be very willing to snatch up the property to put the time and effort into it needed to flip the house. Perhaps you need the extra cash. Perhaps you just want to build up your reserves for additional investments. Regardless, you don’t have to worry about the details of fixing up the property, listing it, negotiating, selling and closing. You leave that to the buyer.

Maybe you are an investor and want to get out of the business. Perhaps you simply are a bit over extended and have a variety of houses. You can sell in bulk and get out from under multiple mortgages at one time. You are still making money but at a lower rate of return. If you are selling houses in bulk though, the sum of the profits will make real estate wholesaling lucrative for you. You can then decide what to do from there.

The convenience of real estate wholesaling is another reason some investors decide to go this route. You are not tied to a particular profit margin or expected return on investment. If you are making money at all, wonderful! You can keep a property or get rid of it as you want to without having to go through all the complicated details of selling directly to a consumer.

In order to make real estate wholesaling attractive to a buyer, you will have to ensure they will get the bulk of the profit from the final sale. So, you are definitely going to make less money. But you also will have more immediate funds and still make some profit from your initial purchase. Also, you will not have to deal with all the time and hassle of trying to fix up the house and sell it to the end buyer.