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