If you are a real estate investor, have sold properties wholesale or have heard of others who do.
In real estate, what exactly is a “wholesaler”? Here are the basics:
- a property is bought at a very low price
- no repairs or rehabilitations are made to the property
- it is being resold to an investor who plans to rehab it and sell it again for their own benefit
Let’s break this down:
To buy a property at a deeply discounted price, expect it to be in poor condition. Properties that need a lot of repairs and have been neglected for years are the ones that usually sell for very low prices.
How do you find properties that can be sold wholesale?
- Direct mail marketing gets salespeople to call before they talk to anyone else. Offers without competition are always the best.
- Marketing also lets sellers know before they call you that you are not an end user and will not be paying retail.
- To buy a lot of properties, you have to talk to a lot of sellers. The national average is that you should talk to 20 sellers before you buy a property. If you can’t find these deals, you’re not talking to enough sellers. The number of properties you want to buy will tell you how many sellers you need to meet with.
Why do sellers sell at deep discounts? Many reasons, including:
- Lived in it for years and never did anything to it (no updates and/or minimal repairs)
- Moving to retirement home
- Inheritance
- live out of state
- Distressed and can’t afford to fix it
- burned owner
- Hard to sell in this condition
- hoarders
What do you need to evaluate when making the purchase?
- After Repair Value (ARV): What will the retail price be? You need good sources of compensation to determine what the value will be after repairs.
- How much will it cost to rehab it to its retail value?
- How much can you pay to buy it?
- Your purchase price must be low enough to allow you and the next buyer to make a profit.
What is done with a wholesale property before it is sold?
- Usually nothing!
Why do wholesalers often have a bad reputation?
I think most people who have bad taste in wholesale have either not done it or have run into some who do it badly.
I was a full time investor for 8 years before we started wholesale. In 2013, my husband and I purchased a franchise from HomeVestors, the folks at We Buy Ugly Houses, and have been primarily in wholesale business ever since.
To get it right, we spend money every month on marketing to the right people to make the phone ring. We then spend a lot of time with the seller working out a solution to your problem. And we negotiate a price that allows us to resell to an investor who will rehab and still be able to make a profit on the deal we sell them.
Take all of these steps and people will respect you and come to you for deals. There is nothing wrong with selling wholesale, so don’t be afraid.
Is wholesale legal?
Wholesale is not a buying technique, but a selling technique. With wholesale, you buy the property for a low price. There is a closing with either a title company or an attorney and you get title as the owner. He then marks it down with a minimum amount and sells it to someone who plans to rehab and make a profit of his own.
It is not illegal as it is a normal buying and selling: you buy it, you own it and then you sell it. The only difference between a wholesale purchase and a regular purchase is the low price and no work is done on the property before it is resold.
With wholesale:
- we are doing a service
- we are a solution
- we are helping people
- we are taking a terrible situation and making it better for these sellers
What can you add? Do you sell wholesale?