What is Real Estate Wholesaling?
If you’re in the process of getting started in real estate investing, you may benefit from getting involved in real estate wholesaling, which is a great way to raise capital that you can re-invest in other properties or in another investment venture. At Gallegos Enterprises, LLC, we take part in lots of real estate investing activities, including fix and flips and wholesaling, which has given us a lot of experience in this area. So in today’s article, we’ll take a look at how real estate wholesaling works and why it’s beneficial.
What is Real Estate Wholesaling?
In its simplest, purest form, wholesaling involves the user of an intermediary between a source of goods or services (or in this case, real estate) and the end consumer. The intermediary is called the wholesaler.
In the case of real estate wholesalers, you serve as an intermediary between the seller and the end buyer. The wholesaler typically secures a contract on the property. Then, they set out to locate a buyer — usually a rehabber — who will purchase the property at a higher price.
There are two basic forms of wholesaling: residential real estate wholesaling and commercial wholesaling. In most cases, the transaction involves a distressed property, where the owner is behind on their mortgage payments and at imminent risk of losing the property.
In the case of a distressed property, the wholesaler can often acquire the real estate for a price that’s significantly lower than market value. Additional room for profit lies in the fact that the home will be rehabbed and renovated. This is what makes wholesaling viable.
How Does Real Estate Wholesaling Work?
Real estate wholesaling is best illustrated with an example. Let’s say you’re a wholesaler who has found a distressed property that will be worth $500,000 once it’s fully rehabbed.
The property requires about $100,000 in improvements, repairs and general rehabbing work. So you secure a contract on the property for a sum of $300,000.
Now that you have a contract on the property, the wholesaler must connect with a fellow investor and rehabber who’s ready to purchase the property as-is for a sum of $350,000. Once you find a rehabber who’s ready to take on the project, you sell the contract to the investor/rehabber and subsequently earn a profit of $50,000. The rehabber remodels and repairs the property and ultimately sells it for $500,000, so the rehabber profits too, creating a win-win-win scenario.
Real estate wholesaling is appealing to many because there are no real significant risks or disadvantages to the wholesaler. The amount of money you earn on each transaction can vary dramatically, but there’s very little — if any — money required to secure a contract on a property. Some wholesalers offer a token payment.
The most significant challenge is finding and connecting with fellow investors and rehabbers because the key to turning a profit is transferring the contract to a rehabber in a prompt and timely manner.
Acquire Real Estate Investment Properties from Gallegos Enterprises
At Gallegos Enterprises, we work with lots of fellow investors and rehabbers, as we sell properties on a wholesale basis and get involved in a number of fix and flip ventures as well.
We also buy homes for cash and sell our properties to soon-to-be homeowners who are seeking a new home.
If you would like to sell your home for cash, please take a few minutes to complete our form. Or, alternatively, if you’re interested in acquiring one of our properties, simply complete the form on the property listing page.
If you have questions for our real estate investing experts, contact Gallegos Enterprises, LLC at 602.753.8252.