Real estate wholesaling is an increasingly popular option amongst real estate investors, particularly new investors who require the capital for more lucrative deals.
Wholesaling properties is preferred amongst many investors due to the lack of risk and the fact that you can get into wholesaling for little or no money down.
In real estate wholesaling, the wholesaler is a middleman between the property owner/seller and the rehabber.
Consider the following example to illustrate how wholesaling works. You’ve found a property that will be worth $150,000 after rehabbing. The property requires about $20,000 in improvements and repairs. You secure a contract on the property for a sum of $75,000.
Next, you connect with a fellow investor and rehabber who’s ready to purchase the property as-is for a sum of $85,000. You assign the contract to the fellow investor/rehabber and earn a profit of $10,000.
The rehabber remodels and repairs the property and ultimately sells it for $130,000, so the investor/rehabber profits too.
The wholesaling process often (but not always) involves distressed property owners, that is, individuals who are behind on their mortgage or facing foreclosure. An adept wholesaler will negotiate a selling price that’s significantly less than the home’s value. The wholesaler will typically expend money as a down payment on the property.
Once sale contract is drawn up, the property’s contract can be assigned to a rehabber who will perform improvements and renovations required to boost the property value and allow for a maximum return.
Once the property is renovated and rehabbed, the rehabber will oversee the sale to its end buyers. Some rehabbers may opt to keep the property, using it as a rental holding.
The key to successful real estate wholesaling is two-fold. Firstly, you must find a property at a rate that allows for a profit for you, the wholesaler and for the rehabber, who will flip the property to the end buyer. Secondly, you must move the property to a rehabber in a prompt manner, so as to expedite the improvements and allow for a fast closing.
If you’re ready to get involved in wholesaling in Chicago or the surrounding area,you’re invited to complete an investor’s form to get started.
Questions about getting your start in real estate investment and wholesaling? Contact Greg Teele with Teele Enterprises, Inc. at 224.343.6890.