Wow, another month is upon us, making 2018 a little more than halfway over. This month, my blog is about the beauty of wholesaling properties. You may be wondering exactly what wholesaling is. This is the formula: a motivated seller with a distressed single family home. Enter eager real estate investors. The first investor is the one who typically makes a deal with the seller by putting the property under contract. Based on the comps in the area, repair costs are estimates.
The second investor, the buyer is the one who buys the property from the seller through the wholesaler. He/she now owns a property with problems that need fixing. When the contractors arrive, typically, repairs should be cosmetic: fresh paint, new flooring/carpet, upgrades to kitchen & bathroom counter tops and appliances. Or a new roof. Any houses with plumbing/electrical issues go by the wayside. The seller gets a portion of funds for their property, the investor who put the property under contract gets an assignment fee (paid by the buyer) and the seller pays the attorney's fee at closing.
Before all this takes place, lots of things happen behind the scenes. Wholesaler negotiates a sales price the seller agrees to then puts property under contract. This is usually half of what the seller is asking. Seller asking price: $175K, we negotiate half or 87,500K. Wholesaler then has his/her addendum put into the contract, which protects him in case he can't find a buyer before closing. The attorney has to make sure the property has clear title beforehand, otherwise the seller has to take care of any issues.
Single family homes, condos, duplexes, triplexes and quads qualify as residential properties. Any property with 5 or more units is considered commercial in the real estate industry. Distressed multifamily properties can be wholesaled to a buyer wanting to make upgrades and cash in. He/she can either sell the property at its ARV or After Repair Value when done through similar comps in the area. Buyers often want to fix up a property and sell it for what it's really worth OR use it as monthly rental income.