Buying Investment Real Estate? Be a Wholesaler! | Max Returns REI

Buying Investment Real Estate? Be a Wholesaler!

Success in the world of retail revolves around wholesale prices. The little boutique where you buy silver jewelry, the cigar store on the corner, and the grocery store downtown, all buy goods cheap on a wholesale bulk basis and then sell those same goods to you at an elevated price. It’s not that well known, but real estate investing works in much the same way, and wholesale real estate opportunities are a lot more abundant than you might realize.

What is a wholesale real estate investor?

In the retail business, there is a chain that starts with the manufacturer, and then goes to the wholesaler who buys in large quantities, who then sells the same goods to retailers at a higher price. The retailer then sells the goods to consumers. In real estate, it’s very similar. We won’t worry about the manufacturing (home building) stage. The wholesale real estate investor’s strategy is to find distressed properties, put them under contract, and then transfer the contract to a retail buyer for a profit.


One of the big advantages of wholesale real estate investing is that you won’t have to worry about credit, or even having cash on hand. You’re simply dealing in shifting paperwork. Assuming of course, that you have retail buyers available, all you’re doing is being a match-maker and facilitating paperwork. You can do as many deals as you can find regardless of how much or how little money you start out with.


Marking up your wholesale property

The biggest mistake wholesale real estate investors make is in overestimating the sales price. Remember, you’re not a rehabber. You’re not going to acquire the property yourself, paint the walls, and fix the plumbing and plant flowers. The only thing you’re going to do is transfer ownership. As such, you don’t have the same maintenance burden that a retail investor has—your only investment is time, and you have to leave some profit for the rehabbing investor you’re going to sell it to. Rehabbing and flipping a house, which is what retail investors do, could involve thousands of dollars and months of time, whereas you may have only a few days involved. If you take a couple thousand dollars of profit, you’re doing well. On the other hand, if you take a couple thousand dollars of profit after spending six months rehabbing a property, you’ve done poorly. That’s why you can afford to sell the property on a lower margin.


How do you close on a wholesale real estate investment?

The easiest path of all is as described above—simply by assignment. This does leave the paperwork open, so everybody in the chain knows how much money you’re making, but if you have good relationships with your buyers that shouldn’t be a problem. A “double closing” may also be useful in some circumstances, and if you work it right, you still won’t need any money if you get all parties together in the same room at the same time. Another possibility is a traditional closing, which you may need to do if you can’t find a title company to do a double close for you. This does require getting some transitional funding or “hard money” (whereas the assignment process doesn’t require any money on your part). The difference is that with a double closing, you’re doing both deals at once; and with a traditional model you’re doing them consecutively.


Wholesale real estate investing does take some knowledge, patience, and most of all; it takes building up a circle of contacts. It’s not the sort of proposition where you can read a single article and start investing the next day, but once you’ve learned the ropes, it’s one of the greatest opportunities for real estate investing there is.

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