Interested in earning through real estate, but don’t have the money to invest? Don’t want to deal with landlord related duties and hassle either? Then real estate wholesaling is the best choice for you. Real estate wholesaling is a short term business strategy that involves the selling of wholesale houses. If you want to know more about this type of real estate, then read on to find out more.
Intro: What Are Wholesale Houses?
The best way to describe wholesale houses is by calling them distressed or under-valued properties. The wholesaler contracts a distressed property with a seller and then finds a party interested in buying that property.
Once the wholesaler finds a buyer, he or she then assigns the contract to them. However, it’s important to note that the wholesaler needs to sell the house before the contract expires with the original homeowner.
Advantages of Wholesale Houses
The wholesaler doesn’t pay any amount of money to the seller when entering the contract. So, there are no finances or investments involved. This means that even if you don’t have money to invest in real estate, it doesn’t matter.
Other advantages of wholesale houses are that you don’t have to worry about securing financing from the bank. Also, you don’t have to worry about being a landlord or doing repairs on the property. This is because wholesalers are never technically the owners of the property for sale. Therefore, you don’t have to spend any money or time doing the normal upkeep and repairs that landlords have to.
How Do You Make Money on Wholesale Houses?
As per the contract, the wholesaler tries to find a buyer who is willing to buy the wholesale house. However, this price is higher than the amount that is agreed upon by the wholesaler with the seller. The wholesaler retains this price difference as profit.
Let’s take a look at an example to understand the process of wholesaling houses better:
Suppose a homeowner/seller has a fairly distressed property. The seller doesn’t have the resources to invest in repairs and upgrades. He assumes that he can never get a good price for his property. This is when the wholesaler approaches the seller with an offer.
Both sides agree to put the wholesale house under contract for $100,000. Once they enter into the contract, the wholesaler uses his widespread network of investors to find an eager buyer. This buyer is willing to invest more than the contract amount.
Eventually, he finds an investor who is ready to buy the property for $110,000. This is when the wholesaler assigns the Purchase to the buyer / investor and makes a profit of $10,000. Remember that the wholesaler doesn’t own the house.
In other words, the buyer pays $10,000 to the wholesaler.
Finally, the buyer pays the seller $100,000 (the amount agreed in the contract).
If you’re thinking of earning through real estate but are short on finances, then property wholesaling is your best bet.