What is Wholesaling Real Estate and How Does it Work?

As an investor, there will come a point at which you’ll be ready to learn more about wholesaling real estate. This aspect of the business is quite simple, once you understand how it works. You may never even have to get your hands dirty.
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As an investor, there will come a point at which you’ll be ready to learn more about wholesaling real estate. This aspect of the business is quite simple, once you understand how it works. You may never even have to get your hands dirty.

Of course, each investor has a preference for the types of investments he or she gets involved with. Knowing all of the options is important in helping you decide which you prefer.

Wholesaling real estate is similar to conventional flipping, in that you have no intention of hanging onto investment properties. The biggest difference is the time frame involved in the process. Whereas flipping means the investor will contract and purchase the property, make any necessary repairs and then sell, the process might take weeks or months after the home closes. Wholesaling might happen overnight.

The goal in real estate wholesaling is to sell the home before the contract with the original seller closes. Profit margins may be less, but so is involvement.

The goal in real estate wholesaling is to sell the home before the contract with the original seller closes. Profit margins may be less, but so is involvement.

Here’s how it works….

As a real estate wholesaler you contract with a property owner who is selling and then market the home to your potential buyers. This is why maintaining ongoing relationships with buyers is important. The more diversity among the buyers, the broader the spectrum of opportunity.

When an interested buyer-investor steps up to the plate, you assign the contract. You, the wholesaler, make a profit, based on the difference between the contracted price you set with the seller and the amount paid by the buyer.

For example, let’s say you and a seller agree to contract at $110,000 for a property that will require repairs totaling $10,000. Once repairs are made, the house will sell for $165,000. An investor-buyer in your network is willing to buy the contract for $135,000, grateful for a profit of $30,000 when he/she sells.

If the investor-buyer is a contractor or can do the repairs for less, the investment becomes even more desirable. You assign the contract for this profitable fixer-upper to your investor-buyer, and you, the wholesaler, make a $10,000 profit without ever owning the home.

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