Flipping Houses as a Wholesaler

Real estate investors can approach a basic flipping houses strategy in one of two ways: 1) repair and sell to owner-occupant or hold and rent or 2) sell to other investors at wholesale.

The first approach consist of buying foreclosed homes or other cheap houses at a deep enough discount to make repairs and still make a reasonable return on investment.

Some flippers make the necessary repairs and immediately sell the property to a retail buyers or homeowners for a nice profit within several months after buying the property.

Other investors make the basic repairs and add the property to their rental home portfolio to build monthly a monthly cash flow. They may elect to sell the property at some point in the future to cash in on accumulated appreciations.

The second approach or ”wholesale flipping” refers to the process of buying foreclosures or other properties at an even deeper discount and quickly selling the property–within a matter of hours or weeks– to another real estate investor. This investor follows the first method–make the repairs and either sell the property or rent it out to tenants.

How to Wholesale Foreclosed Properties

The wholesale flipper may not make as big a profit as he would as a retailer, but he will get a check fast and generate a nice income without all the work and effort associated with the retail flipping houses or buy-and-hold exit strategies.

Here are the steps involved in wholesale flipping houses:

  1. Buy the foreclosures, short sales or other cheap houses at a price that is comfortable for you. It depends on the middle price range for rehabs in your area. The home must be cheap enough to return the profit you seek and yet be attractive enough for your flipper investors.
  2. Do not buy in poor neighborhood or where it will be difficult to rent the homes–target solid middle-class areas.
  3. Put together precise estimates for repairs so that you can make accurate offers. Your target should be about 70 percent of the home’s market value (upon completion of the repairs) minus the cost for renovations.
  4. Make informed offers that will enable you to make a profit and ensures the real estate investor you sell to will also have room for profit.
  5. You should have a list of  “ready and able” rehabbers who have proven source of cash or credit line to avoid delays and a lot of red tape when selling these homes. Make sure that you collect a sizable earnest money deposit upfront before you sign off on a contract.
  6. Try to close the deal within 2 to 3 weeks after you obtain control of the property. The key to cash flow and profits is quantity and speed.

Conclusion

This is why it is important that you put together a list of buyers who have the cash. When building your list, find out specifically what types of properties your investors are looking for—condos, single family homes or townhouses as well as the price range they are looking to buy. You will find it easier to focus on single family homes to avoid homeowner association issues.

Foreclosed homes are not the only source of inventory for investor interested in the wholesale flipping houses strategy. You can also approach For Sale by Owners (FSBO) and the “We Buy Houses” advertising method of securing inventory.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>