Today we’re going to discuss real estate wholesaling, also known as micro-flipping and who this strategy best suits. Let’s get started. So today, we’ll talk about wholesaling, also called micro flipping. Let’s define the concept, as I feel it’s sometimes misunderstood. Many call it micro-flipping because you need to find a discounted property under market value. Then you have to associate an investor that wants to take on this property, refurbish and repair it and then flip it on for a quick profit. They will be buying the contract you have with the original seller. There are a couple of things that you need to understand for you to be able to be successful at wholesaling. You need to be able to source and identify properties at a significantly discounted price because you have to factor in the fee the investor will pay. Wholesaling is an excellent strategy, but it is not a beginner’s strategy, so I will outline a few things you need to be aware of.
First, finding a great discounted deal means there are many ways to do it. You could either advertise or knock on the door and find out what’s happening. You can get a list of recently deceased people for example, this means you will need to work hard to find the right property because if it is listed in the MLS or realtor.com, the discount is no longer there. So, you need to identify properties off-grid, not even listed, to be able to pass it on to somebody else. So, look and think this through. How are you going to find out who all these people are? How are you going to reach them? How are you going to negotiate that deal for you to be able to pass it on to an investor? I would recommend you either shadow an investor or connect to a profession related to real estate investing, such as a contractor or a realtor. Remember, there are a lot of skills you’re going to need to find that great deal which depends on the activity of the markets where you live, buying off the plans of a condo or house development is a great way to make money. Many builders, at least here in Canada, give you early prices. Considering the appreciation that has been happening in the last few years, this is an excellent way to invest, as that’s the whole thing about buying below market value.
Another thing you need to consider, especially if you are in the United States, is to make sure that you check the state law because, in some states, wholesaling is not allowed. If you want to conduct such a transaction, you may close on that property first and then resell it to the investor who wants to do the repairs and flipping. So, you need to check what is permitted. The next thing you need to know is how to estimate the repairs because when you’re looking at a deal or what you think is a good deal, all the profit return will depend on the amount of work required to refurbish it. Suppose you don’t estimate the repair costs correctly. In that case, you need a trusted contractor readily available so you can pass on this information to sell the contract to an investor. This is not something you will be doing; the investor will be doing the repairs. You must explain to them why it’s a good deal for them to buy from you as they’ll pay you a fee, so you need to give them a close estimate of the repair costs.
I feel that wholesaling is not the best way to get started in real estate as there are a lot of things that you need to know for you to spot that deal, estimate the repair costs, put that package together and present it to an investor and speed is of the essence here. So, who is wholesaling best suited to? I believe it suits people that have done fix and flips or have an already established portfolio. As you have established contractors and understand the fast contractual process. You understand how to lock it down and get the seller to agree to sell the property. Let me know what you think about wholesaling, and if you’ve done wholesaling, I would love to hear about your experiences.
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