Buy Wholesale Flip
Advantages Of Wholesaling
There are many advantages to flipping wholesale especially if you are just getting started in real estate investing and have limited funds and/or credit.
As we discussed earlier, when flipping houses you do not have to come up with funds to purchase the property because the funds will come from the investor/buyer you flip to.
The most money you need is for binder deposits & you won’t be getting any new loans so you don’t need credit. Also, because the only money you will be putting up is for binder deposits, you have very little at risk.
You won’t be owning the property for more than a few minutes at the closing table and you’ll be selling the properties in “as-is” condition which means you won’t be dealing with contractors or dealing with tenants.
Nor will you have to deal with getting buyers qualified for financing at banks because most of the investors you will be dealing with will either be paying cash or getting the funds from their partners or hard money lenders.
You also don’t need good negotiating skills when wholesaling or retailing houses because you will almost always be offering cash.
Therefore, the only thing that really needs to be discussed is the price and much of the time you’ll be dealing through real estate agents which means you won’t be talking to the seller anyway.
Even then, you will know what you are able to pay, so you still won’t have to haggle about prices.
You will simply put your offer in writing and let the seller decide.
Either the seller is willing to take your price or they aren’t.
So, the benefits of flipping wholesale are that it …
- requires very little money,
- you get instant profits that can be very large,
- you do little or no repairs, and
- you are dealing mostly with investors who pay cash so you don’t have to deal with qualifying homebuyers.
It is no wonder that flipping is the number one choice for getting started among beginners, but let’s not forget that there are a few drawbacks to flipping.
Disadvantages Of Wholesaling
The drawbacks are that you will be buying properties at 50 to 60 percent of value. Which means that you are going to be dealing in houses that tend to be very ugly and that need extensive repair work most of the time.
- The hardest part of wholesaling is finding the properties because you are limited to houses that can be bought well below the after repaired value. The seller of the property must be very motivated and willing to take a low cash offer.
- As a result, the number of houses that can be bought below market enough to make a profit and still leave room for another investor, can be somewhat limited. However, a lot depends on your market place and your ability to dig up deals.
- If you are dealing in higher priced areas, it can be harder for buyers to come up with larger sums of cash and if you can’t flip a property to another investor before closing, you’ll have to corne up with all cash or lose the deal and your security deposit. However, in the higher priced areas you can make larger paychecks per deal.
- You also only get one payday and that is when you flip the property, so there is no residual income.
- Finally, if you focus solely on flipping, you are missing out on about 75% of the deals that are out there in the other three Deal Sections.
Is “Flipping” Illegal?
You mayor may not have heard that flipping is illegal, which is not true. Simply put, flipping a house is only illegal if fraud is involved.
That only makes sense, because the whole point is that anything fraudulent is illegal.
Fraudulent flipping is usually done by appraisals being inflated and what is called “straw buyers” who purchase the property at an inflated price and then get a kick back from the seller after closing.
The buyer never has the intent of making any mortgage payments and lets the property go into foreclosure. The buyer’s job is simply to qualify for the new inflated loan. Sometimes people also falsify down payments and even title companies have been known to falsify title reports as to who currently owns the property.
In other words, fraud is illegal not flipping a property.
There is no law against buying a property at a good price and then selling it for what it is worth and making some money on your investment, even if you buy and sell on the same day.
It’s the same as if you had bought and sold a car on the same day.
