One of the most beneficial aspects of wholesaling real estate is that it gives you the potential to make a lot of money and build your real estate empire. Once you are established in your area, know the good deals from the bad ones, and have a good list of sellers and buyers, you have the tools necessary to make a profit on each deal and build on deal after deal.
Let’s look at example of how wholesaling can make you lots of money. Say you find a property that is up for sale because the homeowner is so far behind on the mortgage payments that they are facing foreclosure. They need to sell their house as quickly as possible to avoid further financial issues. Your research and experience lets you estimate that the property is worth $150,000 in good saleable condition.
In looking at the property and talking with the owner you discover he owes $50,000 on it and needs another $10,000 for moving and other expenses. You make an offer to them of $60,000 and they accept it. You estimate that the house needs $20,000 in upgrades to make it attractive to a potential buyer, who you know will pay around 60% of the market value of the house.
You offer the house to your buyer for $80,000 and they accept it. You’ve just made $20,000 on the deal. Your buyer will do the $20,000 worth of repairs on the property and sell the house for $140,000, giving him $60,000 potential profit, not calcutlation related closingcosts. So your seller gets out of the house that he can’t afford and you and your buyer make great profits.
Now your next deal may only net you $3,000 profit and the deal after that $12,000 profit. But every deal you make will get you some amount of profit. So the more deals you do the more money you make. As you gain experience in doing these deals you become more proficient in them and be able to do them in shorter amounts of time, thus increasing your earnings potential.
Your reputation is also an excellent advantage in the potential to make a lot of money wholesaling. The more sellers and buyers who make great deals with you, the more they will keep coming back. The more resources you can accumulate on your lists, the more effectively you can match properties from sellers to buyers. Get testimonials from these partners to market to other potential sellers and buyers. Let new potential clients know that other clients are happy with your services.
This not only builds confidence in you for new clients but also stirs competition in that sellers know you have many other sellers you can get properties from and buyers know you have other buyers who are interested in the properties you secure. As such, sellers my drop prices to get you to take their deals over other sellers and buyers my offer more money to purchase properties so other buyers can’t have them. This translates into more money for you.