|
WHOLESALING 101 – What
is wholesaling
by Hari Kusumakar,
Co-Founder,
www.LocateRE.com,
Chicagoland’s most visited real estate investment website
| What is
Wholesaling? |
|
|
| Wholesaling is a Buy
Low - Sell Low opportunity where the sell price is higher than buy
price. For the investor who ends up buying from the wholesaler, it's a
Buy low - Fix- Sell High opportunity or Buy Low-Fix-Refinance/Rent
opportunity. Both the wholesaler and the end investor profit in this
win-win situation. Sometimes this end investor may wholesale this
property further to a fellow investor.
An example: |
|
|
|
Your phone keeps ringing from one of
your newspaper ads that reads "We sell ugly houses to investors at deep
discount". You talk to all these investors and ask them the type of
property they are looking for and their area of interest. Don't forget to
ask them if can they pay cash and close quickly. Note down all relevant
information about this person and add it to your buyers list.
Once you have built a big enough
buyers list you put an ad in the newspaper similar to before but this
time it reads "We buy houses for cash and close quick". Your phone rings
from the ad. It's somebody who wants to sell you their ugly house. |
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You ask them the details of their
situation and decide that it’s worth your time to look at the property.
You get to the house and negotiate to buy the house for cash at a deep
discount. You take out two empty real estate contracts from your file and
agree to buy the property for $55,000 in cash and with a closing period of
10 days. Also during the process make notes and figure out what would be
the estimated repair cost to bring this property up to date.
Now you get back in your car and call
your real estate agent to email you a Comparative Market Analysis Report
for a property in resale condition. When you get home you check out an
email from your agent saying that the property is worth around $135,000.
Now you go in your buyers list and identify the investors who are looking
for this kind of property in this particular area. You pick up the phone
and start calling them one by one Hi Investor, I’ve found something
which might be of your interest .....but you have to move quick. Its a 3
bedroom 1 bath single family house in Englewood at 5757 S Sangamon St.
It’s got a brick exterior and needs work of around 30k. After repaired
value is around 135k and I am asking 60k. When can I show it to you? The
sooner the better? Great! I'll see you at the property in 2 hours.
Investor likes the house. The investor
signs an assignment contract to buy the property for $60,000 cash with
closing in 7 days. Your contract price is $55,000 cash. Your profit is
$5,000 cash, which you get at the closing table. You just wholesaled a
property!
How can wholesalers protect
themselves?
After a wholesaler has tied up the
property with a contract to purchase, the next step is to protect his
position in the deal in case the seller tries to sell it to someone else
for a different price or terms. This could be done by recording the
contract to purchase at the Recorder of Deeds office for the particular
county. The same protection can be achieved by filing an affidavit or
memorandum stating that the wholesaler has the contract to purchase the
property along with a legal description. This is a better method since it
hides the price and terms under which you purchased the property.
What are the reasons why I, as a
real estate investor, should wholesale?
- You want to get
started in real estate investing with no money and very minimal risk.
- You can find more
deals than you can financially handle.
- You are buying
more deals than you can financially handle.
About the author:
Hari Kusumakar is a real estate investor based in the Chicago area. He
also runs the most visited real estate investment website. This website
can be accessed at
www.LocateRE.com. He can be personally reached at
hari@LocateRE.com |
