Wholesaling is essentially helping other people sell their property by using your network and connections to find interested home buyers. Instead of having to buy the house to then sell, a wholesaler will enter into a contract with the seller that determines a reasonable price for the house and once the house sells, that determined amount is what the seller receives. In order to turn a profit, the wholesaler will try to sell the contract for more than the price set out by the seller. For example, if the seller is looking to sell for $100,000 and the wholesaler finds a home buyer who is willing to pay $110,000, then the seller gets the $100,000 they wanted and the wholesaler gets a $10,000 profit. Here, we’ll go over the benefits of wholesaling.
What Are The Benefits Of Real Estate Wholesaling?
How Is Wholesaling Different From Flipping And Selling?
Flipping a house means that you are actually purchasing the house, which involves property tax, insurance, carrying costs, and, in the case of flipping, renovations. There is a lot of investment in flipping a house, both in terms of money and physical effort, and you will hold the property for longer. The property often also needs renovations in order to get its price up and the person flipping needs to work out the cost of expenses versus the amount the home will be worth at the end of the process.
What Client Base Uses Wholesalers?
Typically, property wholesalers work with pre-foreclosure homes. People in this position are looking to sell quickly and need someone with network connections. Because they are hoping to sell fast, the asking price may be quite low.
The Benefits Of Wholesaling
- Low Risk. Flipping takes time for the renovations, whereas wholesaling does not involve making any changes to the house and since the wholesaler never purchases the home, there is less risk. Often, wholesalers will put a clause in their contract with the home seller that they can nullify the contract if the house does not sell by the time foreclosure proceedings begin, therefore lowering the risk further.
- Less Time Consuming. Wholesaling transactions typically operate on a short time frame, as pre-foreclosure homes have a short period in which they can sell. Instead of buying a home to flip and sell and waiting on a good price offer, wholesaling is ideal for those who have an established network of investors and buyers so they can get homes sold quickly. Since time constraints are the main concern for the seller, they are often willing to lower their prices, which gets the property selling fast.
- No License Needed. Wholesalers themselves don’t need to take a course, pass an exam, or be licensed. Instead, wholesalers should partner with an experienced Realtor® who can create an airtight contract and assist in the legal aspects of wholesaling. Partnering with a trusted Realtor® also allows you access to their established network within the Real Estate community and gives you the benefit of their years of experience including how to determine a price for a home. Nothing will set you up for success like partnering with someone who knows foreclosure well.
Discuss With a Top Calgary Realtor Before Getting Into Wholesaling
If you’re interested in wholesaling foreclosure homes, it’s best to speak with an experienced foreclosure Realtor®. While wholesaling is an opportunity to get into real estate without risking your own money, there are some legalities that you must make sure you are respecting. By discussing with one of the experienced members of the Mel Star team in Calgary, you can make sure you are following all necessary guidelines. Remember to have an ethical, educated Realtor® explain the details of wholesaling to you. If you want to learn more about how to invest in Real Estate, contact Mel Star in Calgary at 1-403-861-9944 or by filling our contact form.
FAQ
Q: How much profit can you make wholesaling?
A: That will be dependent on the seller, the wholesaler, and the potential market. A good wholesaler will be able to set a price for the property that is not so low that it scares the seller and not so high that no one will be willing to pay more. The wholesaler can get more value if they have a wider network of potential home buyers and if they are convincing home sellers.
Q: If I’m interested in wholesaling, what do I need to do to get started?
A: *Make sure you know the laws surrounding wholesaling and what’s required of you. You should always check with your legal council to assure you’re operating within the laws of your province. Make sure to have a seller before you have a buyer, have a contract with a seller, and can prove intent to purchase. Importantly, make sure you’re receiving advice and counsel from an actual professional in tandem with your own research.
Q: How can I build a network of Real Estate contacts?
A: Wholesaling works best for someone who already has those contacts. If you don’t have those connections, you should establish them before you go looking for sellers. If you’re just learning about wholesaling, talk to our team at Mel Star and we can explain the steps you need to take.
*The advice on this page is not legal advice
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