Wholesaling Real Estate
I’ve had a number of questions lately from people just starting their real estate career who want to know how to make income without much real estate experience. I checked through past posts and found this one on Assignments, Bird Dogging and Wholesaling. Understanding these quick buying and selling strategies may be a great process for the beginner who wants to make a little money while learning. This post was originally published almost two years ago, but is still relevant.
Following are some highlights from a session on Wholesaling given at a Triad Mastermind meeting by Bill Sandford.
Assignment - finding a deal, putting it under contract, then selling that contract to someone else. With an assignment, you are never actually on the property title. The normal fee you can expect for assigning a deal is $1000-$5000.
Bird Dogging – an investor pays you to find leads for them. Typical payment is $5 or an agreed upon amount per lead or $250 for a lead on a property they actually end up purchasing. Most investors increase the amount they pay for leads based on how many of your leads they purchase. For example, $250 per converted lead for the first five leads, $500 per converted lead for the second five, and $1000 per converted lead thereafter (paid after closing on the property).
Wholesaling is often described as the quickest, easiest, lowest risk way to make money in real estate. When wholesaling, you buy cheap, sell cheap, and sell fast with little or no money out of your own pocket.
Now, let’s talk about what real estate wholesaling isn’t. Real estate wholesale has absolutely zero to do with banks, loans, general contractors, mops, brooms, cleaning supplies, or any sort of repair work whatsoever. It also has nothing to do with landlording, collecting rent, speculation or anything that carries heavy risk. Sound interesting?
To wholesale, you purchase property at a severe discount and sell it to an investor or buyer, typically someone other than the final owner, at a discount low enough that they can purchase from you, repair the property, and then sell it again at a profit for themselves.
The normal fee you receive when wholesaling is anywhere from $300 to $15,000 depending upon the price of the property and how much discount you were able to get when you bought it.
When selling a wholesale property, you will need to disclose the address, your asking price, the condition of the property, a list of needed repairs and a cost estimate of those repairs, and the estimated ARV (after repaired value) of the property.
If you’re having trouble selling a wholesale deal, you’re marketing to the wrong people or you’re paying too much to purchase it. Go back to the seller and renegotiate letting them know that, after due-diligence, you found you can’t sell it.
Locking up the deal: To put it under contract,
- Have the seller sign a Purchase and Sale Agreement
- Get inspections done:
- termite (pest)
- oil tank
- Research and read any HOA (homeowners association) covenants
- Study the deed and check for restrictions
- Check the title
What do you think about these strategies as potential ways to make cash with very little real estate experience? Have you ever done any of these strategies?