How to Legally Wholesale Real Estate

You might’ve heard that wholesaling real estate is a great way to enter the world of property investment without much (or any!) risk. While this is true to a certain extent, it’s important to a) understand the process, b) accept that every type of investing comes with some kind of risk, and c) that it’s done in a wholly legal manner.

Getting Your Head Around the Wholesale Real Estate Process

• What is wholesaling?
• How to wholesale real estate
• What would make a wholesale real estate deal illegal?

What is wholesaling?

In its most simple terms, wholesaling is the process of finding cheap property, entering into a contract with the seller for a small deposit, then finding a buyer who wants the house.

This involves entering into a legal contract, known as a purchase and sale agreement. This provides you with the right to find a buyer within a specified amount of time and how much you will sell the property for. In most cases, wholesale real estate opportunities are those that are in a sub-standard state (commonly known as a fixer-upper). You might also find opportunities with properties that have been earmarked for foreclosure. 

It’s important to know that a wholesale real estate contract doesn’t buy you the property. Instead, it gives you the right to buy it and you then sell this right to someone else and make a profit when you do.

Your fee for successfully wholesaling a property is usually paid in two tranches. The first is when the contract is assigned and the second is when the sale is closed.

How to wholesale real estate

If entering into a wholesale real estate contract interests you, then you should be aware that it best suits those who have (or are prepared to work to get) an extensive network. To make a quick profit, you need multiple leads in order to generate buyers/investors to bring you a profit.

The process is actually pretty simple.

1. Secure your finances. This could be cash, liquidating any assets, or a real estate loan.
2. Understand the market in your chosen area.
3. Get that all-important list of potential investors/purchasers.
4. Find a suitable property.
5. Sell the contract, take your profit, and move on to the next deal.

What would make a wholesale real estate deal illegal?

Becoming a real estate wholesaler is a legitimate business venture. In most cases, you don’t need a license to do so (although do check state regulations before you start). However, there are some scenarios that would mean you’re breaking the law.

The most common is to approach potential purchasers about a specific property before you’ve signed a purchase and sale agreement. You must also make it very clear that you’re not selling the property itself—what you’re selling is the right to purchase the property.

The most important part of staying on the right side of the law as a real estate wholesaler is the wording of your paperwork and contracts. This is where it’s imperative to take professional legal advice, as the wrong words have been many a potential wholesaler’s downfall.

It’s well worth the time and effort it takes to get this right. Then, with a little luck and a following wind, you can tread in the same happy footsteps as the thousands of people who’re quietly amassing their fortunes in the lucrative world of wholesale real estate.

Ready to Explore Wholesale Real Estate Financing Options? Contact BRRRR Loans Today

BRRR Loans is a premier lender for those looking to start or increase their real estate portfolio. Whether you’re looking to wholesale real estate, fix & flip, need a DSCR loan, commercial loan, bridging loan, or anything in between, we’re the go-to lender for savvy real estate investors.

We offer fast, simple, straightforward loans to people in a variety of circumstances. Whatever your financial situation, we’ve probably got a solution that’ll work for you.

Browse our range of products at https://www.brrrr.com and get in touch today for a confidential discussion.