It’s no secret among investors that real estate is one of the best ways to grow and protect your portfolio. But finding good deals can be challenging when competing with every other local investor, not to mention would-be homeowners. That’s where wholesale real estate comes in. This unique method of acquiring properties can completely transform the size and growth of your real estate portfolio. Let’s take a closer look at what it means and how to take advantage of it.
What is Wholesale Real Estate?
Wholesale real estate is a technique for acquiring investment properties that relies heavily on marketing and people skills. It all starts with a wholesaler, who markets to homeowners who don’t even have their properties on the market. This can be done via traditional media like signs, TV, radio commercials, or direct appeals like letters or phone calls.
Wholesalers offer owners a quick way to sell a property for cash without hassles like repairs, showings, and the other issues involved with regular home sales. Once a wholesaler finds a willing seller and negotiates an appropriate price, they’ll reach out to their network of investors. These investors have cash they’re looking to deploy but don’t have the time to search for great property deals. They buy the property located by the wholesaler, who makes a cut for facilitating the transaction.
Typically, investors get the property for below market value, allowing them to make any repairs and then flip or rent it at a better profit than standard on-market deals. In a wholesale transaction, everyone wins!
Why Build Your Portfolio With Wholesale Real Estate?
Getting involved in wholesaling has numerous advantages for investors looking to build their portfolios. They mainly stem from the ability to acquire properties for less than they’re worth. For those renting out properties to tenants, this means better cash flow and increased income.
For fix-and-flip investors, lower base prices mean a reduced risk of losing money if unexpected costs pop up in the renovation process. Altogether, acquiring assets for below market value is the surest recipe for creating long-term wealth.
The Keys to Wholesale Real Estate Success
Wholesaling may be simple, but it can be challenging. It requires hard work and diligence from both wholesalers and the investors who end up with the properties. Here are three key things to keep in mind to succeed.
Leverage Your Network
Wholesaling is all about networking. Investors should develop relationships with as many wholesalers as they can. This raises their chances of finding an active, skilled one to work with or a broader base of less-prolific partners.
Developing genuine relationships that are more than simple transactions will also help improve the return on each deal. Suppose a wholesaler knows an investor will be a reliable, frequent customer. In that case, they’re less likely to try to squeeze every dollar out of a single deal, focusing instead on the benefit of numerous deals over time that still work for both sides. It’s also worth networking with other investors. These folks may steer deals your way if they don’t fit their needs or current preferences, with the expectation you do the same.
Know Your Numbers
Investors and wholesalers alike need to know their numbers back to front for success in this unique field. Wholesalers have to keep an eye on prices in the areas they operate and the demand for homes. In addition, they’ll need a basic understanding of assessing any repairs or updates a home may need, a vital part of finding a suitable and profitable offer price.
Investors need to be aware of all of this and more. They’ll also have to track rental income, the sale price of renovated properties, and costs like property management, taxes, insurance, and other miscellaneous items. Accounting for these factors can be the difference between a failed analysis and a slam dunk deal.
Negotiate the Right Way
Both wholesalers and investor clients need to know the basics of negotiating, as the process is often looser and more flexible than traditional real estate sales. Wholesalers need to understand how to appeal to the reason and feelings of homeowners, who are naturally invested in their homes both financially and emotionally.
Perhaps most importantly, they need to know when to walk away. This is also true of investors working with wholesalers. While both sides generally want to make a deal, sometimes an agreement that works for both sides just can’t be found. Those involved in the wholesale real estate industry should keep their powder dry and wait for the next good deal rather than snatching up a bad one out of desperation.
Revolutionize Your Portfolio with Wholesale Real Estate
As you can see, wholesale real estate can fundamentally change how you grow your portfolio, putting you on track for higher returns and greater wealth in the long run. However, it’s not without its potential pitfalls. Keep these tips and tricks in mind, and you’ll be well on your way to tapping into this underrated source of real estate returns.