16 Feb INVESTORS’ CORNER: Guide to buying wholesale property
Wholesaling is a great way to enter the world of real estate investing because you don’t need much capital to begin with. Real estate offers incredible wealth-building opportunities, but for many, it is difficult to get started in because of the huge capital investment required.
On the other hand, wholesaling changes the game and provides investors at the beginner level with an opportunity to learn more about real estate investing. Since it involves purchasing a property or acquiring it under a contract and then selling that property or reassigning the contract to another investor, you have to be careful while doing so. Here’s a guide on how to proceed with wholesale property.
Search for Properties below market value. The number one step in wholesaling property is to look for property that is in the need of repair. It should be less expensive enough so that the end buyer or investor makes a profit, so you must leave enough meat on the bone for the person you are going to assign it to. Remember that as wholesaler, you will be assigning the contract or selling the property to another investor who will either rent it or fix it up. Hence, you must be able to negotiate a reduced price to wholesale.
Find Properties that are Off-Market. There are homeowners who want to sell, but they haven’t listed their property for sale; that might be due to many reasons. The homeowner might not be physically present or they may be too busy. The seller may be an out of town homeowner and unable to handle necessary repairs and deal with tenants.
Searching for an investor or buyer is challenge for most wholesale investors. You can start seeking buyers at REIA meetings, such as Metrolina Real Estate Investors Association (MetrolinaREIA.org), tax sales, auctions, and trustee sales. Advertising on Craigslist is also a good way to obtain reliable investors and buyers. MLS and public records can also be checked to determine who is purchasing property for cash. Another good idea is to contact other wholesalers who might be able to help you out in getting buyers.
Obtaining a contract is not easy because most real estate listings like MLS require pre-qualification letters or proof of funds. Therefore, it’s better to search for off-market properties and get a contract from there. The seller won’t need any letters or proof of funds. Once you have the contract, you can assign it to another investor or buyer for a fee.
John Wood is a member of Metrolina Real Estate Investors Association, which provides education, mentoring, and networking for real estate investing in the Charlotte region. For more information, visit www.MetrolinaREIA.org.