Before jumping into the actual benefits of wholesaling, let’s talk about what wholesaling is. Wholesaling, it’s basically the best way of acting as a middleman in a real estate negotiation. There is the investor, the seller and the buyer. You’re basically going to find properties and you’re going to negotiate with the seller at a price that is low enough so that when you resell it to the buyer, you can make a profit out of it.
You may have heard about the concept of dropshipping before. Basically, you contact a distributor and that distributor will probably go to China and work and negotiate prices of items by the bulk.
They’ll buy all of it by the bulk and then they will resell it to you. That middle person and the process of selling some of the stuff to you because maybe they can source it at better prices, that person in the middle is going to wind up charging you a fee for that service. That’s in essence what you will do in the event that you choose to be a wholesaler because you’re just simply finding inventory and you are distributing it to a bunch of different buyers.
Who benefits from Wholesaling?
It can benefit everybody involved. You’re helping the seller sell a property that nobody else wants because maybe it’s damaged, or it needs repairs, or maybe it needs renovation, you get to collect the fee out of it and then you benefit buyers that simply don’t have the time to go out and search properties by themselves.
Wholesaling is not the same thing as acting as a real estate agent. Why? A real estate agent needs a license in order to be a real estate agent. You don’t need to have a license in order to wholesale because you’re just simply selling a contract. You’re not selling a house. You’re selling a contract.
Differences between Real Estate and Wholesaling
The seller gave you the right to buy a contract and you simply decided to not exercise the purchase of the contract but instead, you took that contract and you sold it to the buyer. You’re just selling the right to buy a property. Meanwhile, as a realtor what you’re selling is in reality a property. You’re helping people set up contracts altogether, you’re putting in offers, you’re negotiating on behalf of other people. You’re negotiating on behalf of yourself and you don’t need a certification, you don’t need a license in order to do that.
That’s the main difference. Wholesaling, it’s great for people of all levels. For example, if you are brand-new to real estate and you don’t have any money and you have all of the energy in the world and you’re willing to go out there, knock on doors and get people to sell you their properties, this is the right type of investment for you because it will require zero money. All you have to do is to build that relationship with the sellers and enough buyers and you simply start building your inventory and building your list of sellers who are willing to give their property to you.
For this to work out well, you have to:
1.- Tell the seller that you’re reselling the property at a profit and that you have a large pool of real estate investors who will want to get a hold of your property.
2.- In the event that they want to go out of their way to sell it, they can because they simply don’t have access to that list of investors that you have.
3.- Once they agree to that, you’re going to put that into a contract and negotiation meaning that in the event they sell it, the property, the commission has to go towards yourself.
What makes it really powerful is that you can play both sides of the spectrum. If you’re a person that has a lot of time in their hand and you’re willing to do all of that, go out there, grind, do the work, knock on doors, build the relationship and start distributing a bunch of houses, then this is the right strategy for you.
On the other hand, if you are a very busy investor and you have a full-time job or maybe you have a family that demands a lot of your time because you have toddlers, you have children or maybe you have aging parents that are sick and they truly need your help and your assistance but you still want to continue to invest, then the best approach you can do is to work with a wholesaler. You could work with a real estate agent but a wholesaler is also great to have as part of your power team as part of your picture because this person is going to help you find properties that are worthy of investment because they understand the investor mindset.
Their job is to go out there and find properties for you at a relatively cheaper price that even though you’re paying for the commission that the whole seller is charging, you are still buying under market price and you can still make a profit out of it even after you flip it and decide to sell it or flip it and decide to hold it.
Wholesaling: Flipping the Property
If you don’t know what wholesaling is given that there are some viewers who are brand new into the channel, flipping the property simply means renovating it, gutting it up, making it look pretty, get rid of the ugly kitchen, and making it look very nice and up to market standards just like those shows that you will normally see in HGTV where they’re tearing walls down and everything.
That’s basically what flipping means. It’s very versatile. It is labor-intensive in the sense that if you choose to be the one who’s looking for the houses but again, one of the benefits is that you need zero money.
You don’t need to put any money out of your pocket because you are selling the contract but if you are in the other side of the spectrum, then all you need to do is to find a wholesaler, give them your investment criteria and this person will simply go and find those houses for you and in the end, you are buying a contract, you are buying the right to purchase that property.
Build a power team as a Wholesaler
Then, another great benefit that you get that makes this so powerful is that you as a wholesaler, you get bigger opportunities to actually build a power team because not only you get to meet different sellers but you also get to meet different title agencies because the most investors you start adding to your list of buyers, the more title agencies you’re going to start to work with and the more people you’re going to keep knowing and expanding.
In a matter of time, it’s only natural for deals to naturally flow your way. Maybe somebody that works in that title agency knows about somebody who’s trying to sell or maybe that title agency knows about another investor who is willing or who is interesting to get in touch with a wholesaler and then you happen to fulfill that role. This is why it’s very versatile and very powerful.
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