Real Estate Wholesaling Calculator

Real Estate Wholesaling Calculator is used to calculate the maximum allowable offer a real estate wholesaler should make on any property.

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Wholesaling Calculator
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Wholesaler Maximum Allowable Offer (MAO)

What is real estate wholesaling?

Real estate wholesaling is an investing strategy that involves buying and selling properties as a middleman using other people's money. The wholesaler is someone who finds distressed properties, enters a purchase contract from a home seller, and then turns around to find a buyer to sell the property at a higher price. The price difference is the wholesaling fee, usually between 5% to 10%. The wholesaler only has to make a small amount of the earnest money to enter a purchase contract which includes the selling price and the time it will take to find a buyer.

How does wholesale real estate work?

Real estate wholesale is a good strategy for investors who don't have much cash to buy a property themselves or do not wish to tie up their cash from buying and holding a property. What the wholesalers do is find properties that are undervalued and often in distressed conditions. The owners of these properties are usually highly motivated to sell and do not wish to work with a real estate agent. These sellers don't want to deal with repairs and home improvements, they just want to get rid of the house fast.

Real estate wholesaling example

For example, a wholesaler finds a house and enters a contract with an offer to buy a property at $150,000. He makes an earnings deposit for the contract and finds a cash buyer who is willing to buy the property for $170,000. The buyer could be a flip-and-fix investor looking for houses to renovate and sell for profit. The real estate wholesaler would pocket the $20,000 profit minus any fees without using much of his own money.

How to start wholesaling real estate with no money?

You can't do wholesaling in real estate with no money, you need to have some money to make earnest deposits or for advertising to find the sellers and buyers together. Follow the 7 steps below to start real estate wholesaling today.

1. Research

The first step in real estate wholesale is to know the local laws on real estate wholesale and how to find distressed properties that meet your wholesaling criteria.

2. Find distressed properties

Most sellers want to sell their house for the highest price possible even if that means they need to wait for a longer time. For wholesale, your job is to find sellers that want to sell as quickly as possible even at a lower price, or sellers that don't know the market prices for their properties. The home discounted price is the wholesaler's margin in this business. Here are a few tips on how to find these motivated sellers.

• Multiple listing services (MLS) - use the MLS to search for distressed properties.
  
  
• Find for sale by owner properties through the internet or look for sale by owner signs posted on the neighborhoods around your area.
  
  
• Search for homes that have been on the market for a long time.
  
  
• Find homes that have been taken off the market recently.
  
  
• Search for foreclosure properties at local auctions or on the internet.
  
  
• Direct mail or advertising on social media sites to find potential home sellers.

3. Do the math

After you've found a property that meets your wholesaling criteria, you need to do the math and see if a deal is profitable. Research the listing price in the same neighborhood as the property. Check for sold prices on similar houses and styles in that area. This will give you a sense of the fair market value of the house, a margin for error, and know your bottom line.

4. Get in touch with the seller

Find the contact information about the seller and start the negotiation process. Be upfront with the seller and explain how real estate wholesaling works. Let the sellers know the benefits of working with a wholesaler rather than selling themselves. Remember, wholesaling is legal and you shouldn't hide anything.

5. Get the property under contract

Make an offer and sign a purchase agreement with the seller at an agreed-upon price. The contract should include the right to assign the contract to another party and contingency to allow you to withdraw from the deal if there are any unexpected problems found with the house or if you cannot find a buyer before the expiration date. Have a real estate attorney draw the contract for you if you are just starting out and not sure what to do.

6. Find a cash buyer

The fastest way to close the deal is to find a cash buyer. Most conventional lenders would not lend money to finance the purchase of a broken-down property that needs lots of repairs. Even if they do, the process would take at least 30-60 days. Search your networks and your local realtors to find potential cash buyers. Ask your friends and families. Advertise online and in local newspapers to increase your chance of landing a cash buyer for the property.

7. Reassign the contract to the buyer

After you find a buyer, reassign the contract to the buyer, close the deal, and pocket the profits.

Pros and cons of real estate wholesaling

As with any other real estate investing strategy, there are benefits and downsides to real estate wholesaling, following are pros and cons.

Pros of real estate wholesaling

• Small investment - real estate wholesaling requires little investment since the strategy is using the buyer's cash. You only need to have money for earnest deposit and advertising.
  
  
• Low risks - since little money is required, it is a low-risk investment. Even if a deal doesn't work out, you lose the minimum amount of money which may not be possible with other types of investments.
  
  
• Quick profit - money can be made quickly as you are just dealing with sellers and buyers, you don't have the headaches of fixing and flipping the property.
  
  
• Scale up - since you don't have to invest much of your own money, you can find multiple properties to work with at the same time to scale up. Large profits can be made in a relatively short term.
  
  
• Fast turnaround - if you have a larger network of investors, it will be a fast turnaround which allows you to sell the house fast.

Cons of real estate wholesaling

• Takes time - it takes a lot of time to find motivated homeowners who are willing to sell their homes at a discount.
• Negotiation skills - it takes skill to convince property owners to sell their homes to you so that you can make a profit in this transaction. Remember, most sellers want their house to sell for as much money as possible.
  
  
• Large network - for wholesaling to be profitable, you may need a large network of cash buyers or know a lot of people to find potential cash buyers.
  
  
• Advertising experience - if you don't have a large network, you need to have online and offline advertising experience to find cash buyers and distressed home sellers.
  
  
• A real estate license - in some states, you may need a real estate license to do wholesaling.
  
  
• Earnest money - you need to have money to make the earnest money deposit, and you may lose it if you can't find a buyer within the agreed-upon time frame.
  
  
• Lower margin - wholesaling usually has a lower margin than fix and flip.
  
  
• Hard to find - depending on the market, it may be hard to find properties that you can wholesale for a profit. During a seller's market, the home seller may easily find a buyer themselves or with a real estate agent.

Bottom line

Real estate wholesale is a good strategy to use if you don't have much cash in hand but a lot of free time. You can use the wholesale strategy as a starting point to get into real estate. With patience and practice, you can build your own network and start making profits.

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