The business of locating properties (usually needing repairs) at bargain prices and quickly passing them to investors/landlords at prices well below retail.
Wholesaling Real Estate Basics
Wholesaling real estate is a real estate investment strategy that involves finding distressed properties or motivated sellers, entering into a purchase agreement with them at a discounted price, and then assigning or selling that contract to another buyer for a profit. The wholesaler acts as an intermediary, connecting sellers with buyers and earning a fee or assignment fee in the process without actually taking ownership of the property. It is a way to generate income by leveraging opportunities in the real estate market without the need for substantial capital or long-term commitments. You cannot buy many great deals unless you have access to an extensive credit line, partners, or real cash. The best alternative is to tie up the property with a contract and then look for a new buyer to give you more money than you have to give the seller.
Wholesaler VS a Retailer
A Wholesaler is someone who sells goods or services in bulk or large quantities to a Retailer at very low prices. A Retailer sells goods or services to new consumers in small quantities at a much higher price. The more a Retailer buys from a Wholesaler, the cheaper the costs. Retailers buy goods and services at a price they can still make a profit from when they resell to the new consumer. Wholesalers exist because Retailers do not have the time or means to find goods or services at a discount.
In the real estate business, a Wholesaler depends on a Retailer, and a Retailer depends on a Wholesaler. The Wholesaler has the advantage over a Retailer because they are the ones that find such great deals; eventually, they could become a Retailer. This would mean they would profit even more.
Should I Wholesale or Retail Real Estate?
One question we get a lot is “Why doesn’t a Wholesaler do the deal himself and make the money the Retailer is going to make?” The answer is very simple, NOT ENOUGH MONEY! Most deals require the buyer to come up with cash to purchase the property and rehab it. Wholesaling is a great technique to start off with if you do not have any cash or credit. Once you have some cash, you can then move into the Fix & Flip (Retailing) business.