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Cut And Dried:The Basics Of Wholesaling Properties

Aug 4, 2008
You've heard about real estate investing, and you're considering getting into the business, but you're still somewhat confused. What does it actually mean to wholesale properties and how can a person get started in this business? You've heard it might be illegal. You've heard that you can't deal in real estate without a license. What is the truth?

First of all it is perfectly legal to "flip" - as it is called in the industry - properties. This means you put the property under contract and then you assign the contract to another investor - or you sell it to that investor outright. That investor may purchase with cash, or a line of credit. Still others look to hard money loans. Closings happen much more quickly in real estate investing than in the more traditional purchase of a home.

And the answer to the license question is a strong no. You do not need a license to flip properties. This is a property in which you have an "equitable interest". That means you have the property under contract and therefore you are free to do with it as you wish.

What Are You Looking For?

A wholesaler is not looking for the prettiest house on the block. Curb appeal means nothing to this person. In fact the wholesaler is usually drawn to the ugliest house on the block. If that bargain property can be purchased from a motivated seller for a low enough price, somewhere there will be an investor or a rehabber who will purchase it.

A wholesaler is honed in on two things:
1. Finding great deals
2. Having a network of investors to sell to

Who Are Your Buyers?

Who are these investors? Your investors are your potential customers who (hopefully) want what you have. These are individuals who are in the Buy and Hold business, or the Rehab and Retail business, or the Rent To Own business. No matter which, they are looking for bargain properties that they can fix up and eventually get their piece of the pie.

Let's look at a simple example. You've located a distressed property and because of the neighborhood where it's located, (and the research you've done) you're fairly certain its after-repair value is about $100,000. Repairs look to be around $10,000. If you can purchase that property from a motivated seller for $55,000, and sell it to one of your investors for $60,000, you've made a quick 5k. (In this type of transaction, you want to leave the bigger share of the profit for your buyer. Take good care of that buyer, because you want repeat customers!)

The key is to build up this momentum to the point where you are flipping two or three a month. Or more - depending on how much time you can devote to the business.

Build Volume

Now I know you've been watching the infomercials and 5k seems pretty paltry compared to the testimonies given on the show you watched at 2AM. But keep in mind flipping properties (wholesaling) is its own niche. You are not looking for a grand slam netting hundred of thousands of dollars. You are looking for a large number of small deals. That's the mindset of a wholesaler.

Will there be bigger deals? You bet. If you are out there flipping two or three deals a month, sooner or later, a whopper will land right on your plate. And when it does, you'll be glad that you were in the right place at the right time.
About the Author
Iman Yusef-Yahya finds some of the very best
below market deals in the country.
Find out how you can
get instant access
to these below market deals now at http://www.ImanAnd
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