What is Real Estate Wholesaling?
Wholesaling is one of the three top real estate investing strategies. Wholesaling real estate is a relatively unknown concept to many. The real estate investor does not hold the property very long (or at all in some cases) with a wholesale deal. There are three types of wholesale transactions:
- Assigning (or assignments)
Assignment wholesaling occurs when someone enters into a purchase contract with a seller, then “assigns” that contract to someone else for an “assignment fee”. Assignments almost always transpire with an investor who will pay the original contract purchase price to the seller, plus the assignment fee to the person who struck the original contract with the seller.
This form of wholesaling is risky but is often taught by real estate gurus as the basis for their “No Money Down” real estate programs. Students of these programs usually refer to themselves as “investors”, or “wholesalers” and sometimes are not very transparent with sellers. Some “Wholesalers” advertise that they buy houses, but only intend to assign the contracts they get usually unbeknownst to the seller. If they fail to assign the contract, the seller is left in a lurch without any repercussions to the wholesaler. This practice can be damaging and casts real estate investors in a negative light.
For those that do practice this technique, it is advisable that they are completely transparent with sellers of their intentions and assign contracts to investors with whom they have established relationships. It is not suggested to execute purchase contracts with sellers before knowing who the contract will be assigned to. Shopping for a buyer after executing a purchase contract might be a disservice to the seller, and could even be construed as “brokering”. A legal nightmare that no one wants to encounter!
Wholesaling in its purest form happens when a real estate investor purchases a property directly from a seller and then immediately sells it as-is on the open market, usually through the MLS. The seller has been paid and the investor now owns the property with a legal marketable title. Investors that do this are performing buyers and have a variety of reason for selling an as-is house they just purchased. Their plate might be full with other renovation projects on hand.
Possibly the work is beyond their skill set or comfort zone. Or, the project is just too far for them to manage. No matter the reason, the investor is positioned to receive top dollar by taking their as-is house to the competitive marketplace. Especially on MLS, cash buyers and investors are routinely buying houses at, or above the asking price. The demand is high and it’s a seller’s market in most areas for as-is houses.
We train our HomeVestors® franchisees to begin their businesses by wholesaling houses. This helps them learn the ins and outs of real estate transactions, builds their investor lists, and generates immediate cash flow into their new businesses. It also teaches them not to fall in love with houses and to see their businesses transactionally, not emotionally.
Wholetailing occurs when an investor purchases a home from a seller, then takes on minor repairs before selling it. These repairs can be aesthetic to bring the home up to the market standards, or more complicated to take a concern (foundation, roof, etc.) off of a potential investor’s mind.
Wholetailing is a term coined by HomeVestors® to describe and differentiate this unique form of wholesaling. Like wholesaling, the investor purchases the home outright and then resells it once the partial repairs are complete.
The Benefits of Wholesale Real Estate Investing
Wholesaling offers wide range of benefits to real estate investors. For starters, wholesaling is less involved compared to the hands-on strategies of rehabbing or renting. One caveat to acknowledge: there is no guarantee that you will find sellers or be able to make consistent money wholesaling. That said, when executed well, wholesaling is a strong real estate investing strategy.
Wholesaling is also a flexible real estate investing strategy, with three sub-strategies to choose from: assigning, wholesaling, and wholetailing. This makes wholesaling a wonderful way to break into the real estate investing industry. Wholesaling lets you see how home deals are made first hand and cut your teeth as a real estate investor.
For wholesalers, access to an active network of real estate investors is essential. For HomeVestors® franchisees, their franchise grants them access to a nationwide network of motivated real estate investors. In addition to access to an active network, I recommend building a strong real estate investment team and finding a real estate investing mentor.
Finally, wholesaling requires discipline and attention to detail. The ideal wholesaler is driven and ready to work hard to meet their goals.
How HomeVestors® Supports Wholesaling
HomeVestors® equips every franchisee with a proven system and powerful tools for real estate investing. Many franchisees start out with wholesaling, before moving to rehabbing or renting. As I mention above, wholesaling is the perfect way to learn the ins and outs of the real estate investing industry.
Another reason franchisees choose to start with wholesaling is because HomeVestors® provides the essentials for wholesaling success. Franchisees gain access to a national network of active real estate investors for peer-to-peer networking, proprietary software for analyzing deals, and one-on-one coaching with a local real estate investment mentor helps franchisees make the most out of every deal and quickly develop a strong wholesaling strategy.
Call me today at 828-989-3785 to discuss your HomeVestors® real estate investment franchise opportunities.
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