Wholesaling Houses 101

Historically, it was possible to “buy” and sell a house without ever taking ownership of the contract, allowing the real estate investor to act as a “middleman.” However, in recent years many states have instituted regulations governing wholesaling. Each state has its own set of wholesaling regulations. Be sure to confirm the laws in your state before you get started.

There are people out there who claim to be wholesalers but they market properties they don’t own, assuming that at some point the deal will close. Doing this doesn’t make you a wholesaler, it makes you a real estate agent and to be a real estate agent you must be licensed. Be careful. Lacking the proper credentials could lead to legal trouble.

Selling a house is the last step in the wholesaling process, but doing so quickly is critical. Every day you own a house you’re likely losing money, paying for expenses such as utilities and taxes. The only way to avoid these costs is by selling your property as quickly as possible.

Having a network of buyers can help you offload properties in a timely manner. You need to be able to say “Here’s a house I’m selling. Who’s ready to buy?” to a group of people who are ready to buy.

When you’re wholesaling, other investors, specifically fix-and-flippers, will likely be your primary buyers. As a wholesaler, you’re saving them the step of finding a property. In turn, they may be more likely to turn to you when they’re looking to flip houses. Having a network of buyers you trust can help you offload properties quickly.

Generating leads is one of the most important aspects of any wholesaling business. After all, you can’t sell what you don’t have.

While there are many ways to find a lead, not all leads are created equal. You want houses that are ready to sell. You want houses where there isn’t a ton of bidding that will drive the price up. And finally, look for houses that will appeal to other real estate investors.

Keep in mind, buyers are often looking for a house that they can put a little money into and then “flip” for a profit. Consider this when searching for a lead.

This is where wholesaling can become complex. Below we explain the interests of each party involved.

Acquiring the funds to purchase multiple properties isn’t easy and few wholesalers have adequate liquid cash to finance multiple deals at once. To remedy this, many turn to hard money lenders.

Of the many ways to secure funding, hard money loans are often the go-to for wholesalers. Traditional lending institutions can take too long and other methods can be too risky. Hard money lending gives you access to cash sooner. Of course, terms and rates vary, so it’s best to compare different hard money lenders.

Once you have the money and the contract, the next step is to close the deal. As a general practice, don’t contract a property unless you are ready and willing to close.

Too many wholesalers contract multiple properties without securing the financing. They do so as “insurance,” just in case other deals fall through. However, this is a bad practice and can damage your reputation. If you are uncertain about a property, don’t contract it.