Multiple Income Streams by Example

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Wholesaling Real Estate

Wholesaling Real EstateWholesaling Real EstateReal Estate is a great opportunity and I would encourage people to consider it as one of their investment strategies. I personally use several different strategies, but here I want to talk about one I don't directly use at least not much anymore. It is Wholesaling, or sometimes referred to as contract flipping. I don't personally use this method but I do use wholesalers to get deals so I know that the method is real. It is a great way for early investors to get involved with real estate.

Benefits of Wholesaling Real Estate
If you have read about making money in real estate with no money and no credit you probably have read or heard about flipping. It might have come across as scammy or maybe you thought it really cant work like they are claiming. How can someone buy real estate with no credit and no money, this is crazy. Well I'm telling you its not. There are multiple ways to do this but wholesaling is probably one of the most common. You can buy properties paying very little money. Im not talking about borrowing from someone for your down payment either -Thats another strategy which I sometimes use still -. You can literally get involved with very little money period.

The basics of Wholesaling
This is the general idea -ill add subpages to go more in depth as this guide progresses- A wholesaler is in the business of flipping contracts. They are connecting motivated sellers with cash buyers. It is not done by brokering like a real estate agent would do. You as the middle buyer are actually making a contract to buy the property from the seller. Then you sell your interest in the property whether you sell your contract or do what would be called a double escrow or simultaneous close. Depending on your state and excise or sales tax rules you might consider one over the other. -more on that later-.

I don't necessarily do wholesaling myself but I do have multiple wholesalers that I have networked with. They get a hold of me when they get a great deal.. My part is to close the transaction as the end buyer, with cash or a partners cash. That is how the wholesaler ends up getting paid, through their markup of the house or their assignment fee. The technique really works and as long as the wholesaler has a good buyers list and is finding good deals -they are always out there in all economies- they will be able to make some good money in real estate without risking their own money, and eventually use their profits to move to another method.

Dan (not verified) wrote on Thu, 05/09/2013 - 01:09:

I am going to buy my first property to flip from a wholesaler soon, who gets it very cheap from HUD directly. Hope everything works out as planned.
Have you tried land flipping yet? Land as in vacant land.

The Rookie wrote on Thu, 05/09/2013 - 02:13:

I haven't actually tried flipping raw land. I did a long time ago get into land development but it failed pretty bad. 2006 I attempted my first land development turning lots into finished lots with power, road etc. I lost my butt. Had a business partner then it ended that.

We actually spent a huge chunk of our profits from rehabs and rentals/flips and still didn't make it work. Didnt help that the market crashed very quickly after we bought the land.

Anyways, I know some people that did well doing that but I failed at that particular endeavor.

The Rookie wrote on Thu, 05/09/2013 - 02:21:

I have bought from hud directly though. You should try direct from hud, especially if its your first deal. As a non investor which if its your first deal it would most likely be considered non investment, you will get first dibs on hud properties. Hud gives a certain time frame on properties befor investors are allowed to bid. So you get first rights and can always attempt a low ball bid.

If you have investment properties already disregard that. You could still bypass the wholesale markup by bidding directly to hud. But if your wholesaler is good why not let him profit. One thing I never tried was buying from a wholesaler on a hud or reo. I have been offered those deals from my wholesalers but they were gone before I had a chance to buy.

I actually am not 100% sure how they wholesale those deals because of certain restrictions with hud and reo policies like not allowing the property to be assigned even to a cash buyer. I know its possible and have read of a couple ways around the rules but just haven't tried them. Let me know how it goes.

Dan (not verified) wrote on Thu, 05/09/2013 - 02:46:

I actually will partner up with a guy who works for this wholesaler, so I will learn a lot from him and he will walk me through the whole process. They sending HUD over 2,000 low ball offers every single week, so once they get one it'll be more likely to have a deal if the due diligence turned out good.

The Rookie wrote on Thu, 05/09/2013 - 20:35:

Thats great, Keep me posted on how it goes.

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