Wholesaling Real Estate

I closed my first real estate deal of 2009 today!!!  It netted me $5500 before marketing costs which cost about $720 (more on that later).  So is wholesaling houses an easy way to make money? In theory…Yes.  In reality…well…it depends.  In this case it worked out great. I bought the right property and had the right end buyer already lined up.  In all, I profited $4780 for about 20 total hours worth of work.  That’s $239 an hour.  While the process is simple, it does take work and in this market, a little bit of luck.

For those who have no idea what wholesaling real estate means, it is simply a matter of signing a purchase contract with a seller and then selling your rights to that contract (“assigning” or “flipping”) to another end buyer before your inspection period or closing date runs out.  With the proper contract contingencies, it is a fairly low risk way of making a few quick bucks in real estate.

The trick to this process is finding a buyer quickly. Now, this is probably the most important and hardest part of this process, especially in this market.  With a lot less investors out there who are rehabbing (buying, fixing up, selling at retail) houses, wholesalers have a better chance of selling their properties if they can sell them to landlords.  Smart landlords are buying right now.  Houses are way off their highs from a few years ago and if you are going to be holding the property long term until the market turns around then you can get some great deals right now.

So here are My 7 Steps to Wholesaling Properties for Quick Cash…

1)   Learn your Local Market – What types of properties are investors buying? Where are they buying? How much are they worth at fixed up retail value?

2)  Create a Buyers List – you need to have buyers lined up for your properties since you need to sell them quickly.  There are many ways to do this but I’ll save the details for another time.

3)  Find the Deals – Typically, you need to buy houses for a discount of between 40-60% off of there fixed up retail value (There is a little more to it but that’s the basic magic number. There are basically two ways to do this.  Find great REO deals on the MLS (it is a little trickier with these because technically when a bank is involved you cannot assign your purchase contract).  The other way, which is how I recommend, is to find the deals yourself before they go out on the MLS by marketing.  Believe it or not, you will get more then you think.

4)  Get the House Under Contract – Negotiate your ass off and wait for a winner. Don’t rush out and get a so-so deal. Patience pays in the end. The better the deal, the easier to sell to an investor.

5)  Assign the Contract – Contact everyone on your buyers list who you know is in the market to buy these types of properties. Email, phone, fax, internet marketing.  This is a marketing business. The better you are at marketing the more successful you will be. Assign that buyer your purchase contract for a fee.  The fee can be whatever markup you can sell that house to an investor for. Usually anywhere between $3,000 - $15,000 with an average of about $5000.  Some people get much more.

6)  Send the Purchase Contract and Assignment Contract to Title Company – This is where we pray everything goes smoothly…it usually doesn’t.

7)  Pick up your check - $$$

Anyway, I have to run for now.  Obviously there is a lot more to it so I suggest that you get a little more educated before going out and doing this.  I will follow up with some great resources.

While this is not exactly Slugmoney, if real estate interests you, wholesaling houses is probably the easiest way to get started for very little money or risk.  I highly recommend that once you have wholesaled a few houses and made a descent cushion of cash, to cherry pick your best deals and keep them yourself for the long term.  A few of these will give you some nice monthly cash flow as well as long term financial wealth.  Now that’s the kind of Slugmoney we’re after!