What if there was a way to start investing in real estate with no initial capital?
You'd tell me I'm crazy - right? Well, wholesaling real estate is a strategy that entrepreneurs all over the world are using because it requires little or no initial capital, good research skills, and great people skills.
But wholesaling real estate has both pros and cons. It's not the silver bullet of real estate investing that many make it out to be. It takes discipline, constant follow-up, a lot of knowledge about real estate, and good real estate data.
So, what are the 10 things you need to know about wholesaling real estate before getting into it?
More on that below.
What Is Wholesaling Real Estate?
First, let's talk about what it means to wholesale. Simply put, wholesaling in real estate is the process of buying a property at a discount and then selling it for a higher price to someone else. This lets you as the real estate wholesaler make money without having to hold on to the property for more than a few days (or if you have a buyer lined up, even hours).
The Good Aspects Of Wholesaling Real Estate
1. It’s generally - generally - lower risk than standard real estate investing
Since the wholesaler does not actually buy the property, he or she is not responsible for any problems that may arise or any costs that come with them. This means that the wholesaler can make money on the deal without having to take on the risk of ownership, he financial burdens of repairs, etc etc.
Also, since the wholesaler doesn't have to get a loan to buy the property, they don't have to worry about losing money if the property doesn't go up in value. In general, real estate wholesaling is a way for investors to make money without taking on as much risk as traditional real estate investing.
2. Wholesaling deals are often driven by the wholesaler’s reputation
Accurately estimating repair costs is an art. Therefore if you’re known as someone who can give accurate repair estimates, buyers are happy to work with you. Consistently estimating correct repair costs means you’ll build a reputation as someone in the business that contract buyers can trust. As your business grows, this good name will help you close more deals.
3. It’s a great way to get started in the real estate investing world
When you wholesale real estate, you can learn about the different aspects, like location, condition, and market demand, that affect the value of a property.
Also, wholesaling can help you learn how to work with other real estate professionals and how to negotiate deals. This experience can be very helpful for people who want to work in real estate or buy and sell properties in the future.
4. Wholesaling can be done virtually
One good thing about wholesaling real estate is that you can do it from anywhere in the world - all you need is a computer. Now, this can be hard for wholesalers to deal with when they're negotiating, since it's always best to do so in person. When using this strategy, virtual wholesalers must also be very good at evaluating the property virtually through video walkthroughs.
5. Transactions clear faster than traditional real estate investing
Another good thing about wholesaling is that it can be a fast way to make money in real estate. You can often make money in just a few weeks because you don't have to spend a long time looking for and buying a property, fixing it up, and then trying to sell it. This makes it a good choice for people who want to make money quickly in real estate.
6. Wholesaling real estate is a very scalable process
Once you understand how wholesaling real estate works, it's easy to hire virtual assistants to do the paperwork while you find motivated sellers and negotiate contracts.
7. You can get started with little capital
Wholesaling is a great way to get started in real estate investing because you don't have to actually buy the property. Instead, you only need a small amount of money for a deposit and any marketing you need to do. You don't have to fix up the house to make money from it.
The Potential Downsides Of Wholesaling Real Estate
1. Managing simultaneous wholesale deals can be stressful
Taking care of multiple wholesale real estate deals can be hard for a number of reasons. First, each deal has its own set of requirements and deadlines, which can be hard to keep track of. Also, wholesale deals usually involve working with more than one person, like buyers, sellers, and real estate agents. This can take a lot of time and requires good communication and negotiating skills.
The financial parts of wholesaling real estate, like getting short-term loans and keeping track of budgets, can be complicated and require careful attention to detail. To help you combat this complexity, it’s best to grab a real estate CRM.
2. Real estate wholesaling is extremely competitive.
The field of wholesaling real estate is usually pretty saturated, as it doesn’t take a ton of capital to get started. Therefore, it can be an extremely competitive space to get into.
Wholesalers armed with the best technology will usually come out on top of those deals.
3. Locating a contract buyer can be challenging.
One of the worst things about it is that it can be hard to find someone to buy it. Since you're not really selling the property, you'll need to find someone who is willing to pay the higher asking price for the contract to buy the house from you. It can be hard to do this, especially when the real estate market is slow.
Realeflow's marketing tools like direct mail and email marketing gives you tools to find and connect with investors, which will give you a leg up on your competitors.
4. Payouts aren’t as big as traditional real estate investing.
As you're taking on less of a financial risk - you can expect the financial reward to be slightly lower as well.
Don't get us wrong - this is a great way for new investors to get into investing. But as the financial rewards are lower, it's usually viewed as a jumping off point, and not quite the end goal.
At the end of the day, wholesaling takes less capital and less time to complete deals, so the payout is a bit lower than traditional real estate investing. BUT - if you’re able to navigate multiple wholesale deals simultaneously, it’s an excellent opportunity.
It also requires nuts-and-bolts real estate lead generation, whether you're using software or finding leads on the MLS.
As is the case with any investment strategy, wholesaling real estate takes knowledge, discipline and a little guts. Realeflow is there to give you the tools you need to find the best deals and capture the most profit through wholesaling.
Ready to get started? Grab your 7-day free trial of Realeflow here!