In the single-family residential market, you have undoubtedly heard of wholesaling. Naturally, this might conjure up thoughts of houses sitting on tall shelves in warehouses. What exactly is wholesale real estate anyways?
Wholesaling is a nickname used to describe a type of real estate investing or transaction where the investor buys and sells an interest in the property without holding it.The wholesaler has a direct relationship with sellers through various marketing forms. They can then negotiate the terms of a sale to take to another market and sell for a profit.
Wholesalers typically use a double close or an assignment of the contract to sell the property. The investor buys the double property close and immediately sells it to the end buyer. Frequently the title company waits until everything is signed and funded to execute both closings. The wholesaler assigns their interest in the purchase contract to the end buyer with an assignment model.
There are many benefits to wholesaling as a real estate investor.1. Wholesaling is a short-term strategy that an investor can realize benefits from quickly.2. It does not require a large pool of capital to get started in wholesaling.3. Wholesaling can be used to get direct experience in many aspects of real estate investing.4. Since wholesaling focuses on acquiring real estate and quick disposition, investors can cycle through more deals quicker.
1. By selling the properties without holding them, wholesalers short-circuit one of the best ways to build wealth in real estate.2. To be successful, a wholesaler must accurately determine the ARV and estimate rehab costs to determine a property’s value. That can be very challenging for a new investor.