If you’re interested in entering the real estate market, wholesale real estate could be a great way to get started. In addition, wholesale real estate can be a great way to gain real estate experience without sacrificing a lot of financial resources. If you’re interested in learning more, this article will walk you through everything you need to know about wholesale real estate, including how to wholesale real estate works, how to get started, and key benefits and challenges.
What is Wholesale Real Estate?
Wholesale real estate consists of three parties – the seller of a home, the buyer of a home, and the individual that connects the seller and the buyer. The process of connecting a seller with a buyer is what is considered wholesale real estate. To make the connection, the wholesaler will acquire the real estate contract from the individual selling the property. Then, the wholesaler will assign the real estate contract to an individual interested in purchasing the home. The wholesaler then makes money based on a wholesale fee for helping connect the buyer with the seller.
Why Would a Real Estate Seller Use a Wholesaler?
Often, a home seller will utilize a wholesaler when their home is off the market. Owners may have put their homes on the market and found no success. They would turn to wholesale real estate for assistance.
How Does Wholesale Real Estate Work?
Essentially, wholesale real estate is the process of acquiring the real estate contract from the seller, then assigning the contract to the buyer of the home. The wholesaler is a middleman connecting a home seller with a home buyer.
Selling the Contract
The first stage of wholesale real estate is acquiring the real estate contract from the home seller. When assigning contracts, the wholesale real estate investor does not purchase the real estate. They only manage the real estate contract through the contract.
A common theme within wholesaling is the assignment of a double escrow, which means that an individual will witness the purchasing of the real estate property and agree to sell the property at a later date. In most cases, the property sells within 60 days. However, some real estate lenders don’t allow for a double closing. Therefore, checking in with lenders before moving forward is essential.
How to Wholesale Real Estate
To get started with wholesale real estate, you should first connect with an individual that has experience within wholesale real estate. Connecting with an experienced wholesale real estate agent will help you get more familiar with wholesale real estate. It can also help you prepare for what to expect through the process.
The wholesale mentor could potentially connect you with real estate sellers. Connecting with real estate sellers would help you get started on the following wholesale real estate process stage: acquiring a contract.
Then, you’ll want to find individuals interested in purchasing a home. You will then transfer the contract to the home buyers and receive a “finders fee” for the exchange.
Once the contract has been assigned to the home buyer, you can start the process over again to get started acquiring a new contract.
Benefits of Wholesale Real Estate
Why get started in wholesale real estate? There are several reasons, but three factors stand out.
Faster Way to Earn Profits
Wholesale real estate provides an opportunity to earn profit fast. Acting as a connector means you can scale out the number of contracts you acquire and eventually sell.
Become Familiar with Real Estate Market
Traditional real estate requires heavy investments. Wholesale real estate is different because you don’t have to acquire the home. Due to the few resources required, wholesale real estate is a good option for individuals interested in learning more about the real estate market without committing significant financial resources.
Little Resources or Credit Required
As mentioned, wholesale real estate doesn’t require the actual purchase of real estate property, so there are few financial resources needed to get started with wholesale real estate. The requirement of little financial resources makes wholesale real estate a good option for individuals not interested in making significant investments to earn money.
Challenges of Wholesale Real Estate
Although there are many benefits of wholesale real estate, there are some potential challenges to consider.
Profits are not Guaranteed.
One of the main challenges with wholesale real estate is that profits are not guaranteed. There could be times that you purchase a contract from a seller yet cannot find a buyer. In such situations, you’ll have to continue pitching the wholesale contract to potential buyers to make back your initial investment.
Can Be Difficult Finding Buyers
As mentioned above, if you don’t have someone to purchase the wholesale contract, you don’t have any profit. Finding a buyer can be challenging, so it’s advised that you put together a buyer list before investing in wholesale real estate contracts.
Maintaining an Active Buyer List
A key aspect of having an active buyer list is maintaining the list with as accurate information as possible. Things to keep track of include:
- the home preferences of the buyer
- their budget range
By keeping your buyer information as up-to-date as possible, you’ll be able to pitch buyers the houses that fit their needs.
How to Get Into Wholesale Real Estate
Entering the wholesale real estate market is not difficult. Here are the key steps to take to get started.
- Research and get to know your local real estate market
- Network with individuals that have experience in wholesale real estate
- Identify the neighborhoods that you’d like to invest in
- Create a buyers list of individuals in these neighborhoods
- Organize your finances and any additional resources you’ll need
- Start seeking houses and sellers
- Choose between a contract and a double close
Wholesale Real Estate Lead Generation
As mentioned, one of the best ways to get started with wholesale real estate is to develop a buyer list. You should also build a seller list as well. In both cases, it can be helpful to establish a pathway for wholesale real estate lead generation. A wholesale real estate lead generation option can be as simple as advertising your services online or in the local paper. Skip tracing is also a strong option for real estate lead generation.
One crucial aspect of establishing a wholesale real estate lead generator is selling your services and having clear contact information. If building a website, you should also research conversion-rate optimization to boost your landing page effectiveness.
As with any investment, wholesale real estate may involve risks, but it is one of the easiest ways to get started in real estate investing. In addition, wholesale real estate requires very little financial investment and is a great way to learn more about real estate and networking within the field.
If you’re interested in wholesale real estate and want assistance getting started, feel free to contact us at Best Skip Tracing. We’d love to help you on your real estate adventure.