The Low Down on Wholesale Properties
Many real estate investors enter the industry through wholesale properties. The advantages to this strategy are that the initial investor only holds onto the property for a short period of time, around 30 days, before passing it on to the next investor. The weight of the majority of the risk falls on the end investor since the wholesaler does not need to deal with remodeling, renting or finding a homeowner to purchase the home.
Understanding the three main components of wholesale properties will help you once you decide to invest.
Finding a Deal
To invest in wholesale properties you have to find properties that you can buy at a great price. You will not be able to purchase a price at market value and still be able to sell it to an investor while leaving enough room in the price for them to make a profit. To find a deal with enough room for you and another investor to make money on you will need to look long and hard. These deals are not usually just sitting out on the market.
Contact banks to see if there are any foreclosures they are looking to get rid of or homes they want to sell fast before it goes into foreclosure. You can also try contacting owners of homes that have been sitting on the market for a long period of time or owners of rental properties who are ready to be done as landlords.
Property
There is more to finding the right property than just locating one with a low price. You want to invest in wholesale properties that will be easy for you to add value to. Being familiar with the costs of repairs, both big and small, will help you know which wholesale properties could be worth the time. Doing quick remodels or small updating can bring up the value of the house substantially making the property more appealing to the end investor.
Do some research and take time to look at the comps to see what the property could potentially be worth. Make sure that you are comparing apples to apples by finding houses that have the same number of bedrooms, same lot sizes and similar square footage. Knowing how much the property will be valued at after improvements is important information to provide to the next investor to entice them into the deal. Familiarize yourself with all the details of the property that you can. Good investors will want to know all of this information before agreeing to buy the house from you.
End Buyer
While you are looking for the right property to purchase wholesale you also need to be looking for the right buyer. The quicker you are able to match up property with buyer, the faster you clear up your bottom line for the next investment. Spend time regularly networking and building your list of contacts and potential buyers. Find investors looking to buy and get to know what they are looking for in a property. Deals are faster when you have a buyer waiting. However, you are also able to find buyers online if you have a good investment property with no buyer in mind.
The profits are smaller on each wholesale deal that you make compared with purchasing a property as the end buyer. However, through wholesaling properties you are able to turn deals faster, resulting in a larger potential for total return. The market is loaded with potential buyers and investors just waiting for the right deal to present itself. If you position yourself as the middle man you stand to earn a great deal.