Wholesale a House
A great way for an up-and-comer to join the robust house flipping community is by wholesaling houses. Essentially what a wholesaler does is find and buy a real estate property at a cheap price and then resell it to an investor. This investor is often another house flipper who will make all of the necessary renovations. What's great about wholesaling is that you yourself don't have to spend any money up front. The investor who you sell the property to will pay for the house on your behalf. You, on the other hand, will receive a sum of money, sort of like a finders fee.
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Steps
- Put yourself out there. Make sure that other people in real estate, and homeowners wishing to sell their property, know who you are are where to find you. You should always network as much as possible so you can increase your chances of finding people like this. Some great spots to network are places like REIA groups, foreclosure auctions, or by talking to friends and family members. Also, you should also advertise yourself a great deal. Consider creating a website for your business.
- Find some leads. If the properties don't come to you, you need to make the effort to go out and search for them. Look for houses online through wholesalers lists and even Craigslist. A great resource you might consider using is MLS or "Multiple Listing Service". MLS is essentially a place where real estate agents can list all of their available properties that are for sale. This service is better than most real estate listings platforms because it updates almost instantaneously. If all else fails, hit the road and search for properties yourself. Who knows, you might even find one that hasn't been listed yet.
- Find the right house. Although you will not be remodeling the property, the house flipper you sell to will be. If you want to get top dollar for your house, you need to make sure that the property does not have any major damage considering the price. When looking at a house, the kitchen is often one of the most important features to consider. Kitchen remodels can cost tens of thousands of dollars, so if the kitchen is in a terrible state, you won't be able to sell the property for as much. Additionally, look out for any major structural damages like a termite infestation or a cracked foundation.
- Calculate. You must always remember that both you AND the person you are selling to need to profit from this deal. An investor will never buy a property to break even. They expect to make somewhere in the tens of thousands of dollars from flipping the house. If you subtract the cost of repairs and your wholesaler's fee from the after repair value or ARV, make sure there is enough profit to make the deal worthwhile for the investor.
- Find an investor. A smart way to approach wholesaling over the long run is by assembling a buyer's list. These buyers are regular house flippers and real estate investors in your area who are frequently looking for property to make money on. Also, you might want to try hanging bandit signs around your area. Bandit signs are an incredibly cheap way to get your name out there and to find potential buyers. Once you have this buyers list, turn it into a mailing list and email these people every time you have a new property to sell.
- Choose the right offer. Just because an offer is higher in price, doesn't mean it's always the best option. Sometimes, a smaller cash offer can be a better choice than a higher finance offer. When people use finance, it is often a longer process with more unpredictability. Additionally, it will keep your property in your ownership for a longer period of time, meaning that you will have things like home owner's insurance, utilities, and maintenance to pay for. Cash offers, in contrast, are clean and simple. Do the math and choose the deal that's right for you.
Tips
- If you feel comfortable after doing a number of wholesales and have expendable savings, consider taking the next step and become a house flipper.
- When deciding whether you should purchase a property at a certain price, always make sure it is 70% of the ARV (after repair value) or less.
Warnings
- Never purchase a property that will not provide profit for both you and the investor.
- Every town has its own laws regarding "bandit signs". Make sure you know and conform to local regulations.
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