 |
|
|
|
|
|
What is Wholesaling?
Real Estate Investing
How to get
started
Common mistakes
Tips
to finding a good deal
Property Investments
Real Estate Option
Tax Liens
Wholesaling
Seller Finance or 'Subject
to'
Short Sale or
Pre-foreclosure
Rehabbing
Raw Land
Mortgage Investing
Birddogging
Condo Hotel
Hard Money Lenders
Lease Option
Appraisal
MARKET VALUE
explained
Wholesalers typically make smaller profits though they buy and sell properties in large quantities. They may buy 50 homes at a time with help from a bank and then sell them for a small markup to sell them quickly and repeat this process over and over again.
Wholesaling real estate is so great! The best part is that you don't take ownership of the property ever. You assign the contract to another buyer after you've put the property under contract. Then the other buyer will close on the property in your place. With little or no money down, there's almost no risk at all.
More commonly known as "flipping properties", Wholesaling real estate is a great way to invest your money and make huge profit on someone else's property. If you don't believe me, let me show you just how easy it is:
With the right advertising, you can expect your phone to be constantly ringing. All you have to do is find a property with sufficient equity and then you can get started. For example, a property worth $500,000 can be negotiated to a buying price of $450,000. Then complete the sales contract with the homeowner as the seller and you as the buyer.
The first line on the sales contract is where the buyers' name is added. Sign your name and make sure to include the words "and/or assigns" directly after it. Those three little words will allow you to assign the contract to the rehabber.
Now you just need to make the contract binding. You'll need to leave a deposit with the homeowner at the time of signing. Generally you can leave as low as $50 deposit, so if you are not able to wholesale or 'flip' the property, you are not out a lot of money.
Now I know what you're thinking, that must be a typo. $50! Who would accept a $50 deposit on the purchase of real estate? It turns out a lot of people!
The trick is in the way you present yourself. Say something like "I generally leave a $50 deposit and will close in 45 days. I don't expect that to be a problem for you, will it?" 9 out of 10 times they'll say "Okay." Speak with confidence and the homeowner won't have any reason not to take $50 as a deposit.
The next thing you need to do is generate a
list of potential buyers for your wholesale properties. Try running an ad
in the paper that says something like:
Investor Special!
Fantastic
deal for refitters!
555-555-5555
OR
Genius Investor?
Make the most in real
estate TODAY!
555-555-5555
When the calls start coming in, make sure to get all the vendors information. Record their name, number, fax, and email, and maintain that information in a database. The next time you've found a great deal, you'll already have a validated list of buyers. Remember to run your ads from sixty to ninety days. Even if you sell your property right away, it never hurts to keep the ads running.
Be honest and tell the investors that the property sold but make sure to mention that you are working on another deal too. Ask if you can you call them once you've finalized the deal.
Example:
Let's say that the original homeowners are in distress. They've fallen behind in their payments or are facing foreclosure. They have to move quickly. The house is still in good condition and is easily worth $100,000.
The homeowners still owe $50,000 on the property and they have moving costs of $2,000 and will need an additional $3,000 to pay deposits on their new home. You can easily find this out by asking them what they are seeking as a result of your assistance. All you have to do is offer them $55,000, and they'll surely accept.
Again, the house is in good condition and easily worth $100,000. You can estimate that with approximately $15,000 in repairs, the house will be in market condition. Line up a rehabber that you know will pay 65% of the retail value. Once that's done, you can sell it to them for $65,000, making $10,000 as your assignment fee.
The new owner will be responsible for repairs and maintenance, so that will make the new price is $55,000 to the homeowners. The difference between the $100,000 fair market value is $65,000 and $10,000 of that you keep for putting the deal together.
Let's say that the original homeowners are in distress. They've fallen behind in their payments or are facing foreclosure. They have to move quickly. The house is still in good condition and is easily worth $500,000.
The homeowners still owe $250,000 on the property and they have moving costs of $7,000 and will need an additional $9,000 to pay deposits on their new home. You can easily find this out by asking them what they are seeking as a result of your assistance. All you have to do is offer them $315,000, and they'll surely accept.
Again, the house is in good condition and easily worth $500,000. You can estimate that with approximately $30,000 in repairs, the house will be in market condition. Line up a rehabber that you know will pay 65% of the retail value. Once that's done, you can sell it to them for $325,000, making $10,000 as your assignment fee.
Here is the math for
you:
500,000 (value) x 0.65(65%) = $325,000
Assignment Fee: $325,000 - $315,000 = $10,000
Math for
Rehabber:
Purchase price: $325,000 + $80,000 (repairs) =
405,000
Final sale price $500,000 + 405,000 =
$95,000 that rehabber can make. This amount however depends how low the
rehabber can keep his cost down.