What Is Wholesaling In Real Estate – How To Make Money Wholesaling
If you want a side hustle that can change your life, a reverse wholesaling real estate business may be just what you are looking for.
Why? Well, wholesaling properties can help you earn a lot of money, working as little as 10 – 15 hours per week. You also don’t need an investment for most of the deals you will make. It’s precisely the type of high ticket side gig that can help enable you to leave your 9 – 5.
You may recall the article I wrote about my interview with Robert Lyon. Robert shared the details about his real estate wholesaling business with me. As I looked deeper into this niche, I uncovered a process called reverse wholesaling, which is very similar to wholesaling with some key differences.
What Is Real Estate Wholesaling?
Regardless of the model, real estate wholesaling brings together buyers and sellers and earns a fee for setting up the deal.
Let’s look at the difference between the 2 models…
- Find properties below market value.
- Find clients to sell to.
- Negotiate the terms
- Close the sale.
As the wholesaler, you are trying to move quickly on the properties. You’re looking to get in and out of the deals quickly. Once you have a property under contract, it’s a matter of finding a buyer as soon as possible and getting the deal done so that you can get paid.
Reverse Wholesaling In Real Estate
- Find cash buyers looking for properties.
- Find out what the client wants.
- Find properties that fit the client’s needs.
- Negotiate the terms.
- Close the sale.
When using the reverse wholesaling method, building relationships with buyers is your priority. I say this because you need to find a buyer and assess what they want before looking for a property.
This method may not provide the fast in and out action of regular wholesaling. However, it has its advantages by building relationships with real estate investors who will likely make more investments in the future. These relationships can set you up to create multiple deals.
The Benefits Of Reverse Wholesaling Real Estate
You may be wondering how to make money wholesaling? Or perhaps you are wondering how much money will you make with reverse offer real estate. Well, the research suggests that it depends on the market you are working in. It seems the average is somewhere between $5000 and $10,000 for homes.
Commercial properties can offer massive upside from those figures. Let’s say you get a commercial building under contract for $2,000,000, and you get a 5% commission. That’s a $100,000 commission.
Another benefit is that you can do this from anywhere. You can work from home, from abroad, or on vacation. There’s not a lot of overhead involved with this side hustle opportunity. Thus, it allows you to have location freedom, flexibility and do virtual real estate wholesaling.
Perhaps the most significant advantage is that you have a buyer before you go looking for a property. Think about it. If you purchase a property, you are under pressure to find a buyer who will want what you have. Reverse wholesaling means you already have a buyer, and you are simply going to find a property that they want.
It’s like getting a shopping list and buying someone’s groceries for them. You know what they want, and if you bring it to them, they will pay you. Now imagine purchasing the groceries first and then finding someone who will buy the random assortment you chose. That’s going to be a little more complicated.
Reverse Wholesaling Real Estate For Beginners
How To Find Buyers For Wholesaling Real Estate
When it comes to buyers, you should know that you should be searching for cash buyers. There are a couple of reasons for this…
- Working with cash buyers, you ensure that you don’t have to deal with banks or other lenders. Essentially, you eliminate the chance for hold-ups or snags, which could cause a deal to fall through. By dealing with a cash buyer, it’s simple. You find them what they want, and they pay cash for the title. Nice and clean.
- Cash buyers are likely to be investors. Not many people are buying a home with cash. Cash buyers will perhaps want more investment properties. That means you can set yourself up for future deals if you satisfy the buyer.
As you can see, with this model of wholesaling, it’s all about the buyers…
You need to understand what type of property they are looking for. You need to understand the neighborhoods they would like. You need to know how much equity they expect to get upfront. The amount of rent they can collect.
So, where do you find buyers? Well, there are many ways you can do this. You can purchase a buyers list. You can check public records to see who has purchased properties. You can go to real estate trade shows to network.
You can call. You can send emails, and you can even send snail mail addressed to the potential buyer. What may be most important, though, is to identify who could be a potential buyer.
- Apartment Building Landlords
- Real Estate Wholesalers
- Commercial Developers
- House Flippers
Building relationships with these types of buyers are going to be the key to your success.
Finding properties for your buyers is the next step in the process. However, this part should be very straightforward. Because you have already found out exactly what your buyer is looking for, you can perform a targeted search.
Finding motivated sellers is another critical piece in the process. These buyers are looking to move on from the property quickly. The property may have damages, or the owner may have debt issues. Whatever the reason, the buyer wants to sell fast. Because of this, you can get the property for under-market value.
Building relationships with wholesalers and real estate agents is a great way to stay connected and find potential sellers.
Other reverse wholesalers have set up real estate wholesaling websites and 1-800 numbers to promote buying properties. That allows potential buyers to contact you. Because you already have a buyer, it will be easy to assess the viability of any possible deal.
Closing The Deal
Once you have your buyer and your seller, you’re going to need to move to get the deal done. At this point, you will want to have a lawyer get involved to ensure everything is crystal clear for all parties involved. It would be a shame to put in the time and effort to get this far, only to have the deal fall through now.
How does this look?
Well, let’s say your buyer was willing to pay $250,000 for a property that can make a rental income of $1000 per month.
You find a seller willing to sell a property to you that will meet the buyer’s conditions for $225,000.
You get the property under contract from the seller for $225,000. You then assign that contract to the buyer for $250,000. In this scenario, you end up making $25,000 as the middleman.
That all sounds great. However, it’s essential to protect yourself by ensuring you can get out of the deal if something falls through with your buyer. You can have this written into the contract, so you carry no risk. You can also ask the buyer to put a deposit into escrow when they accept the deal. If they back out before the closing date, you can keep the money in escrow to cover your time and effort.
Knowing this, you can see why it is essential to bring a lawyer in at the end to ensure everyone is happy with the terms and conditions of the deal.
Get Started In Real Estate Wholesaling
As you can see, if you’re looking into a real estate side hustle, wholesaling in real estate can be a fantastic option.
Wholesale flipping offers many advantages over traditional real estate investing. You don’t have to provide any of the money for a down payment. You don’t have to wait for the property to appreciate. You don’t have to worry about finding tenants or doing repairs.
You bring the interested parties together, get a deal done and collect your fees. That’s why wholesaling real estate for beginners is such a great option. If you wish to become an investor in some real estate long-term, this can be a great way to get capital together to move on to the type of property you would like.
For side hustlers who dream of leaving their 9 – 5, reverse wholesaling offers the type of life-changing income that can make this possible. By creating relationships with your buyers and setting yourself up for future deals, you can build a business that can turn your side gig into your full-on hustle.
If you would like to see more ideas for side hustles, be sure to check out the Side Hustle Catalog for over 100 ideas!
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