Wholesale real estate is property that investors seek to purchase under market value. Wholesaling real estate is a popular way make money from real estate without having to own property. In a typical wholesale transaction called an assignment, a wholesaler will seek out a seller through outbound marketing and put their house under contract.
Then, the wholesaler will market the deal to other investors who would like to purchase the property. Next, the wholesaler and investor will sign a new “assignment contract”. The new investor will usually agree to pay an “assignment fee” to the wholesaler. This assignment fee is the difference between the price of the original contract and the assignment contract.
Calculating a Wholesale Assignment Fee
For example: John, our wholesaler, puts a deal under contract at 123 Main St. for $225,000. John knows that if he markets this to other investors, they would likely be willing to pay $240,000. John now begins to market his contract for 123 Main St. He finds a buyer to assign the contract to for $240,000, making John a profit of $15,000 ($240,000 – $225,000) for his work in finding the deal. So, if John does a couple of deals per month like this, his wholesale real estate business will be quite profitable.
Wholesale real estate deals can come in many forms such as:
- Single Family Homes
- Land/Vacant Lots
- Apartment Buildings
- Commercial Real Estate
- Mobile Homes or Storage Facilities
Real estate wholesalers can make a lot of money if they have the right systems in place to locate deals and market their deals. Real estate investors spend most of their time managing current projects, as a result, wholesalers that can consistently find good deals will always be in high demand. There is a lot of work and marketing that goes into finding deals that can be wholesaled. Therefore, busy investors can utilize these wholesale deals to grow their businesses.
In conclusion, wholesale real estate is often sought after by investors and can be profitable for both parties in the transaction.