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What is wholesaling? In short wholesaling is selling to a reseller, not an end user. So wholesaling real estate means that you are selling the property to someone else who will be selling it to the end user. Wholesaling can be done with deals for all cash, subject-to (sub2) or with financing.
Let’s look at some examples.
We went out and put a nice 4 bedroom home under contract to buy it subject to the existing loans with no money coming to the seller at closing. House is worth $230k on a bad day, existing loan balance is $202k. We marketed it as take over payments deal for only $6k plus closing costs, which makes purchase price $208k and leaves $22k in equity for whoever buys it. So you need $6,000 to get it and you make $22,000 profit at the closing table. That makes 366% return on investment (ROI) on this deal.
All three parties benefit in this situation. Obviously we benefited by 6k, the seller benefited, since they got rid of the house they did not want or can afford to keep and the buyer benefited by purchasing 22k of equity with 6k.
On one hand wholesaling is the great way to make a quick couple thousand, without taking possession of the property. All you need to do is to market to attract sellers, prescreen sellers, go out construct and present offers, negotiate, sign the contract and do the due diligence. Once you have the contract signed with the seller you must market to attract buyers, show them the property, etc.
On the other hand wholesaling is the great way to buy properties. You do not have to do any of the above! All you have to do is bring 6k to the closing and you own property without signing for debt or borrowing hard money and you made 22k. This is a great way to buy your rental properties, since now the lending industry is in big turmoil and it is almost impossible to get 100% financing for investment loans. Think about is, on the home worth 230k the bank will ask you to put down at least 10% which is 29k. You can buy 4-5 subject to wholesales with that kind of money.
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