Investing in wholesale real estate is catching on fast. If you’re not sure how it works, read on. Let’s assume you are the wholesaler. Your objective is to find a seller and a buyer, and you make the profit. It’s no different to buying and selling any item. The same concept applies, only the commodity you are selling is property.
You have to find a property that is not in good condition – a property that won’t be of interest to the average buyer. The seller must be desperate to sell because he or she wants to get rid of this noose as quickly as possible. This desperation is the key to your success. The scheme will not work if your seller is in no hurry to sell.
Your next step is to calculate how much the property will be worth once it has been fixed up. Then you negotiate a price with the seller, bearing in mind how much the repairs will cost. Use the seller’s eagerness to your advantage. Try your best to get the property for as low a price as possible. The lower the price, the more you will make on the deal.
When you and the seller have agreed on a price, sign an intention to purchase contract and have the property locked so that no-one else can buy it. Now you need to find your buyer. The buyer must be a ‘flipper’. A flipper is the term used in the real estate business to describe someone who buys a derelict property, fixes it up and then sells it as fast as possible. This is known as flipping.
People who have been in the wholesale real estate business for some time will have a network of flippers. So it’s easy for them to spread the word and make a quick sale. If you’re starting out at this game, you will slowly but surely build up your own group of flippers.
A flipper always has cash on hand so the deal will not involve any mortgage on the property. You and the flipper will agree on a wholesale fee to be paid to you. Then you introduce the flipper to the seller and the deal will be concluded between the two at the pre-agreed price. When the sale has gone through you will be paid for your efforts.
So, how much can you earn on each deal? Well, as no two properties are the same, your potential earnings will vary. The wholesale fee is in the thousands, not in the hundreds, so you’re looking at big bucks. Depending on the property you can expect to make between $5,000 and $20,000 on each deal.
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