Wholesaling real estate is a great way for new investors to build capital and accumulate down payment money for future rehab projects. Some investors learn the very basics of wholesaling and try to jump right in, but that can be risky if you don’t understand the process completely. There a few vital steps to follow in order to ensure that the deal works in your favor. In order to complete a successful deal, you must first take the time to learn how the process works and how to avoid common wholesaling mistakes.

What are the basics?

A wholesaler is someone who puts a property under contract, and once the contract is ratified, assigns it to another investor for a higher price, also known as an assignee. The assignee legally steps into the shoes of the assignor (original buyer) and takes on all the rights and responsibilities of the underlying purchase agreement. To accomplish this, both the assignor and assignee must enter into an Assignment Agreement. In this way the assignor makes a profit, with relatively low risk involved. By wholesaling a property, you can build capital without having to put in all the time and money that a complete rehab requires.

As a wholesaler, you never actually take ownership of the property. Keep in mind that you will need to put a deposit down when you ratify the purchase agreement. However, if done correctly, you will be collecting a deposit from the Assignee to back up the funds you have in escrow. While completing a rehab may be more lucrative than wholesaling, it’s a good option if you are just starting out in the investor space.

How do I begin?

While the process might seem simple, there are several key aspects to the deal: 1) you must have the ability to find off-market deals, and 2) you absolutely must have a network of trusted buyers before you purchase the property. Many times, a new investor will get a little too eager and put a property under contract before they have a credible buyer lined up. You risk losing your deposit if you can’t ultimately find a buyer (assignee) for the property. You risk agreeing to purchase a property you may not be able to afford. Reduce your risk by negotiating the low deposit amount and always have a liquidated damages clause that protects you from further liability.

How can WCP help me wholesale?

One important aspect of wholesaling is making sure you have language in your purchase contract and assignment agreement that will protect you. For example, you must always have an assignability clause included in the purchase contract. We have helped numerous investors complete wholesale deals. We have a network of completely vetted and trusted buyers that we can connect you with. This allows you to immediately get started without having to build a contract list from scratch. The majority of off-market deals require a quick turnaround – don’t get caught trying to find your buyers after you’ve already put your deposit down. Great DC Deals is another source you can use to help sell your wholesale property.

Reach out to us today if you have any questions or would like to learn more about wholesaling a property.