If you are a real estate investor, you have sold properties wholesales or have heard of others who do.
In real estate, what exactly is a “wholesaler”? These are the basics:
- you buy a property at a very discounted price
- no repairs or renovations are made to the property
- it is resold to an investor who plans to rehabilitate it and sell it again for their own benefit
Let’s analyze this:
To buy a property at a deeply discounted price, expect it to be in poor condition. Properties that need a lot of repair and have been neglected for years are the ones that typically sell for very low prices.
How do you find properties that can be wholesaled?
- Direct mail marketing gets salespeople to call before talking to anyone else. Unbeatable offers are always the best.
- Marketing also lets sellers know before calling that you are not an end user and will not pay retail.
- To buy a lot of properties, you need to talk to a lot of sellers. The national average is that you should speak to 20 sellers before buying a property. If you can’t find these offers, you aren’t talking to enough sellers. The number of properties you want to buy will tell you how many sellers to meet with.
Why Do Sellers Sell at Deep Discounts? Many reasons, including:
- I lived in it for years and never did anything to it (no minimal updates and / or repairs)
- Moving to a retirement home
- Inheritance
- Live out of state
- Distraught and i can’t afford to fix it
- Burned landlord
- Difficult for them to sell in this condition
- Hoarders
What do you need to evaluate when making the purchase?
- Post Repair Value (ARV): What will the retail value be? You need good supplemental sources to determine what the value will be after the repairs.
- How much will it cost to rehab it at retail value?
- How much can you pay to buy it?
- The purchase price should be low enough for both you and the next buyer to make a profit.
What do you do to a wholesale property before you sell it?
- Usually nothing!
Why do wholesalers often get a bad rap?
I think most of the people who have a bad taste in wholesaling have either not done it or have come across some who do it badly.
I was a full time investor for 8 years before I started wholesaling. In 2013, my husband and I bought a HomeVestors franchise, the folks at We Buy Ugly Houses, and since then we have mostly sold in bulk.
To get it right, we spend money every month marketing to the right people for the phone to ring. Then we spend a lot of time with the seller to find a solution to their problem. And we negotiate a price that allows us to resell to an investor who will rehab and still be able to make a profit on the deal we sell to them.
Follow all these steps and people will respect you and come to you for bargains. There is nothing wrong with wholesaling, so fear not.
Is wholesaling legal?
Wholesaling is not a buying technique, but a selling technique. With wholesaling, you buy the property at a low price. There is a closing with a title company or an attorney and you become the owner. He then marks it out for a minimal amount and sells it to someone who plans to rehab and make his own profit.
It is not illegal as it is a normal buy and sell – you buy it, own it, and then sell it. The only thing different between a bulk purchase and a regular purchase is the low price and no work is done on the property before it is resold.
With wholesale:
- we are doing a service
- we are a solution
- we are helping people
- we are taking a terrible situation and making it better for these sellers
What can you add? Do you sell wholesale?