Real estate investing can be a hard career to break into for two reasons: lack of capital, and lack of experience.
Many people think that becoming a real estate wholesaler is an easy way to start an investing career in real estate, but that is far from the truth. Only the people who are willing to work incredibly hard, and go through the process of becoming an expert at finding and buying the best investment properties, will be successful as a real estate wholesaler.
Real estate wholesalers do extensive research to discover steeply discounted investment properties, then either buy them or place them under contract, and then quickly sell them or reassign the properties to another real estate investor.
#1 Wholesalers Don’t Typically Buy Properties
Real estate wholesalers don’t usually purchase investment properties. Typically, wholesalers place an investment property under contract, which doesn’t involve any out-of-pocket money, and then assign the contract to a real estate investor. Wholesalers, then, profit from finding outstanding real estate investments, which they assign or sell to investors.
Some real estate wholesalers may actually purchase a property and resell it to an investor. In such cases, it’s common to use a double closing (simultaneous closing), where the wholesaler and his customer simultaneous close both deals.
The benefit of a simultaneous closing for the wholesaler is that he can use the money received from his client’s closing to pay for the purchase of the property.
#2 Wholesalers Dig For Deeply Discounted Properties
Real estate wholesalers search for investment properties that are deeply discounted, which they sell or assign to investors for a discounted price below retail. For this reason, wholesalers often search for off market properties, rather than using the MLS.
One of the most valuable skills a wholesaler possesses is the ability to find and buy investment properties at a steeply discounted price. They often invest a great deal in marketing, and network with people who can help identify properties before they go on the market.
Wholesalers have an eye for properties that can generate outstanding profits once they are rehabbed, often relying upon extensive research of cities and neighborhoods where investment properties are located. Thus, wholesalers are often used as regional real estate investment experts by large investors.
#3 Wholesalers Build Investor Networks
Since real estate wholesalers find properties for investors, they typically have an extensive investor network. Their clients can be composed of both individual and institutional investors, and their clients can be located anywhere in the world. Therefore, the best wholesalers market their services internationally, though they specialize in real estate within a specific geographic area.
#4 Wholesalers Work In Volume
Since wholesalers make a small profit on each deal, they depend on volume to support their business, which often includes an administrative staff, research staff, and sales staff.
For example, a wholesaler with a staff of 6 employees finds an exceptional investment property that he puts under contract for $80,000, assigns the contract to an investor for $85,000, making a profit of $5,000. As a result, the wholesaler will need to do around 10 deals a month to cover expenses and make a small profit.
Real estate wholesalers, therefore, are not only experts at finding discounted investment properties; they are experts at finding a high volume of profitable, high cash flow properties.
Institutions and individual investors who want to buy investment properties in volume, therefore, usually use a real estate wholesaler to supply the properties.
#5 Wholesaling Real Estate Isn’t Easy
Real estate wholesaling can be a great way to break into the industry, but it’s far from easy. The best wholesalers are highly specialized real estate investors that provide an important service to other investors.
For someone looking for an easy way to get into real estate investing, wholesaling real estate is not the answer. Wholesaling real estate takes a great deal of time and energy, and takes a lot of experience to become an expert at finding and buying the best real estate investments.
Graystone Investment Group
Graystone is an experienced Investment Group, wholesaling properties in the Greater Tampa Bay market (on the Gulf Coast of Florida).
Unlike other wholesaling groups, we find properties that we assign or resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years, at no extra charge.
To investigate the profitability of Tampa Bay real estate investing, please fill out our Investor Profile, or contact us direct.