Wholesaling real estate - why buying now makes sense

Wholesaling real estate - it's a term that's been bounced around a lot lately in real estate professional circles. It's a practice that's been hot in bigger markets for decades, and is now catching on in smaller cities, like Augusta.

Perhaps you've heard of the term but are a little shaky on what it means exactly. Let's clarify: Buying or selling real estate in the wholesale market parallels wholesaling in other markets, like groceries. If you buy wholesale, you might forego some of the finish-end amenities of a product in order to cut out a middleman and make a huge saving on the purchase. In the grocery world, a store like Sam's Club or Costco would wholesale products to you - you'd buy in bulk and shop in a barebones warehouse instead of a dressed-up supermarket, and thus, you'd save a ton.

In real estate, wholesaling is similar to this process; however, the wholesale vendors are not as prevalent as city block-occupying warehouse conglomerates. They are out there, though. The properties they market may have some due maintenance. And if you can establish a working relationship with a wholesaler, the benefits are quite bountiful, whether you look to purchase investment properties (now is the best time ever) or live in the home as your primary residence (now is also the best time ever).

So how might one find a wholesaler? Well, Auben Homes is always acquiring new properties with the intent of wholesaling them. In addition, wholesaling is exactly what the people behind all those "I Buy Houses Cash" signs are all about. They find motivated sellers through those signs, get the property under contract, and sell the contract to an interested buyer. Everyone wins. The seller finds a solution, the wholesaler earns an amount for his or her time spent finding the property and getting it under contract at an attractive purchase price, and the buyer - again, whether they are looking for a residence or an investment - finds a sweet deal from the wholesaler.

If all this sounds confusing, it's really not, if you can visualize the process in other terms. Imagine an empty grain silo. This silo represents the amount of money the house will be worth on the retail market. Let's imagine for illustrative purposes that the house will be worth $100,000 on the retail market. (Remember that we are dealing in the wholesale market, though. We're below the radar of the general populous. It's kind of cool like that.)

If a wholesaler gets the property under contract for $50,000, that grain silo is half full. There is also room for another $50,000 before the silo fills up. If he or she sells that contract (it's called assignment) to the end buyer for $60,000, then the wholesaler has made is profit and the property still has $40,000 worth of breathing room that can be spent on any necessary repairs, or it could be sold outright if no repairs are needed. See how it starts to come together? The seller has gotten $50,000 to solve any of their problems, the wholesaler has made $10,000, and there's still room for the buyer to play around with this property before the "silo" is full. Equity is a very cool thing.

Be sure to visit the Auben Homes website for a complete listing of our investment properties.

--Auben Homes

August 7 week in review and more...

Yet another week comes to a close here at Auben Homes, as we reflect on all of the little "adventures" we undertook - or, in some cases, the ones that undertook us - over the last five days.

Early in the week we put the brass tacks into 3913 Creekwood, a contemporary home in the Clairmont subdivision. A 3/2 with high-end frise carpet, tile and hardwoods underfoot everywhere in the home (not to mention tile countertops in the kitchen, wood paneling on the ceiling of the dining room, an absurdly large backyard with a massive deck and a sick great room with a fireplace) it's the kind of house you really cringe at putting on the market. Because soon it will be gone, and out of our lives forever. And we all wanted to move into it.

We spent a large portion of the week servicing our rental homes - putting carpet in this one, taking care of a leaky faucet (on the double) in that one.

Then, it was on to 808 Lake. This is the kind they don't make anymore, but should. It's a solid little bungalow just on the fringe of downtown North Augusta. I love that area. You can see half the state of Georgia from just about any standpoint, and there's always a breeze. Yet, there you are, walking distance from an ice cream parlor (The Pink Dipper) and a great wine shop (Wine World), not to mention North Augusta's Greenway, a 10-mile foot and bike trail that winds through some of the most serenely beautiful riverfront land anywhere.

And the house itself sits snugly in the Hammond Hill area, where apparently the city had a stern law that no houses could be built unless they adhered to a quality code. Some are six bedroom palaces, some are bed and breakfast-style mansions, and interspersed are lots of smaller cottages with great yards. I could go on all day. The house itself is an all-hardwood (though we're putting in lots of tile in the kitchen and bath) 3/1 with tons of potential, which we plan to maximize over the next week as we put the finishing touches. Check our website in a week to catch the snapshots of the finished product.

Beyond that, we've got lots of great rentals, wholesale deals and retail houses coming up. Check back often, we get new houses everyday, almost. Have a great weekend, all.

--Auben Homes