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Getting started in real estate can be tricky, especially when you do not have the capital or experience for the job. Real estate businesses rely heavily on investments through other sources, but what if you could still run your real estate business without much funding? I am, of course, talking about wholesaling.
Wholesaling is a very common tactic that real estate investors use to sell houses without having to buy them first. Investors using wholesaling act as intermediaries, connecting sellers with buyers, without having to purchase anything themselves.
This simply involves finding a great deal on a home (usually a fixer-upper), putting it under contract and then flipping that contract to your buyer at a higher price. Therefore, your buyer funds the transaction, and you collect the spread (the difference between your buy price and your sell price).
If you are struggling to find investments in your real estate business or skeptical of wholesaling in general, here are five reasons to reconsider.
1. A Simple Learning Curve
Using wholesaling in your business is quite simple, especially if you are new. Other investing strategies often require some form of investment and training. However, wholesaling can be very simple to learn and is a great way to start your journey in the real estate world.
Though most investing strategies require some form of degree qualification, wholesaling does not. You do not even need to know how to fix up houses or remodel them. All you need to start a wholesale retail business is a network of buyers and sellers. This can be done on social media very easily without leaving your house.
It is also one of the few investment strategies that is very simple to learn and implement. With a little research, you can find out the basics of wholesaling real estate. You will have to learn what to offer and what to consider in a deal. When you make an offer, you need to factor in your wholesale fee, so work backward from your selling price minus your fee to identify your offer price.
2. Instant Cash, Instant Progress
Wholesaling does not entail long waiting periods. You can find buyers and sellers in a span of a few days and receive the payment for each deal you make almost instantly. While remodeling or holding land can prove to be a lot more financially rewarding in the long run, it is also very risky.
Houses can lose their value over time, and construction projects can take years before they pay off. Wholesaling does not have this problem because you are dealing with clients on a short-term basis. In fact, adept wholesale agents may receive payments in days or even hours.
Of course, the pace of the wholesale market also makes it very difficult for real estate investors to find buyers for their sellers or sellers for their buyers. As long as you take on a manageable number of contracts, you should not face this problem. Three contracts at any given time is very manageable as a sole proprietor.
A great way to build your network of buyers and sellers is through groups on social media. You can get access to deals for sale and introduce yourself to group members to interview them and add them to your buyers or sellers list.
3. Not Limited To Location, Credit Or Cash
Beneficially, you do not need any prerequisites in order to start your business. You do not need good credit or even cash. In addition, the main reason you do not need a license for wholesaling is that you are not really buying anything — you are simply connecting buyers with sellers, with your profit in the middle.
Other than prior experience or knowledge, you can also skip the task of creating a location for your business. Often, all you need to close a deal is a laptop and a phone. This saves the expense of office space and can provide you with the liberty of working anywhere you want.
4. Higher Returns, Larger Paychecks
No other real estate investment strategy pays as much upfront as wholesaling. Although you may be able to make more money collectively over a larger period with other methods, wholesaling can offer massive paychecks as soon as the transaction is complete. It is also important to note that incremental payments may be a lot more than initial payments; they can also stop at any time if your client files for bankruptcy.
Wholesalers are in complete control of their ROI and do not have any cap, unlike property managers and real estate agents. Wholesalers can mark their property up by 50% even, and can potentially close multiple deals in a month.
5. Minimal Risk And Valuable Experience
Wholesaling is a great way to jump-start your career as a real estate agent. The low barrier to entry to the open market makes for a great place for you to test the effectiveness of this market. You can also get higher paychecks and much more at almost no risk. Since you are not directly buying or selling anything, you are not spending your own money. This gives you the chance to make more confident decisions and focus more on the deal than the fear of failing.
Whether you are running a new business or an older one that is having trouble staying afloat, wholesaling is one of the best ways to start or to continue a real estate business.