How to Wholesale a House Successfully (Tarek’s Favorite)

Tarek El MoussaBlog, Flipping Houses, Real Estate Investing0 Comments

"Sold" sign.

There are a lot of different ways to wholesale a house. In fact, it’s one of my favorite strategies for new real estate investors who want to get into flipping houses.

Let’s dive in. First, what is wholesaling? Wholesaling real estate means selling a house “as-is” to another buyer—typically another investor who’s going to rehab it, and then rent it or flip it.

Step 1 – It all starts with finding a good deal. By that, I mean finding a seller who is motivated to sell their house for below-market value because of their situation: either the house needs a lot of repairs, the seller is going through a divorce and wants out, the house is in probate, the seller has fallen behind on payments…any number of reasons. The bottom line is, you have to get a house under contract for substantially below its market value so that there’s enough margin for both you and the real estate investor you’re going to wholesale the house to to make a good profit.

For example, let’s say you find a house that has an after-repair value of $200,000. Your buyer isn’t going to want to buy your wholesale deal unless he can get it for 70% of market value, less any repairs and your wholesale fee. Let’s say you want $10,000 to wholesale the house. Your numbers are going to look like this:

$200,000 (after repair value) multiplied by 70% – $20,000 (repairs) – $10,000 (your wholesale fee) = $110,000 (your maximum offer)

If you can’t buy that house for $110,000, then please don’t waste your time or the seller’s. Move on quickly to the next deal.

Step 2 – Make an offer. This is the most self-explanatory aspect of wholesaling real estate. If the numbers work, make an offer and see what happens. You never know unless you ask.

Step 3 – Get the house under contract and take it to your local title company or escrow company (who ideally you’ve found beforehand and pre-qualified as real estate–investor friendly and used to doing “double closings”).

Step 4 – Find your wholesale buyer. When wholesaling houses for a living, you must have a list of wholesale buyers who have access to cash and who can close quickly. These are usually the guys at your local real estate club who are actually doing deals. They are not hard to find. If push comes to shove, write an ad and put it on Craigslist.

Step 5 – Assign your contract or get the deal closed (simultaneous closing or double closing).

Step 6 – Take your check to the bank and take your spouse out for dinner.

That’s it! Wholesaling real estate isn’t difficult at all. The hardest part is finding the motivated seller – not the buyer (which is what most people think is the hardest part). Most wholesale real estate is bought by the same 80% of buyers. You don’t need a huge list to wholesale your deals to, just a few hungry, successful ones. Once you start establishing yourself as the go-to wholesale guy or gal in your market, buyers will start finding you and asking you to consider them first when you’re wholesaling a house!

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