How To Wholesale Houses For A Profit

By Author: Simon Macharia
Total Articles: 7
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Flipping houses is most regularly used to refer to buying and selling houses. It really means wholesaling houses even though most people take it to mean buying, fixing and selling houses. Wholesaling houses involves buying houses low, restoring them to marketable condition then selling them at a higher price for a profit.

We will concentrate on this meaning in this article.

Wholesaling houses is the quickest method to produce cash in real estate investing. It also needs the least amount of cash invested in the deal. Occasionally you can wholesale houses without using your own cash.

So what does it involve?

1) Identify distressed cheap houses
Motivated sellers form the best source of cheap houses. People in trouble and who own houses form the best source of cheap houses. These are people with inherited property, bad tenants, liens on their properties, divorcing and so on.

You target them with mail pieces such as letters or post cards. In my business, I send them 2 mail pieces a month apart. Each letter or post card prominently displays my website URL as the main call to action. My phone ...
... number is not as prominent. This way, they go to my real estate investor website rather than call me; my website pre-sells for me.

Chances are the transactions I get are fully pre-screened and pre-negotiated so I need just a few minutes to tell whether it is a deal or not - then make an offer or move on.

Some people wholesale properties that have been foreclosed, but this is not the subject of this article.

2) Sign a contract to buy
As soon as you have identified a good deal whose figures look desirable, you must put it into contract. In each state, there are contracts regularly used by real estate agents, or you can get contracts that can be used countrywide. I prefer to use contracts mandated by our state real estate commission because they are more popular and most people, including title companies and sellers are more comfortable with them.

3) Begin title work.
I generally take my contracts to my title company for title work to begin. You must ensure you will clear all liens on the house before you buy and sell. This is the work of the title company. As an investor, you do not need to get too concerned about the technicalities involved. I prefer to let professionals do their work.

4) Identify buyer with cash
I prefer dealing with real cash in the bank. Cash transactions have few limitations and are better. Most real estate investors buying houses may have sold a house or have a line of credit for cash purchases.

Alternatively they have private money lenders or get cash from hard money lenders.

Avoid buyers looking for traditional mortgages. Most loan companies will not lend on houses that need renovation and you could have seasoning issues, meaning you must hold the property for 6 months to 1 year before you can sell it.

5) Sign a contract to sell
The type of contract you sign depends on the amount of money in the deal. You must ensure to leave enough profit for your real estate investor buyer. After all they will fix up the house.

If I stand to make less than $10,000 I prefer to do a contract assignment.

In contract assignment, you simply assign your contract to your real estate investor buyer. You assign the contract; you do not sell or assign the house. This is perfectly legal all over the country and you do not need a license for it. This contract is usually as little as 2 to 3 paragraphs.

In this case, the real estate investor buyer you wholesale the deal to closes the transaction, not you. You collect an assignment fee once the deal is closed.

If I am making more than $10,00 or my profits are near or the same as the real estate investor I sell to, then I prefer to do a simultaneous closing, also called double closing. This involves buying the house from my motivated seller, then selling it to my real estate investor buyer.

In a double closing, you buy and sell on the same table, so it involves 2 transactions. In this cash as the property changes hands, you own it for a few minutes before you sell it. Of course, you have to incur closing costs that you do not incur in contract assignment.

He contract for simultaneous closing id just like the one to buy with a higher selling price and more favorable terms for you.

In either case, you must collect earnest money before you sign the contract. Always make sure they lose their earnest money if they do not close on the transaction. You must make sure the contract expires before your contract to buy and the property reverts back to you.

6) Collect your cash
You must make ensure follow the transaction process until the deal is closed. You collect your check from the title company when the transaction is completed. It is therefore in your best interest to make sure you close any loose ends and make sure the deal does not fall between your fingers.

How must money must you have to flip houses?
When you sign your contract with the buyer, you may have to put up earnest money, usually between $100 to $500. There is no contract without earnest money. When I sign the contract to sell, I collect an earnest money check which is deposited with the title company.

In simultaneous closing, the first transaction can be closed with cash from your investor buyer so you may not need to use your own money. If your buyer source of funds does not allow you to use his money to close the first transaction, then you might need to get transactional funding to a few points to close the first transaction before you can sell.

Ultimately, the checks you collect from wholesaling houses will be easy and fast. You can close a few houses a month.

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