Every successful house flipper has a proven strategy they generally stick with -- like their recipe for success. The house flipper's goal is to make as much profit as possible while doing a business they're good at and often enjoy. Some house flippers do this all on their own, and some employ help. Wholesalers are one vehicle flippers use to help with their business. Find out whether you might want to work with one yourself.
The wholesale business
The way wholesalers stay in business is to sell contracts they negotiate with sellers to end buyers (you). Although people buying property to use as their primary residence could and sometimes do use a wholesaler, real estate investors such as house flippers and landlords make up the bulk of a wholesaler's clientele. Since the wholesale business is alive and well, lots of house flippers must use the services.
Steps to a house flip
There are many moving parts to the house flipping business, including:
- Figuring how much can be spent on a property to make a profit (acquisition and renovations).
- Choosing a good market.
- Using a buyer's real estate agent OR sending out direct mailings and driving around (driving for dollars) to find properties.
- Analyzing the deal.
- Making an offer.
- Arranging financing.
- Getting the property inspected.
- Closing on the property.
- Working with contractors.
- Managing the rehab.
- Paying bills such as utilities, supplies, and contractors.
- Making a punch list to ensure your contractors did what they were supposed to do.
- Selling the property. This involves staging, listing, and considering offers.
- Negotiating the sale.
- Closing on the sale.
That's quite a list. If you like every aspect of flipping, though, and have a system down for getting the job done while making a profit, you don't necessarily need to work with a wholesaler. But if you haven't crunched the numbers to find out, you might be surprised to learn you might be able to make more money by using one.
What a wholesaler can take off your plate
Referring to the above list, if you use a wholesaler, you can remove the first six items. That should be an instant relief to you and frees you up to concentrate on working only on the flip, not acquiring the flip, too. Of course, you'll pay a wholesaler for those six services, and that's where crunching the numbers comes in.
Wholesalers typically don't perform this service for less than $5,000, and they often make significantly more than that. But they might be able to get you a property for less than what you could negotiate, meaning you might save money by using a wholesaler. Plus, the time they save you in acquiring properties to flip is worth something too -- time is money, after all.
How to work with a wholesaler
There are a couple of ways to work with a wholesaler. You might have someone you know who will work for you. You can let that person know the type of property you want, your price range, and any other specific information of importance to you. They can then get a property for you. This is called "reverse wholesaling."
Otherwise, you can wait for a wholesaler to contact you about a deal. Wholesalers typically have a list of potential buyers, and when they acquire a property, they let investors know. You can get in the game by joining online forums for investors, searching for deals on Facebook (NASDAQ: FB) Marketplace or Craigslist, or joining a local real estate association or investment group and getting the word out that you're interested in buying properties to flip.
The Millionacres bottom line
If you love to find properties to flip and are a skilled negotiator, you might choose not to use a wholesaler. But if acquiring properties is what you like least about the house flipping business, consider using a wholesaler, who will take that huge task off your plate and might even save you money on deals.