Real estate wholesaling isn’t as easy as the gurus make it sound, but it’s not that difficult either. We hear this kind of sentiment all the time…
I want to start real estate wholesaling but I’m having a hard time getting started. I keep getting overwhelmed. What am I missing? Don’t I need an attorney for these contract forms? Should I tell people I’m a wholesaler? Don’t I need an LLC? What about insurance? Where do I get the forms? I’m not sure if I get it and I’m afraid to mess this up.
We explain the basics of real estate wholesaling here. If you know what it is, but want to know more about how to do it, you’re in the right place.
Practice by getting leads and talking to sellers. Work on the leads and gain experience with different kinds of situations. No two deals are the same. You need to figure out the best real estate route for you and only you by growing your knowledge of real estate solutions. The more familiar you are with the real estate problems people need to solve, the more effective you’ll be as a real estate investor.
You’ll probably be surprised by how many different scenarios present themselves when you start talking to motivated sellers. Real estate investors make money by solving problems – so start with finding and talking to people with real estate problems.
Most people that try to get into real estate investing decide to start with wholesaling because it seems quick, easy and doesn’t require a lot of cash. Very few people who try to get into real estate wholesaling actually do a single deal. Part of the reason is that with real estate wholesaling, you have to find not only a good deal, but an exceptional deal to be able to wholesale it. There has to be enough profit margin for not one but TWO investors. One exception is if you are in an extremely hot market, where your “wholesale” buyer may be an end user (someone who intends to live there) instead of an investor.
DON’T spend time and money creating an LLC or hiring an attorney until you actually have something under contract that you want to purchase. Too many new investors spend thousands of dollars and countless hours setting up a business that never makes a purchase or sale. Your time and money are better spent looking at leads and building your network.
Texas real estate contracts aren’t terribly complicated. See the linked post for more details. You shouldn’t need an attorney. If you have concerns, you can probably pay a real estate agent or broker a small fee (maybe even just lunch and a promise to refer future business) to walk you through it.
You probably don’t need any insurance for wholesaling real estate either. If you have a high net worth, you should consider a personal umbrella policy, but other than that you shouldn’t need any other insurance until you actually purchase a property or hire staff.
You don’t have to explain real estate wholesaling to the seller. If you plan to wholesale the property, we recommend adding “and/or assigns” to the buyer name on the contract to be absolutely clear. If the seller asks why, say you want the ability to change the buyer’s name to an(other) entity or to one of your partners at closing. Most sellers won’t question it, but if they do, the simplest explanation is that your wholesale buyer is one of your partners, which is true.
DO spend time building your network. Reach out to experienced real estate investors who can answer your questions and be potential partners. If you’re in the Austin area, we’d love to help. You won’t know all the answers that motivated sellers have at first, but if you have a strong network you can get the answers you need to move the deal forward. Your mentor is probably your strongest asset, and the most likely buyer for your wholesale property.
Real estate wholesaling is both easier and harder than closing on the property yourself. It’s harder because you have to get an even better price so your buyer can make money too. That typically means looking at more leads and talking to more motivated sellers. It’s easier because you don’t have to find funding, hire contractors or do as much due diligence yourself. Wholesalers collect their profit very quickly – often within days of signing the contract – and don’t have to deal with typical buyer demands, delays and financing hurdles.
Once you get a property under contract, if you think hard money might be a fit, we’re your go-to hard money lender for wholesaling investment properties in Austin, Houston, and San Antonio. We offer short term hard money loans for wholesalers in Texas. Contact us for details.