Wholesaling Real Estate

Investing in real estate is risky business and very costly, there's the cost of the property itself, closing cost, rehab cost, holding cost, as well as all of the other fees, charges and the unexpected costs that are sometimes overlooked.  It is a very involved process.  Well, there is another way to investing in real estate - wholesaling.  Wholesaling eliminates all of the costs, the stress, and risk involved in investing in real estate, primarily because you never actually take ownership of the property.  It really is a simple process - get the property under contract, assign the contract to another buyer/invetor/rehabber who closes on the proeprty, the new buyer gives you a check (predetermined fee) at closing and you're done.  You can realistically do this with little to no money down.

Here is an example of how it works:

1. Find a property

REOsNH.com is a perfect place to find properties discounted below market value.  If you see a property that you like but a bit pricey, make the bank a realistic offer - 9 times out of 10 they will accept because they need to unload ther inventory of real estate.

In this example, a property is worth $200,000 and you negotiate or find this home listed at $100,000, you would fill out the sales contract with the bank/homeowner as the seller and yourself as the buyer.  See the links to the right (coming soon) to find real estate contracts or contact your loacl Realtor. 

When filling out the contract, write your name on the Buyers Name line and add the words "and/or assigns" after it, this will allow you to assign the contract to the buyer/investor/rehabber.

To make it a binding contract, a deposit must be given to the homeowner at the time the contract is signed.  Typically a $10 - $20 deposit is sufficient and if the deal falls through, this is the only money that you will lose.  Give the seller a timeframe in which you plan to close, 45 days is the rule of tumb.

2. Build a Buyer Database

Building a buyer database is critical to the closing process.  Place an ad in the paper and then when people call add their information the the database.  Every time you get a property under contract, e-mail and/or fax the details to your list.

The best reponse in attracting qualified buyers is to run an ad in the newspaper, something to this effect:

Handyman Special
Selling Below Market Value
(603) xxx-xxxx

Investors Wnated!
Undervalued - Won't Last at This Price
(603) xxx-xxxx

3. Negotiate with Your Buyer

If the proeprty you're looking at is worth $200,000 in good condition and the seller accepts your offer of $100,000 and you figure it will take about $20,000 in repairs to get it ready for resale.  You should know up front what % of the retail value your buyers are willing to pay, in this scenario, the buyer/investor/rehabber is willing to pay 65% of the retail value, which is $130,000, this would make the $10,000 difference your assignment fee.

$100,000 (original cost) + $20,000 (repair est.) + $10,000 (assignment fee) = $130,000 (65% of the reail value)

The buyer/investor/rehabber will pay $100,000 to the seller and $10,000 to you as an assignment fee then the buyer will fix it up and sell it, making the difference between the $130,000 and the $200,000 fair market value.

4. Prepare for the Closing

Using an investor-friendly title company will save you time becasue they do all the work for you.  All you have to do is find the deal, wholesale it and go to the closing - the title company does the rest.