Not many people realize that real estate (mainly houses) can be successfully bought and sold without using your own cash or credit and a handsome profit can be made out of the deal as well!
As hard as it is to believe, it’s really true. In this article, “How to Make Money Wholesaling Houses without Cash or Credit”, I will explain how this can be done.
First, all real estate transactions begin with a contract. It doesn’t matter if it’s a $100 million dollar hotel, a $10 million dollar apartment complex or even a small mobile home, a contract is mandatory.
Now, in order to make money via wholesaling houses without any cash or credit, you need to be able to control the property with a contract for at least 30 to 60 days. You certainly don’t need any cash of your own, other than a small amount for marketing to attract motivated sellers.
As an example, assume a house is worth $100,000 in excellent condition. Depending on the part of the country you are located in, this could either mean a decent dwelling or a rather simple one, especially if you happen to be in New York or California where real estate prices are known to be particularly steep. Nonetheless, let us take the base price as $100,000.
When the house is in excellent condition, this is called the ARV or After Repair Value. In this example using the $100,000 ARV, let us assume that the seller agrees to sell the property for $30,000, for whatever reason. Now, this is where “The Flip Man” comes into the picture willing to buy the property for $30,000. This lead will normally come from my marketing such as bandit signs. Generally, I deal mostly with owners directly and not with realtors, the main reason being that the owner is the decision maker and I don’t need an additional middle man. Of course, this is only a matter of preference and certainly not a must.
Now, I will start marketing the property in order to wholesale it to an investor. There are two schools of thought – either you build a buyer’s list first, from which you find a suitable buyer/investor, or you let the deal create your buyer’s list which I did and train my students to do the same.
Therefore, I start marketing the property at $45,000 and I may have 10 investors to call about buying the property. Even though I can only sell the property to one investor, I will build a buyer’s list from the other 9 investors that called.
Finally, the deal is settled at $38,000.
Let’s close – now I have a contract with the seller for $30,000 and the buyer for $38,000. From there, I will submit both contracts to the title company or the closing attorney, whichever is being used.
Now, most deals have a closing time frame of 30 days with the seller and I will give my buyer only 10 days to close…most serious buyers in fact take only three days, which is why you only want to deal with serious buyers.
OK, the deal is set and you have everything in place with the closing attorney, the seller, and the buyer, all meeting together at the closing table. In most cases that would be the first time they have met so I have to make sure everything goes smoothly.
Once the deal is completed, the closing attorney cuts the seller a check for $30,000 and “The Flip Man” a check for $8,000 which is the difference between the two contracts.
So the check that I received is an assignment fee of $8,000 where I basically assigned my $30,000 contract over to the buyer for $8,000. When I started marketed the property, I actually did it at $45,000 and eventually sold it at $38,000. So, I made $8,000 on the deal.
This is an actual, NO MONEY DOWN deal. This is how you make money, wholesaling houses without any cash or credit – the buyer provided all the funds to close the deal. All you need is the knowledge of how to set that up and how to close the deal…that’s it!
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