- Real Estate
Wholesaling Real Estate With Assigned Contracts
Why learn about wholesaling and assigning real eastate contracts?
Getting into real estate investing seems impossible to people who don't have great credit and large amounts of cash to invest. Since the downturn, banks are stricter than ever when it comes to lending money to beginning investors. If you want to learn how to buy, and sell homes, with out a cash investment, with no credit, and without ever needing to qualify for a loan, wholesaling real estate is for you.
If you know how to find good deals, and know how to find buyers for your real estate, the power of wholesaling and assigned contracts will earn you the capital needed to become true real estate investor. Even established can benefit from wholesaling and assigning contracts when the find a deal that they do not have the time to fully commit to.
Wholesaling Real Easte
Wholesaling in simple terms means selling to someone other than the final purchaser. A wholesaler is a middle man in the sales process. Your job as a wholesaler is to find the properties a real estate investors is looking for using the same techniques that they would employ. This task becomes a little tougher because you must find the deal that have enough room for your buyer to make money while leaving enough profit for you.
When evaluating the potential of a deal you need to look at the ARV. This is the appraised resale value of the home after all repairs are made. After subtracting all transaction and repair cost's, if there is at least 40% profit to be made it is a good deal. This leaves at least 10% for you and makes it attractive to investors with 30% profit left in the deal for them. Making any less is not worth your time or theirs.
Once you are able to negotiate a profitable deal with a seller you place it under contract just as if you were planning to purchase the home for yourself. There is only one extra step that is necessary and that is to give yourself the right to assign the contract.
Assigning Your Real Estate Contracts
To make a contract assignable, the only thing is to write your name as "Your Name, and/or Assigns." By adding the and/or assigns clause, your contract is now assignable. It is good habit to always sign your contracts this way, even if you don't plan to wholesale a particular property, because of the flexibility it affords you.
Now that your contract is assignable you have the right to sell your contract to a real estate investor. You will then make a separate assignment contract with the buyer which assigns them the rights to the original contract. The contract will state how much is due to you upon signing of the assignment contract. You are now legally free from any obligation of buying the house and any closing costs involved. Wholesaling becomes a win for everyone involved.The seller unloads a property they no longer want, the buyer acquires a property that they can profit from, and you gain a commission for bringing them together.
YouTube Video-Assigning Contracts-How to Wholesale
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How the Real Estate Wholesaling Process Works
Being a wholesaler involves many of the skills that it takes to be a real estate investor. You need to find motivated sellers with stressed properties, you need to be able to evaluate the values of properties, and you need to locate buyers of your properties. What it eliminates is the need for financing, expense and downtime of repairs, and the need to manage properties.
The first step in the process is to find a motivated seller. As mentioned previously, you need to find deals that can be repaired and purchased for 60% of their ARV. Often times to make these profits the home is going to need work but you want to avoid any major projects that will tie up vast amounts of time or resources.
After you have negotiatied a deal that fits your criteria, put the house under contract with your new name, the one that ends in "and/or assigns." You will need to make a small deposit. Negotiate to keep this low. This will be your one out of pocket expense other than marketing and consulting.
Now you have a contract that you can market, the next step is finding a buyer. It is important to build up a network of buyers before ever having a house under contract in order to make this part of the process go fast enough to not have the contract fall through. Try to have at least 100 contacts who you know are looking for investment properties. Learn what they are looking for so you can give them what you are looking for.
Negotiate a deal that hopefully leaves you at least 10% of the ARV, but never less than $5,000. The amount of work you have done is always worth at least 5k. Then have a contract written up and assigning the contract to the buyer you have lined up. For a house worth 100k, should have made you 10k in the process. You have provided a valuable service to both buyers and sellers by bringing them together.
This is not a get rich sceam. This is a viable way to get started in real estate investing without need of financing. It takes a lot of hard work and must be treated like a serious business to have any degree of success. If you keep at it you will accumulate the capitol needed to make long term real estate investments. Other people find making the deal their favorite part of the process and continue to focus on wholesaling as their main income.