Real estate wholesaling is one of the smartest ways to get started in real estate investing. Real estate wholesaling allows you to reduce risk while not tying up capital. However success in real estate wholesaling necessitates hard work, a thorough comprehension of the method, and an understanding of the intricacies of a successful transaction.
According to Adam Gower's article, "Real estate wholesaling is a real estate development and investment business strategy that requires minimal capital. As a wholesaler, you work to:
- Find a property that is undervalued, distressed, or in need of significant renovations before it is listed on a public real estate market.
- Negotiate a right to buy contract from the seller, typically using an all-cash offer and a promise to close quickly.
- Tack on a finder’s fee of 5%-10% of the property’s value.
- Find another buyer to put under contract and purchase the property. These buyers are often other real estate investors looking for excellent properties to renovate and resell, also known as flipping.
In addition, "You sell the property to the investor at a wholesale price, which is less than the market value. These properties are generally not publicly listed, so you allow real estate investors to acquire these properties without competing with other buyers.
The ideal property is one in which you can negotiate a purchase price well below market value. The price has to be low enough to add your finder’s fee and any necessary renovations costs and still be attractive enough of a price for an investor to buy and flip the property at market value and turn a decent profit."