Little to No Capital Required

This topic has been one of heated debate for quite some time now. You have the “Die Hard” Wholesalers, your Rehabbers, and Landlords that all feel that their strategy is the best. Probably the best way to describe where everything ts in, it’s to think of a triangle. If you look at Real Estate like a triangle you’ll see that on one side we have rehabs, on another side we have Rental Property and on the last side of the triangle, we have wholesaling.

Wholesaling vs. Rehab

Wholesaling is the bottom side of the triangle, the foundation that quickly injects large chunks of capital into your home buying business. This is the capital that you’ll be using to grow your business and purchase longterm wealth vehicles like Rental Properties later on. This is the best strategy for beginners and I wouldn’t recommend trying to do any of the other real estate investing strategies until you’ve had a few wholesale deals under your belt.

If done properly, you should only need to show up to Close The Deal and then pick up your check at the title company. Remember that time is your most valuable asset!

Once you've created your real estate investors list, it won't be hard for you to move these deals in a short amount of time, normally within 10 to 15 days. Your buyers will be paying with All Cash and nancing is not an issue.

Wholesaling is much easier than selling to an “End Buyer” . In a slower Real Estate Market, it may literally take two to three months for you to nd a qualied end buyer who wants to buy the property.

Remember that the keyword here is “QUALIFIED BUYER” . When you’re dealing with other investors you know that they either have cash or hard money, and nancing isn’t a big issue.

On a transaction with an end buyer, you’re going to get interested people with various nancing issues and you’re the one that has to worry about getting the deal closed.

Once you nd a buyer, you've got to get their loan approved, then have to get the loan taken care of, get the appraisal, and all the other things that come with a regular retail buyer, and at the beginning, you want to make sure you can move and close your deals fast.

That brings me to another reason why I recommend wholesaling real estate over rehabbing for beginners. When you buy, x and resell real estate, you’re committed to the property. Once you close on that baby it’s yours. The Good And The Bad! If some unforeseen problem arises (It always does), you’re going to be the one that carries the expense. If you’re rehabbing a property, you have to start by hiring a contractor or handyman, who will do all the repairs to the property, while you will have to market the property and go through the process with the end buyer. All of this may take a long time, and you are the one carrying the costs. Every day that this property remains in your possession, money is pouring out of your wallet.

In a wholesale deal, all that you are really doing is getting control of the property. You would simply take the same property that you would normally buy and rehab, and get it under contract. Then, you’re taking that contract, marketing it, and selling it to other investors that want to take on the project. There are investors out there that prefer doing rehabs. These are investors who have the cash to pay and who don't mind waiting six months to do a rehab. There are also investors that want to do a deal, but are horrible at talking to sellers and would not be able to secure the pricing that you can. These Rehabbers have no problem paying you an “assignment fee” (the amount that you pocket when you sell your contract) because they understand that it is a cost of doing business for them.

The Rehabber will generally net more than a wholesaler but look back at all of the risk and time associated with doing a rehab. The average, depending upon your location is between $25,000 to $40,000 and at times even more. But most wholesale deals are going to net you anywhere between $10,000 and $20,000. Usually about half of what the average Rehabber makes per deal. However, unlike the rehabber, as a wholesaler, you have more control over the amount of money you earn. The best part of wholesaling is that your pay is directly proportionate to your ability to put deals together and not how much time or physical labor you have in a deal. As you get better at negotiating, you’ll be getting properties under contract for less and less, allowing you to sell the contract for more and more.

I would personally rather do four wholesales and spend less time than to wait six to eight months for a single rehab to cash out. Even if you’re in a position to wait that long, is it really worth the risk? That’s the question that you need to ask your self when deciding which real estate investment strategy you want to take on. Exactly how much risk are you willing to accept?