Derek Morgan
Derek Morgan
Real estate agent showing home
Derek Morgan
Derek Morgan

    What is Real Estate Wholesaling?

    For those who want to jump in the real estate market but aren’t certain that your current financial status can bring you there, then becoming a wholesaler could be the right move for you. Wholesaling is a great first step if you are looking to make a profit by breaking into the exciting world of real estate investing. This article will act as a beginner’s guide, taking you through the eight steps you need to complete in order to become a successful real estate wholesaler.

    Step 1: Do Your Research

    Before becoming a wholesaler, familiarize yourself with wholesaling laws. Different states have different regulations, it’s crucial to know what you're getting into ahead of time. Additionally, take time to research the markets and neighborhoods where you are interested in buying property. Using resources like RealEstateSkills.com/resources and searching locations with Unreal Estate’s online search can help you get a better understanding of specific areas.

    Step 2: Find the Right Property

    To be successful as a wholesaler, you should aim to find properties that are listed below market value and make them more appealing to end buyers. Many investors start by looking for homeowners who are motivated to sell, such as homes in foreclosure or with liens. A lot of good deals can also be found on the Multiple Listing Service (MLS), online networking groups, direct mail campaigns, and social media marketing. Don’t overlook these resources and try out various methods. By paying attention to what works best for you during your search, you can narrow down your strategies over time to the few that give you the best results.

    Step 3: Crunch the Numbers

    After settling on a property that you’re interested in, determine whether buying the property makes financial sense by crunching the numbers. This entails finding out the property’s fair market value and how much it will cost to make any necessary repairs. This information can then be used to calculate your maximum allowable offer, which is essentially the highest price you can pay for the property.

    Step 4: Get in Touch with the Seller

    The next step is to reach out to the seller and start the negotiation process. Depending on where you found them, the seller's information may not be readily available. You may need to look at public tax records or search for them online. When you do reach out, be upfront about the fact that you're a real estate wholesaler, and explain how working with you will benefit them.

    Step 5: Perform Due Diligence

    Performing due diligence can be challenging when buying an investment property online, but it's  not impossible. Start by verifying the fair market value of the property by looking at comparable properties sold in the area. You can also compare rental income, occupancy rates, and cash-on-cash returns to analyze your investment.

    Step 6: Get the Property Under Contract

    Finally, you should be prepared to present your offer to the seller and put the property under contract. Verify that the contract includes an inspection contingency, which allows you to cancel the contract if any unexpected problems come up during the inspection. Additionally, the contract should include the right to assign the contract to another party.

    Step 7: Market Your Contract to Cash Buyers

    Finding the right investment and settling on a deal with the seller are not the final steps. Your contract now needs to be marketed to potential cash buyers. One of the simplests ways to do this is by getting in touch with a REALTOR® in your area. They can help you identify cash purchases made over the past year and provide other helpful insight. Again, don’t overlook social media. It’s another great way to connect with potential buyers.

    Step 8: Reassign the Contract to the End Buyer

    When you find an interested buyer, you can reassign the contract to them, and the end buyer will take over the contract and purchase the property. This process is called "double closing" and it is how wholesalers make a profit. 

    As the wholesaler, you'll be able to assign the contract to the end buyer for a higher price than you paid for the property, giving you the difference as your profit. 

    It's essential to ensure that the contract includes the right to reassign the contract and also ensure that you have a Title company that can facilitate this transaction.

    It's also important to remember that as a wholesaler, your primary focus is to find good deals and connect them with end buyers, rather than holding onto the property for yourself.

    Conclusion

    Now that you understand the eight steps involved in becoming a real estate wholesaler, you're ready to start your journey. Remember to do your research, find the right property, crunch the numbers, and market your contract to cash buyers. With hard work and determination, you can be on your way to making a profit in the real estate market.

    Wholesaling is a great option for those who are new to real estate investing and looking to gain experience, test the market and build their network of buyer and seller. Also, it can be a great way to generate cash flow quickly if you play your cards right. However, be aware of the legal regulations and laws in your area and be honest and transparent with sellers and buyers throughout the process.

    While we’ve listed out several steps, the effort you put in will be worth the profit you make and your entry into the world of real estate investing. Complete Step 1 day and find the right property for you on unrealestate.com/search.

    We'd love to hear your thoughts about this article and our blog. Let us know how we did by completing the Unreal Estate Blog Feedback Survey.

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