There’s a great way to get your foot in the door with real estate, and it doesn’t require an expensive buy-in. In fact, you won’t need to spend a penny of your own money. It’s called real estate wholesaling, and it’s a short-term business strategy that’s ideal for newcomers to real estate investing. All you need in real estate wholesaling is determination, an eye for deals, and a willingness to approach homeowners and investors.
In this strategy, the wholesaler looks for distressed properties and then makes an agreement with the owner. The agreement states that the wholesaler will buy that property for a certain amount. The next thing the wholesaler must do is find a buyer who will pay more than what the wholesaler has agreed to pay for the property. Wholesaling is an off-market listing, meaning that you are personally shopping this around. Once you’ve been able to find a buyer, you keep the difference.
The goal in real estate wholesaling is to sell the home to an interested party before the contract with the original homeowner closes. This means no money exchanges hands between the wholesaler and the seller until a buyer is found by the wholesaler. The wholesaler makes their money by finding a buyer willing to purchase the home at price higher than the amount agreed upon by the buyer. The difference in price—paid for by the buyer—is the profit, retained by the wholesaler.
Wholesaling real estate is best suited for people who want to get into the business, but don’t have the cash. There’s no financial barrier to getting started as a wholesaler, but what you do need are a willingness to scour the market for investment opportunities and the people skills to persuade the homeowner and the buyer that you can help them.
While a lot of investors start out in wholesaling, as you’d imagine, it isn’t necessarily easy. In fact, wholesaling requires persistence, an ability to find distressed properties, and a black-belt ability to talk to people. After all, you’re trying to gage a total stranger’s interest in selling their home. If you’re totally new to wholesaling, it’s a good idea to practice you pitch with people so you’ll come across as calm and reassuring.
When you’re in conversation with the homeowner, your first order of business isn’t to give them your pitch. You actually are there to see if this is something that makes sense for them and for you. They may say they’re not interested, but that doesn’t mean you should rush away. If they want to keep talking, listen to them. Keep the lines of communication open because that “no” could actually become a yes down the road. They will likely be skeptical or resistant, and it’s your job to let them know that you’re actually offering them an opportunity that could help them. Even if a homeowner is opposed to the idea in your initial conversation, leave your card with them. Who knows, you could plant a seed with them that may prompt them to do business with you later.
While there’s a lot of work involved in wholesaling – identifying properties, talking to homeowners, and securing buyers – in some ways, it’s easier than other types of real estate investing. After all, you don’t have to worry about rehabbing the property, renting it out, or managing it. If you’re interested in getting your feet wet in real estate, wholesaling is a great way to get started.