Getting started in real estate investing can be very challenging, especially if you don’t have tons of capital to invest. But wholesaling provides new investors with a great option for generating capital that can be invested and re-invested over time. So in today’s article from The Short Sale Gal Kristine Zelazo, we’ll explore how wholesaling works and why it’s beneficial to new investors.
Real Estate Investing Tips: What is Wholesaling?
Wholesaling, in its simplest form, is serving as an intermediary between a source of goods or services (or in this case, real estate) and its end consumer.
In the real estate field, this same concept rings true as real estate wholesalers serve as an intermediary between the seller and the end buyer. In most cases, the wholesaler secures a contract on the property; then, they find a buyer — usually a rehabber — who will purchase the property at a higher price.
You can get involved in residential real estate wholesaling or in commercial wholesaling. In the case of many wholesaling transactions, the property in question involves a distressed property, where the owner is behind on their mortgage payments and at imminent risk of losing the property.
In the case of a distressed property, the wholesaler can often acquire the real estate for a price that’s significantly lower than market value. Additional room for profit lies in the fact that the home will be rehabbed and renovated. This is what makes wholesaling viable.
Real Estate Investing 101: How Does Wholesaling Work?
To understand real estate wholesaling, it’s perhaps best to illustrate the workings with an example. Let’s say you — a wholesaler — have located a distressed property that will be worth $400,000 after the rehabbing process is competed.
The property requires about $50,000 in improvements, repairs and general rehabbing work. You are able to work with the owners and successfully secure a contract on the property for a sum of $320,000.
Now that you have a contract on the property, you set out to find an investor and rehabber who’s ready to purchase the property as-is for a sum of $360,000. You transfer your contract to the investor/rehabber and subsequently earn a profit of $40,000. The rehabber remodels and repairs the property and ultimately sells it for $390,000, so the investor/rehabber also enjoys a profit. It’s a win-win-win scenario.
Real Estate Wholesaling – The Benefits and Disadvantages
Real estate wholesaling is fairly unique in that there are no real significant risks or disadvantages. The amount of money you earn on each transaction can vary dramatically, but there’s very little — if any — money required to secure a contract on a property. Some wholesalers offer a token payment, though.
The only real challenges surround developing a network of rehabbers whom you can work with on a regular basis. The key to profiting from wholesaling is to transfer the contract to a rehabber in a prompt manner. But once you develop some strong connections, you can see some major advantages.
NEED HELP Getting Started in Wholesaling?
There are a number of unique steps and processes involved when getting started in real estate investing, including wholesaling, but when done right, you can stand to make significant profits. You’ll have lots of advantages in this regard when you work with a real estate investing and short sale expert like Kristine Zelazo, better known as The Short Sale Gal.
Based in Florida, Kristine works with both buyers and sellers and she is an experienced negotiator. So if you’re an investor seeking to get started in buying short sales and need a great mentor or wish to pursue a short sale transaction for the sale of your property, turn to Kristine Zelazo, the Short Sale Gal!
To get started with selling your home, simply complete the home pre-sale form to provide Kristine with additional information on the property in question. Then, call 786.570.0360.