What is Wholesale Real Estate?

When you hear the word “wholesale” what comes to mind? The general idea we have when it comes to wholesale is “wholesale trade” as it concerns the channel of distributions that we know.

The initial idea of wholesaling in business is to make products available to retailers in large quantities at a lower price, the retailer then makes the product available to consumers in smaller quantities. This idea is very much different when it comes to real estate wholesaling.

When it comes to real estate, there are a lot of ways an investment can be made to make a profit from the sale of properties.

Usually what people do when considering making investments in real estate is to save up money for a long time, and only invest when they feel they have raised enough money that will generate many returns. Such a drawback has been taken care of with the advent of real estate wholesaling as another option.

Wholesale real estate is very different from wholesale trade and other forms of investment that are linked with real estate. For real estate wholesaling, a wholesaler goes into a contract with the seller who has put up his house for sale. Usually, the house is often in a state that would require certain repairs.

So rather than repair the house or fix the issues, the seller puts it up for sale. The wholesaler serves as a link between the seller and anyone willing to purchase the property.

Real estate wholesaling doesn’t require you to buy a property and keep it, then wait till you find a buyer and then try to resell at a higher amount and make a profit. The wholesaler here makes a profit without any form of purchase. The profit is made when the wholesaler sells the property at a price which is higher than what the seller is willing to sell the property.

A quick example of how real estate wholesaling works.

A homeowner has a property that he is willing to put up for sale, but there is a level of uncertainty if anyone will purchase the property. This is because the property is not really in a good condition and would require some repairs which the homeowner is not willing to undertake and may lack the necessary funds to carry them out. Instead, he decides to sell the property.

Along the line, a wholesaler comes into the equation and goes into an agreement with the owner of the property. They have a contract that puts the sale of the property at $100,000 for the seller. The wholesaler then goes out in search of a buyer for the property, in the process of the searching for a buyer, he finds one who is willing to pay $120,000 for the property and sells it to him.

From the example it is clear to see that the wholesaler didn’t in any way purchase the property, all he had to do was to link up the interested buyer with the property, sell it and collect the money.

His initial agreement with the owner of the property was $100,000 and he sold the property for $120,000. Making for himself a profit of $20,000 while giving the seller the sum of $100,000 which they agreed upon.

Key points to note about real estate wholesaling.

Real estate wholesaling isn’t the same as flipping, though they both have certain similarities. But for real estate wholesaling the timeframe is shorter, and the repairs and other costs that are usually associated with flipping are not involved in real estate wholesaling. This makes flipping riskier than real estate wholesaling.

Also, the wholesaler would need to have great marketing skills in other to convince potential buyers to purchase the property, despite the state which it is in. Some investors will most likely not be interested in the property and may not also see the need to invest in such, it is the duty of the wholesaler to make them see reasons to purchase the property.

Real estate wholesaling is not an easy ride, considering that it seems to be quite comfortable and different from other forms of real estate investing. The wholesaler would need to possess such traits as patience and diligence in carrying out his marketing activities.

Good communication skills and a valuable network of investors would also come in handy for a wholesaler, it reduces the time that will be spent in trying to find investors to purchase the property.

Very important is the fact that proper research has to be done concerning the property, to ascertain the real owner and avoid any sort of legal issue which may come up in the process of carrying out the contract.