Wholesaling or flipping real estate should be the buzz-word of investing in real estate this year. With the number of distressed and foreclosed properties climbing through the roof, small real estate investors have plenty of opportunities to make quick profit in the current market. And the opportunities for money making are bounded only by the investor’s motivation and willingness to work hard in order to find the right properties and to close the deals with prospective buyers.
Given that wholesaling houses does not require putting money down or taking property ownership, risks about losing money in this business venture are almost none. All that needs to be done is to locate the property, put the property under contract with a contingency, and then assign the contract to another buyer who will close on the property on behalf of the wholesaler. If there are no buyers to close the contract, contingency is exercised and the wholesaler walks away from the property. No deal, no profit—but also, no (or very limited) cost.
Now, identifying the right property may be a daunting task for the non-experienced. However, there are several tasks that can be done in order to have the properties located:
– Browsing multiple listing services to spot homes in the pre-foreclosure process or those in foreclosure.
– Using intuition and market information that point to areas that have experienced large increases in unemployment. This is likely to suggest that many properties in those neighborhoods have seen an increase in foreclosure activity.
– Driving around to locate the properties or assigning this task to someone who will do it for a small fee is what should be done once the areas with high concentration of distressed properties are identified. Even though the “bird dogs” or “property scouts” will do the scouting job, the person who will flip the property should still inspect the houses personally in order to find the most promising leads.
– Using marketing materials, such as signs, letters, or fliers can also be useful. Signs at strategic points in neighborhoods often attract the attention of sellers. However, it is necessary to check whether there are any restrictions on sign postings in order to avoid being fined.
While many investors are reluctant to look for properties in certain local communities that traditionally have a bad reputation, real opportunities may exist right there. Wholesaling does not involve investment of personal money—it is simply an intermediation between a seller and a buyer. Therefore, no property with a sales potential should be left behind. Run-down and discounted properties in many distressed communities may offer a potential for sizable returns. Those properties may fare really well in the current market in which the rising number of families is lured by high affordability, historically low interest rates, and tax credit for first-time buyers into a once-in-a-lifetime opportunity to attain homeownership.
The driving motto behind the wholesaling business should therefore center on the premise that all properties, no matter in how bad shape or in what local market, will find a suitable buyer for a suitably low price. After all, flipping properties is a business in which high profitability depends on high turnover. Thus, no matter where a lead may be located, each lead may count toward realizing a fair profit at minimal or nonexistent financial cost.