Also sometimes called bird dogging, wholesaling is a specific type of real estate transaction that requires specific considerations and know-how if it’s to be done correctly and successfully. If you know what you’re doing, you can definitely make a lot of money. If you don’t, the opposite could happen. That said, it’s important to know the ins and outs of what you’re doing before you definitively decide to get started in wholesaling. Let’s take a closer look at how to make sure you’re the one on top, as opposed to on the bottom.
Become an expert at estimating repairs
Successful real estate investors know how to tell beyond the shadow of any doubt when a deal is really a deal. This means being able to tell when a given deal is going to pay off properly for everyone involved before it starts. Start with a service like Delineator that can help you figure out what the “comps” in your subdivision are looking like. Make sure you find out what the average “days on market” (DOM) numbers are in regards to the property you’re considering, too. Always look at either the average or the lowest selling points per square foot, as opposed to the upper end of the list. The reason for this is that “real rehabbers” worth their salt are dealing with high hard money loan interest rates and will want to sell properties quickly.
Become an expert at assessing holding costs
Another important factor to understand before signing on for a project is the holding costs attached, as well as how they can affect the success of your endeavor. For example, take a property that costs you about $ 100,000 to acquire. When you add in assignment fees (maybe $ 2500) and repair costs of $ 7500 or so, you’ll probably be asking your lender for around $ 110,000 up front. If you figure that your hard money lender will be charging you interest rates upwards of 14%, then you’re looking at a property that costs you about $ 1300 for every month that you own it. This is one reason why it’s so important to understand the DOM data in regards to your property. The faster you can sell, the larger your profit is going to be.
Always enlist the help of true professionals
You can never be too careful when it comes to choosing the people that you work with. Always make sure that you’re working with bona fide “real rehabbers”, as opposed to rehabbers who may simply be looking to re-flip a house or property. You will also want to take care to get proper TREC contracts in place before you begin. The rehabber’s money lenders are sure to want to see bona fide real estate contracts before they sign on for funding, so it pays to be prepared in this way.
At the end of the day, wholesaling is far from impossible. However, it does require a little know-how and ability when it comes to assessing the market.