One of the best strategies to use for beginning real estate investors is Wholesaling. Why is this technique a great beginning? Because wholesaling properties does not require the investor to use any of his or her credit or money to complete the deal (as long as you know what you are doing).
So what is wholesaling? Here is how it works: An investor finds a property using Real Estate Comps that is well below its market value, gets the property under contract, and then assigns or sells the CONTRACT to another investor or buyer to complete the purchase!
You do NOT improve the property; just get it under contract and SELL the contract to another investor who is looking for a house in need of repair. That’s it! It’s as simple as that! You can typically sell a CONTRACT for anywhere between $500 – $10,000+ profit!
What would be the steps necessary to complete a successful transaction?
Step 1- Determine the After Repair Value (ARV). The most successful way to determine ARV is to use InvestorCompsOnline to provide comparable property information. Analyze a set of the lowest comps in the area and the highest comps of the area. For your purposes, when making an offer, seek out the lowest comps in the subdivision.
Step 2- Calculate the repairs. Do a quick drive by, look the property over, and determine what repairs may be needed. As a rule of thumb, it is a good idea to figure in a set amount as repairs when making an offer. If the amount of repairs turns out to be significantly higher than you originally set, then you may need to walk away from the deal. If lower than you thought, then you may increase the assignment fee.
Step 3- Make an offer. Understand that you are making offers that will benefit your business, so your asking price will be lower than what most people’s expectations are. Expect 90% of your offers to be emphatically declined, 10% of your offers to be countered, 5% to be interesting, and 1-3% to accept. Also, it is best to construct an offer that will allow your end buyer to profit. Many new wholesalers make the mistake of not caring about the end buyer. If the end buyer cannot sell to someone else, then they will not be in business long and you will have lost a good partner. Losing partners will cut YOUR career short in this business.
The end goal is a win-win transaction for all. You make money and the end buyer does too. Use your InvestorCompsOnline account to access more wholesaling training on the support desk.