There is more to property investment than Buy-To-Let, HMO management and house flipping. Some techniques don’t even require you to purchase a property to generate a profit.
In this article, we’ll explore the world of property wholesale and introduce a few methods that will help ventures of this kind to stand the test of time.
What is Real Estate Wholesaling?
The “wholesaling” of real estate involves an investor or “wholesaler” approaching the owner (or “vendor”) of a property that is in need of modernization or renovation, and making an offer to put that property under contract.
The wholesaler then sells that contract to an investor seeking their next development project, making a profit in the process.
Below, we’ll delve into a number of the most effective, lowest-risk approaches to property wholesaling.
Base Your Approach on Plenty of Research
Opportunities that look great on paper are not always as rosy in practice. Before you put a property under contract, it is vital that you get it properly valued and look into any potential pitfalls that may affect its value in the eyes of a developer.
You should undertake thorough research into the building’s location, including upcoming local development schemes. You’ll also need to check for any legal pitfalls, such as matters relating to access rights and protected buildings or natural features.
Safety is another major issue affecting future renovation and development - so be sure that all checks are undertaken thoroughly before official documents are signed.
Finally, you must make sure that all claims and statements on the part of the vendor are properly verified.
Build a Strong Network
The most effective wholesalers are those who are able to enter into a strong, lasting, reciprocal relationship with a select few investors or developers.
If you can achieve this, you’ll have trusting partners to whom you can turn time and time again, resulting in a system that is fruitful for all parties.
Engage in Regular, Transparent Communication
The selling and contracting or property is seen as a high-risk activity, considering the large sums of money involved. To this end, you must cultivate a sense of trust in the vendors and investors with whom you work.
The easiest and most effective way to do this is to communicate regularly and openly with all parties, responding to their questions in a timely manner and facilitating a culture of honesty. This will encourage them to be honest with you in turn.
If you employ this approach, you will find it easier to gauge the motivation of the vendor and to better understand potential pain points.
As a result, you’ll find it easier to tell the more viable prospects from those that may be too risky. Remember: not every prospect is a “goer”. Be selective and know when to walk away in order to protect yourself from risk.
Develop a Standard Process
Try to create a series of steps that you will follow each time you approach a new prospect. These don’t need to be set in stone - they can be tweaked as you build on your experience.
Networking with other wholesalers will help you here, as you’ll be able to pick their brains and learn of the approaches that work best for them.
A set process will make each investment easier to manage, as you’ll have a clearer idea of what to expect each time, and no element will be forgotten or given insufficient attention.
What’s more, introducing your system to vendors and investors will help you to retain control of the process and instill a sense of confidence in these partners as you move forward together.
You may even decide to implement a number of private rules that apply only to you as a wholesaler.
For example, when it comes to negotiating an offer, it’s vital that you stick to your budget - so be sure to set a limit, and if the vendor insists on pushing you beyond that amount, it should be your signal to walk away.
After all, you may otherwise find yourself paying over the odds and selling at a loss.
By employing the methods suggested above, you will be far more likely to achieve success and a good return in almost any market.
