What is Wholesaling?
Great question! What is wholesaling? Well, wholesaling is a misconception. It is not an investing strategy. It is more of an investing exit strategy. It is very important that you understand that because strategies are really about how we are making money like if we are rehabbing and lease options. Wholesaling should never be a primary strategy. It should always be an exit strategy, but when you are first starting out, your primary strategy is exiting out of as many deals as possible. So, wholesaling becomes the primary focus for most investors. It is a beautiful thing because there is little risk involved. There is no money needed. There are no loans needed. You do not need a whole lot of money to go out and do it. In some types of wholesaling, you do not need any money to do it.
Talking about that, there are so many different ways that we can wholesale. I am going to talk about those as well, but what I want you to be clear on is that wholesaling is really nothing more than the art form of controlling properties through contracts and then we assign our rights to those contracts to a new buyer. That is something that you want to think about when you are looking at this model because what we are doing is contracting the property and we are choosing not to close on it. So, instead of letting the deal go away, we still want to exit out of the deal and make money. So, we find a new buyer and we assign our rights to a new buyer.
Now, also understand this. Wholesaling, true wholesaling is where you never close on the property. You never actually buy the property. You never actually show up on the title. You never actually close or do any of that. You never go into escrow or anything because you are assigning your rights to that contract to a new buyer through what is called an “assignment contract.” At that point, the new buyer is the one that closes. They are the ones that go get the money. They go to escrow. That is something that you want to be very clear about.
Wholesaling is so many things. If anyone ever pigeon holds you and says that it is “finding properties as a discount and finding a cash buyer,” well, the problem is that is someone who has not experienced wholesaling or knows wholesaling like I do. I have been wholesaling for nine years now. There are so many different ways.
You have what is called “traditional wholesaling.” You have wholesaling options, wholesaling unsellable properties, wholesaling to a retail buyer, wholesaling REOs which by the way isn’t a true wholesale because in some cases, you have to take the title or close or borrow money, but there are ways to do that using what is called an LLC. There is also wholesaling commercial real estate and also what we know as “co-wholesaling” which is the fastest and easiest way to get started as a wholesaler because it really is truly little to none at all risk in it. There is really truly no money needed in that type of strategy.
When you are looking at wholesaling, just know that it is really about being able to control as much as you can and through contracts, and then selling those contracts to a new buyer for a fee without every closing on the property or borrowing money to close on the property.
There again, wholesaling is a very broad term. Never let someone tell you that it is a pigeon hold or that it is one type of thing. It is not. If they do tell you that, run from them. I will tell you right now that if you want to start as a wholesaler, the fastest way for you to start is co-wholesaling.
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