Wholesale Real Estate
Flip deals in two weeks or less
What Does it Mean to Wholesale Real Estate
Wholesaling real estate means finding a property that would make a good fix and flip deal, putting the deal under contract, but then assigning the contract to another investor before the deal closes. You don’t have to finance the deal, but you get paid by the other investor for finding the deal.
Finding a good wholesale deal requires the investor to find a discounted deal. This happens when the seller has motivation to move quickly, and usually the property is in severe disrepair—meaning they can’t just list it for a good price on the MLS.
Once you’ve found a property like this, you’ll put it under contract and pay any needed earnest money.
After a property is put under contract, you now have until closing to find another person to assign the contract to! This means that you’re going to find another real estate investor who will take on the full fix and flip, and they pay you for the trouble of finding the deal. This is called “assignment.”
If you can’t find someone else to take on the contract, you can walk away before closing. If you’ve phrased your deal correctly, you won’t even lose your earnest money.
Example Wholesale Deal
The overall premise to finding a good wholesale deal is to first find a property that would make a great fix and flip, and then ensure there’s enough profit that you can take a cut as well.
Here’s what that might look like:
$80k purchase price + $65k loan/closing costs = $145k
You’ve determined the after repair value (ARV) of the property to be $220k.
A good rule of thumb for a profitable fix and flip is to keep all your costs under 70% of the ARV. That leaves enough room for unforeseen costs and still profit nicely.
Now, let’s calculate that wholesale deal with these numbers in mind. With an ARV of $220k, that leaves your 70% target at $154k! That’s great because your costs are under that number.
As a wholesaler, you could offer a great deal to a fix and flipper and pocket $9k as your assignment fee ($154k – $145k).
Your Financial Situation
The first factor is how much money you can dedicate towards real estate investing. Both fix and flips and BRRR deals require more capital (If you’re not sure what BRRR is, you can read more here). Even if you find a deal that qualifies for our 100% financing program, you’ll still need capital to guard against unforeseen costs. With a BRRR deal especially you’ll want some funds to protect against vacancy and other costs associated with owning a rental property.
As there are only minimal upfront and no long-term costs associated with a wholesale deal, going that route ends up being popular for many new real estate investors.
Your Financial Goals
The Property Itself
Once you take a look at the property, the ideal strategy often presents itself. For example, a property with minimal repairs would be ideal for a BRRR property. You can quickly do the renovation and get it rented out.
Or, a property with a massive rehab requirement may turn you towards a wholesale deal. Let someone else deal with that headache while you walk away with $5k.
Your Risk Tolerance
Use Do Hard Money’s Cash Buyer List
We know that finding someone to assign your wholesale contract to is the hardest and most stressful part of the process. That’s why we’ve made our cash buyers list available to you.
Here’s how the wholesale process works inside our Find-Fund-Flip System:
- Use our software to find, market, and evaluate deals. That software is called Investor’s Edge.
- Close on the deal.
- Submit a loan application to us.
- We evaluate the deal first by an in-house expert, then followed by a third party local expert.
- If the numbers line up, we’ll send your deal out to our list of 20,000+. Most deals are picked up within 1 business day.
Of course, in order to be a successful wholesaler, you’ll need a constant supply of new potential deals. Read our page on Find Sellers to learn how we can help!