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We’ve already discussed the reasons to be a real estate wholesaler, and we hope that article gave you enlightening insights as to how this can be a lucrative enterprise. But how do you actually make money wholesaling real estate? If you’re intrigued, read these helpful tips on how to master the money-making art of wholesaling real estate.
How Real Estate Wholesalers Make Money
Unlike real estate deals intent on fixing and flipping properties, wholesalers make money on real property transactions. Wholesalers make money by finding the ideal home below market value -usually a fixer-upper, a foreclosure, or from a homeowner highly motivated to sell. Once the perfect property is found, a wholesaler will get that house under a wholesale real estate contract and then sell to an investor.
The wholesaler makes money by putting the house under contract for less than the investor would normally pay. To give an example, let’s say you get a home under a contract for $72,000. You could potentially find an investor to pay a higher price that is reasonable, yet still under market value. So, if you track down an investor who can pay your elevated price of, say, $85,000 – your profit is $13,000.
Save Money With a Double-Close Deal
Another way to make money in real estate wholesaling is by saving money. With a double-close deal, you do not have to dip into your own personal funds to purchase a property contract. Also known as an assignment of contract, a double close is when the title company utilizes money from the end-investor to pay off the original seller. As an extra incentive, a double-close deal must be completed on the same day. Therefore, many sellers and investors are happy to complete the transaction quickly. Not to mention, you never have to dole out cash from your own pocket while buttoning up the transaction.
Take Advantage of Assignment Deals
Another way to make money wholesaling real estate is to cultivate assignment deals. This is when you, as the wholesaler, take the contract you obtained from the seller and assign it to the end investor. By assigning the contract to the investor, he or she now becomes the buyer and agrees to the terms of the contract. As the wholesaler, you make money by charging a fee for arranging the deal and assigning the contract to the investor.
Broaden Your Territory
To make money as a wholesaler, you need to be willing to explore different housing markets. This is especially true if you are working in an area that doesn’t have the ideal properties for wholesaling opportunities. As mentioned, the best homes to target for wholesaling are those in foreclosure, need intense repairs, or are owned by highly motivated sellers (such as a landlord ready to quit the rental business).
After doing some research, you’ll find that some areas in the US have more of these ideal properties than others. You might discover that the prospects of how to wholesale real estate in Florida are far more promising than trying to succeed as a wholesaler in other states in the country.
A quick internet search will show you where the highest concentration of foreclosures is in the US (Florida being the highest and Vermont being the lowest concentration of foreclosures in the US). This should inform you as to where to target your wholesaling efforts. In short, broaden your territory to obtain the best below-market values on houses so you can stand to make more money when selling purchase contracts to investors.
Take Advantage of Quick Turnarounds
The quicker you find motivated sellers and match them with capable investors, the more opportunities you have to make money as a real estate wholesaler. This means the quicker you turn around contracts, the more deals you can get done – and the more deals you do – the more money in your pocket. This quick turnaround is especially feasible in a double-close contract scenario which must be done on the same day.
If you manage your time wisely, you could theoretically close on 5 – 10 homes in a month. If you calculate an average profit of $2000 per home (which is an extremely low-end estimate of profit), you could stand to earn $10,000 – $20,000 a month. While that’s a conservative estimate, it’s still an example of how real estate wholesaling can be incredibly lucrative.
In closing, how to make money wholesaling real estate is more about making better choices geared toward the outcomes you want. With time and the right research, you can definitely make money, and we hope we’ve inspired you to attain your money-making success in real estate wholesaling.
Photo by Francesca Tosolini on Unsplash