6 Secrets to Cash Flow in Wholesale Real Estate

Wholesale Real Estate is probably the easiest but least understood method of generating cash flow. The general challenge in understanding it has to do with definition.

I like to think of wholesale as an umbrella that covers various methods of property acquisition. Now, the purists may disagree with me on this, but this is why I’m saying it. Wholesale, in real estate, means the same as in any other market, you buy well below market value and often get bigger discounts buying in bulk or in bulk. If you think about the retail industry, it’s a little easier to see: your favorite gift shop buys its products from a wholesaler who buys from the manufacturer for a low price because he’s stocking your gift shop and 10 other stores too: the wholesaler You get a nice discount but you clinch it to sell to the store owner, who clinches it to sell to you. Now think about your Costco and Sam’s Club stores: you go there to take advantage of BULK discounts; You may not need 75 rolls of paper towels in a large package, but the unit price is so much better than the regular grocery store, you just can’t help it!

The same goes for wholesale real estate: it’s simply buying below market price at lower prices per unit, and then marking up to sell to a retailer or end user.

So how can you buy wholesale real estate?

Bank REOs Listed by Realtors

Pre-Foreclosure/Short Sale Properties Listed by Realtors

· Directly from distressed property owners: Landlords, Landlords, Rehabbers

Massive REO purchases from the banks themselves or other institutions

From a wholesaler who has already done the work for you in one or more of the above methods and can now sell to you for a small margin but still well below market value.

Now let’s take a look at cash flow. The phrase “Cash is King” couldn’t be more true than in today’s environment: everyone, and I mean EVERYONE, is looking for cash. Here are some of the ways cash rules in real estate today:

Institutional loans, especially for investors, are almost non-existent

Hard money lenders want more and more “skin in the game” and the rates are higher, sometimes up to 20%

Many investors are selling inventory just to raise cash

Other investors are pooling cash to buy inventory

Banks and private sellers alike love to see all cash offers.

Foreclosures force homeowners to become renters, increasing both the number of discounted properties for sale and the number of people who need to pay rent to investors who can buy, hold, and rent for income.

New investors, strapped for cash, need ways to generate cash flow, but can’t yet buy rental properties for themselves

MORALEJA – THE ONE WHO HAS CASH WINS!

**Quick note here: I’m talking about residential property here, however many of the same concepts can be transferred to commercial investment as well.

So… what are the SECRETS of Cash Flow in Wholesale Real Estate?

1. Start with the end in mind: Know your exit strategy, before looking for a great deal, what are you able to do with it when you find it? Can you buy it yourself? If you can buy him, will you be able to do any rehab he needs? If you can do the rehab can you rent it and if you do will you own or get a property management company? Do you know of any property management companies? If you are going to sell it, who will buy it? How will you sell it? Do you need an agent? Do you know any agent that works with investors? How much can you mark it? What will you do if you don’t sell it or can’t sell it? These are just some of the questions you’d like to be able to answer before you leave. The answers you get will help determine which acquisition and disposition strategies you will employ.

2. Find Buyers FIRST – No matter what strategy you use to buy a property or even what you think you will do with a property, you need to know if you can get rid of your property. want to buy it! Find out where and what other investors in your market are buying, how much they are paying and what kind of discounts they want; This way, you won’t waste your own time, money, and effort negotiating deals that no one else wants!

3. Trade wisely: Know your market. This works hand in hand with number two above, but it goes a bit deeper. If you’re investing locally or in other states, you still need to know where the deals are being bought, but you should also try to get information on the market itself. Which zip codes are desirable, which are not. What is the current market average? How many foreclosures and vacancies are there in the area, what is the economic climate? Are people working or losing jobs? Also, know what the property is worth in its current state of repair and be prepared to negotiate for the lowest deal you can get.

4. Let the next kid do rehab: TV shows like Flip This House have made the idea of ​​rehab seem like the thing to do. Even with all the challenges those guys have each episode, it never ceases to amaze me how many new investors want to rehab and sell for a profit, even in this market. Unless you have a lot of money, you can act as your own general contractor, enjoy HUGE amounts of stress; my advice is let the next guy rehab. bigger payday while he also bears all the risk. He Go get him 10 more deals like that!

5. Leverage Your Relationships – You may be surprised at who you already know or who they know. 90 percent of success in real estate investing comes from your set of connections, and cash flow depends on that set of connections to be sure. Stand in any crowd long enough and someone will say “Man! If I had the funds, I’d buy as much real estate as possible right now.” If you are or know that person, then use your relationships to solve that dilemma. Raising money is not an easy task and most of us are concerned about how to approach it because we don’t want to seem like we need money. But if you go in thinking that, you’ll sound like that. However, if you do it with a strategy where you’re going to be adept at finding and selling great deals for profit and will do the job if a couple of people can chip in…well, then you have a value proposition that many people are looking for right now. NOTE: Creating a private money program like this requires due diligence on your part, as well as, but not limited to, professional guidance from attorneys and CPAs.

6. CONTROL vs. BUY – This is perhaps the most important point to understand when it comes to cash flow in real estate. The absolute KEY to creating cash without USING cash is CONTROL. Did you know that a contract on a piece of property gives you something called an “equitable interest” and that you can actually SELL or ASSIGN that interest (with the owner’s permission) to another party who can then close the deal? And that you do this for a fee? And that you can do this without a real estate license (subject to state and local laws, of course). This is the core of wholesale here: holding onto the property long enough to find a buyer willing to pay more than you have under contract. Now, these aren’t usually huge spreads ($2K to $25K on average), but we’re talking about a quick, easy, highly repeatable event here, and once you complete one or two, you’ll be hooked.

So let’s review.

Wholesale means buying from the market, marking up a little, and selling for a profit. You can purchase products in a variety of ways, such as bank-owned properties, short sales, bulk convict, distressed owners, or through the wholesalers themselves.

Cash is king and today everyone and I mean everyone wants and needs cash. Loans are almost unaffordable to find, hard money is more expensive and requires more “skin in the game” than before, some investors are selling to raise money, other investors are pooling cash to buy property, homeowners are forced by foreclosures become renters and increase the number of discount properties available to cash investors, and new cashless investors must be able to start from scratch.

The 6 Secrets to Cash Flow Through Wholesale are: Start With, Then End In Mind: Know Your Exit Strategy. Find buyers first. Trade with knowledge: know your market and know your product. Leverage your relationships – everyone wants to invest in real estate. being a problem solver, and finally, but most importantly, CONTROL vs. BUY – Even if you have SOME cash, don’t tie it to a deal, just take control and sell your equitable interest to someone with deeper pockets than you – build capital from this and you can then build income from properties you can own.