Is wholesaling houses still a viable real estate investment strategy for 2015?
The U.S. housing market has made a remarkable rebound, with new sales records being reported in many areas. That said; does wholesaling houses still work in this rising market environment?
It’s amazing to see how many investors are not familiar with the concept of wholesaling. Subsequently, the wholesaling strategy still has doubters. Over the last couple of years, online real estate forums have seen a wide variety of individuals questioning the viability of wholesaling houses, and even if it works at all. So does it? Has it? And if it does, will it continue?
It is hard to fathom that wholesaling wouldn’t work, simply based upon the fact that there are hundreds, if not thousands, of real estate wholesaling companies and related businesses. Then there are the wholesalers that have made millions of dollars annually, and have the checks to prove it. Those that want to do their own independent research and due diligence on the matter can easily browse through public records. They will find extensive evidence of wholesaling for spreads topping as much as $100,000 a transaction.
How Wholesaling Houses Works
Even those that question wholesaling believe in far more complicated real estate investing strategies. Publicly traded REITs, real estate stocks, investing in mortgage debt and securities, and even fixing and flipping can be far more complicated.
Wholesaling real estate is about acquiring properties at attractive prices and turning around and delivering them to others for a reasonable profit. Wholesalers add value by investing time or monetary resources as well as expert knowledge in sourcing properties, and then matching them with buyers that need them at attractive prices. It’s a win-win-win. The seller is able to liquidate their holdings speedily, the wholesaler collects a reasonable check for their services, and the end buyer saves a lot of time and money in their search, and gets a great deal. This isn’t too much different to how car dealers function. Yet, nobody questions those business models, and few haven’t shopped them.
Types of Real Estate Wholesaling
There are effectively three different variations of wholesaling houses for investors today:
- Buying and Selling
Some real estate wholesalers operate in the most traditional sense of the word. They buy low, often in volume, and then take their properties to market and resell them low to others.
- Back to Back Flipping
Over the last decade, back to back wholesaling has become more common place. Wholesalers buy, close and immediately resell to a predetermined buyer for a higher price. The wholesaler adds value through their matching service.
- Wholesaling Real Estate Contracts
Flipping contracts has been a business model used in a wide variety of industries for decades. This model enables all parties to save by streamlining costs and the process. Others may call it assigning contracts. Wholesalers collect an assignment fee for their role in securing and serving up deals for the other two parties.
Why Wholesaling Isn’t For Everyone
Sadly, even though they offer an incredibly valuable service to sellers, being a real estate wholesaler doesn’t always come with the admiration it deserves. Those that know them, understand their value, and do business with them can find them one of their most valuable and appreciated business partners. However, not everyone gets it.
Why not?
As mentioned earlier, some just don’t understand wholesaling. They aren’t aware of it, or haven’t tried it. And then there are those that haven’t made it work for them because they didn’t invest in their real estate investing education before jumping in, or that have been told by others that have ulterior motives that they shouldn’t pursue it.
Wholesaling Houses in 2015
Wholesaling real estate has worked in the past, just as flipping houses and operating rental properties has. However, with all of the changes to the market, will wholesaling remain a viable option in 2015?
There is one simple answer: yes. Wholesaling should serve investors as a viable exit strategy. Home prices are heading up. Sales should see an increase as spring nears. During upward phases like this, wholesalers can see profit margins increase exponentially.
As we rolled into 2015, there was over $150 billion dollars in REOs and delinquent mortgages falling into foreclosure. Accordingly, many homeowners need help. Many might say that these are the perfect conditions for wholesaling real estate, and doing it in high volumes consistently.
