Ever hear the term “there is more than one way to skin a cat.” Well, it holds true in business and real estate so as long as you are not trying to skin this cat let me share something with you about reverse wholesaling.
It seems to be the newest buzz word in real estate investing. Here’s the kicker, it’s the same thing as regular wholesaling, they just put emphasis on the order you do things.
I like to call it being prepared. Can we start are own buzzword? Prepared Wholesaling – boom, done!
What is wholesaling, reverse or regular
Wholesaling a property is essentially when you get it under contract only to assign the contract to a buyer, usually at a small premium so you earn a buck for your time and efforts.
Let’s say I contact John Doe and ask him if you would be interested in selling his house, which is in need of updating and some work. I get it under contract for 150K. We agree and sign a contract for that price and I ensure the ability to assign is written in the contract (most times its a check box in standard state contracts).
I know that I can sell this house at 160K to a flipper because after it’s fixed up it’ll be worth atleast 250K.
So I take it to my “buyers list” and offer it for 160K and assign the contract to them, thus making an easy 10K (and no it’s really not that easy)
There is also the option of doing a double close if you cannot assign, but that is a deeper dive than this post’s intent.
So where is the reverse magic?
1.) Find your buyers
Basically, when it comes to reverse wholesaling the goal is to first line up your buyers (a.k.a. – create your buyers list) and then “take their orders” for the type of properties they are looking for.
Then you hunt for properties that fit the bill.
This does make sense, you should definitely build a buyers list as a wholesaler. Knowing what your buyers prefer can’t hurt either. However, speaking as an investor myself – if you find a good deal for me, my property criteria is pretty freaking wide open.
I always like to say, when it comes to good real estate deals “if you find it, the buyers will come.”
2. ) Line up financing
Again, this is something you should be doing as a wholesaler if you plan to be successful. If you are assigning contracts then financing may not even be needed.
There are plenty of situations where it is though, sometimes to just get under contract maybe the seller wants to see proof of funds. If you don’t have the cash to show yourself then you should have atleast a bridge loan or hard money to provide that short time financing.
This is something to have sorted out before you actually need it, so when you do it’s already been approved.
3.) Get properties under contract
Last, you find those properties that your buyers desire and get the under contract.
There’s the…..err, magic.
Victory Loves Preparation
I’ve always loved that quote and honestly, that’s all reverse wholesaling really is – Prepared Wholesaling.
So for those of you wholesaling out there – be prepared and keep grinding. Finding deals is not easy, if it were everyone would be doing it.
I’m gonna stick to my buy and hold rentals and let the wholesalers find the deals for me to rehab and rent.
Be sure to run the numbers through the property calculator so you can show your buyers, like me, that the property will turn a profit if bought.