HI this bexsentico and i just want to let folks know i didnt write this its some info i found out and thought it might be helpful as it was to me
I have been working with more and more real estate investor wholesalers. One of the first questions I am asked by people who are new to the business is exactly how wholesalers actually make money.
First, I want to describe what a wholesaler does and does not do and then I will cover how they actually make a profit when they wholesale a deal.
When we are talking about wholesaling real estate, we are specifically referring to you finding a great deal, placing a contract on the property and then selling your rights in the contract to another investor or someone who will be living in the property.
Specifically, you are not "helping people sell their home," like you would be with a real estate license.
So, how do wholesalers make money? They make money by selling their rights to the contract. Here's an example of how a wholesale deal might work.
You find a property that is worth $100,000. You talk with the seller, and they agree to sell you the property for $55,000. You then write up a contract to purchase the house in the next 45 days for $55,000. You also include that you have the right to assign your contract to someone else if you want to.
Next, you go and find another investor who wants to purchase the house or someone who wants to live in the house. For this discussion, we will call them your buyer.
You and your buyer agree that they are willing to pay $65,000 for the house. So, you buy it for $55,000 and you are selling it for $65,000. You have a gross profit of $10,000 (not including your expenses to find the seller, find the buyer and any closing costs you might have).
In future articles, I will cover the mechanics of how the transaction works, but for now realize that your buyer will be purchasing the property for $65,000 and the seller will receive their price of $55,000. This leaves you with a gross profit of $10,000 on the deal.
If your buyer comes from a real estate agent or broker on your dream team, you may also need to pay a real estate commission from your profits. On this particular deal, if you agreed to pay a 3% real estate commission for your real estate agent or broker to bring you a buyer, you would pay them 3% of the $65,000 purchase price or $1,950. In that case, instead of grossing $10,000 on the deal, your profit (before other expenses) would be about $8,050.
The big picture is simple: wholesalers are paid for finding truly great deals, placing them under contract and then selling their rights to purchase the property at the contracted price.
The more you learn about real estate, investing, sales, marketing and psychology - and actually implement - the more successful you will be at wholesaling real estate. However, what are the key things you must learn to wholesale real estate profitably?
First, you need to be able to find great deals. This entire process starts with the knowledge of what a good deal actually is.
A deal needs to include one or more of the following criteria:
1. Able to be purchased for significantly below current fair market value, and/or
2. Has great positive cash flow with little or nothing down and/or
3. Has the possibility of owner financing
These usually stem from some type of motivation from the seller. As an aside, the motivation of the seller can be from good news like a job transfer with significantly higher pay to not so good news like a divorce situation. In both good and bad scenarios, you should only make deals where both parties win.
The second thing you must learn, which is just as important, is how to find buyers for your deals. I strongly believe you should be doing this from the very beginning by building your buyers list. A buyers list is nothing more than a list of people who are usually investors, but can also include folks looking for a home to live in. The size and quality of your buyers list can determine your success or failure as a wholesaler because you need people to sell your deals to.
The first two things - finding deals and building a buyers list - are the TWO major areas that you must learn and master as a wholesaler. Practicing, improving and ultimately, mastering these two skills are the foundation that you must work on daily.
In addition to finding deals and building a buyers list, you must also learn how to complete your paperwork to wholesale real estate. This involves learning and understanding your contract to buy (or option agreement if you use that) and your assignment or contract to sell.
Your ability to put deals together and sell houses relies heavily on your ability to negotiate and sell both yourself and the deal. Become a better negotiator and salesperson and you will improve the number of houses you buy, the price you purchase them at, the number of houses you wholesale to a buyer and the price you sell them for. It is that important.
I am tempted to say that you can't wholesale alone, but I will say, at the least, it is almost impossible to do the entire process by yourself. You should have a team of people helping you wholesale, including key dream team members like a real estate agent or broker who can help you find deals, determine value, bring buyers and introduce you to other critical team members. While you are usually not borrowing money yourself to wholesale deals, having a great lender on your team to work with your buyers can make your ability to wholesale a much smoother process. Also, don't forget the importance that a flexible title or closing company can play in your ability to close creatively structured deals.
Finally, you must understand the transaction flow and especially the closing process. Understanding what needs to happen and when in a real estate deal will allow you to fix things before they become an issue and improve the ratio of your deals that actually make it to closing - when you ultimately get paid. A great dream team can help you accomplish this.
I hope this was helpful this was 2 of the 4 messages im getting from a wholesale website ill put up the other ones in about two days feel free to leave a comment bye and everybody have a good one