Wholesale Real Estate Flipping - What is it and should you be looking into it?

There are a lot of ways to make money in real estate, investing is just one of them. But, did you know there are more self-made millionaires in real estate than any other industry? The most common type of real estate investing is the "buy and hold" investing tactic. Being a landlord is what most people think of when investing in cash flow income and real estate. The idea is to have a monthly cash flow over time and gain equity in the property while making money on it as you go.

While a lot of markets across the country are gaining equity rapidly, some markets are still stalling. And still others, it might be difficult to find tenants with a secure income in order to provide you that cash flow each month. This is why Wholesale Flipping has become popular in the last couple of decades. Wholesale real estate requires a small amount of capital to get started and can actually generate profits rather quickly.

Wholesale flipping does require more transactions but the amount of time invested can be more than owning several rental properties.

Wholesale real estate flipping is very similar to product flipping as well. You wholesale the property to someone is going to make improvements and then eventually sell the property via retail. If you sell it to someone who is a buy-and-hold investor, they can keep it for several years and rented out themselves for cash flow. This is the wholesale flipping process in its most basic form. The wholesale investor will make an offer on the property and then assign that contract to the end buyer, will either buy-and-hold or fix and flip.

The wholesale investor doesn't have to actually invest any of their own money in reselling the property or fixing it up. The only capital is to put up a deposit, which they will get back with the assignment of the property to the end buyer.

The only sticky part of this situation is that both the buyer and seller will know the profits that the investor is making. If the profit is somewhat significant, the signing of the contract may not work for the end buyer.

Some of the most common wholesale flipping tactics are simultaneous closings. This is not a simple as assigning a contract. A simultaneous closing is where the wholesale investor will be the buyer and seller within the transaction of buying and selling the property, usually on the same day. This is usually within a short period of time as well. If a wholesaler buys the property they will also have to come up with the money to purchase it even though their intention is to sell the same day they bought it as to not incur any holding costs.

Even if the wholesale investor has to hold onto the property for a short period of time, they may not profit as much and that could be more resell restrictions imposed by the lender if the property was a short sale or bank owned property. Lenders can start restricting the resell of these types of properties because they know that wholesale investors are making profits by reselling right after a purchase.

In reality, if you have the funds to purchase a wholesale property or even flip the property same day and hold on to the property for monthly cash flow income, the outcome could be very lucrative.

If you are interested in learning more about wholesale flipping or any type of real estate investments throughout Minot North Dakota give us a call. Specifically what we deal with on a daily basis and can help answer any questions you might have and help you feel comfortable with whatever type of real estate investing you'd like to pursue.[Content inspired by BiggerPockets]

Feel free to leave a comment below or contact us for more insight.

Comments

Orlando Realtor says

We have experienced a lot of this in our area. Lots of investors are finding unique ways to make a profit, not just once, or monthly, but regularly by doing this! It's a great tactic. Lenders seem a little leary, but it's all legit and legal and a great path for real estate investors.