Introduction to Wholesaling
What exactly is wholesaling?
Wholesaling is the process of purchasing something from its original owner at a discount, then transferring it to a person or company that will package it up nice and pretty to sell to the public.
Simply put, a wholesaler is the middle-man supplier. In retail, it’s the person who buys lots of items directly from the manufacturer prior to providing them to the store where they will ultimately be sold. Because big department stores have more valuable ways to spend their time than negotiating prices directly with factories and artisans, the
wholesaler provides a necessary service to the original seller and the retailer by doing the legwork to get the goods from one to the other.
In real estate, this process is similar. Although sometimes wholesalers do buy multiple units of property as a bundle for a discount, that’s not usually the case.
There are lots of reasons why a seller may be willing to sell property at a deep discount, usually as an attempt to attract a buyer quickly. Common motivating factors of such sellers include divorce, new jobs, inheritance, entering foreclosure, and unforeseen emergencies. During these tough times, the wholesaler comes in and saves the day, handling the sale so the seller can get the cash they need!
What does a real estate wholesale deal look like? Here’s the gist of how a wholesale deal goes down:
1. FIND: You, as a wholesaler, find a property with an owner that is motivated to sell fast and cheap
2. ANALYZE: You check out the property, evaluate its potential worth and as-is worth, and come up with an offer range that is profitable for you.
3. NEGOTIATE: Now that you have the numbers on your side, you make an offer! You’ll probably have some back-and-forth with the seller for a bit, and then you’ll negotiate a deal. Put down your deposit and get a contract on the place!
4. PREPARE TO CLOSE: You have to do your due diligence, like ordering title searches, inspections, and getting insurance for your new property. These things must be done before you can close.
5. MARKET: Figure out what kind of buyers are most likely to buy the kind of property you just got, and start marketing to them. Eventually, you’ll have buyers’ lists for this, but you can still market without them.
6. SELL: Once you have all the documents in order and a buyer lined up from steps 4 and 5, you get to sell the contract for the property to your buyer! Sometimes, it’s necessary to actually own the property and not just have a contract on it, then sell it.
Reprinted Courtesy of the Central Florida Realty Investors. The author is a real estate investor, wholesaler and Realtor ® Visit www.CFRI.net From the December 2017 issue of the CFRI Newsletter.