As you begin to research the fix and flip industry, it’s normal to wonder about wholesaling. Wholesalers are real estate investors who find discounted properties and turn them around for a profit. It’s a much more hands off process compared to rehabbing homes, as this requires investors to get the property in good shape. But, is the grass really greener on the other side?
Let’s explore the differences between wholesalers and fix and flip investors and the best route for your future goals.
Wholesaling Properties
Some investors recommend wholesaling because you can get your feet wet in the real estate investment industry and make quick cash. Unlike rehabbers, wholesalers don’t have to spend the time or money getting the house in good shape. Still, wholesaling is harder than it looks.
Usually, the biggest issue for wholesalers is finding investors who want to buy their properties. It’s recommended to build a list of investors who are interested in purchasing homes, but not all wholesalers take the time to do this. Even if you do network and build up your connections, it’s possible that you could end up without a buyer.
Wholesalers also have to estimate repair costs and the after-repair value (ARV) of the home. This needs to be done so that they can determine how much the property can be sold for and how much profit they can make. Working with these numbers is great practice if you plan to eventually progress to fix and flip investments.
Fixing and Flipping Properties
There is no question that rehabbing homes is more labor intensive. It requires you to make the financial investment while also fixing up the home. It’s not uncommon for investors to get more than they bargained for! That said, some investors look at fix and flips as a stepping stone. They start off with wholesales and then move onto rehabs where they learn about construction, permits, city inspections and more.
Fix and flip investors also admit that they like having a more stable pool of buyers to work with. Networking is crucial for wholesalers because they are working solely with investors, but fix and flippers sell to prospective buyers. As long as they choose a good property in a good location, it can generally be sold for a decent profit. For some, this could feel like a more secure purchase.
There is no right or wrong way to enter the real estate investment industry. Some investors stick with wholesaling and move onto fixing and flipping properties, while others move from rehabbing to wholesaling. It all depends on what your short- and long-term goals are and what approach will help you meet them. One thing to know – both wholesaling and fixing and flipping require funding. Contact First Equity Funding to learn about our hard money lending options.
