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HomeTipsAdvantages and Disadvantages of Investing in Wholesaling Real Estate

Advantages and Disadvantages of Investing in Wholesaling Real Estate

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Wholesaling real estate is a good option for anyone looking to make additional income in an industry where they do not have a license. Another good thing about it is that you do not necessarily need to spend money to earn in this business. This means that this option promises high returns with minimal loss.

This makes it such a great income-generating option to consider. It is, therefore, not surprising that you are here wanting to learn more about this business venture. However, even though this sounds promising and appealing from the surface, it does not mean that it does not have its drawbacks.

Just like with any business opportunity, this venture comes with benefits and disadvantages. Before jumping into this, you need to know both the advantages and disadvantages. This knowledge can help you choose whether it is something you want to do or not.

Luckily, this article has the sole purpose of discussing the advantages and disadvantages of this investment option. Before we discuss that, we will first look at what this real estate investment method is all about. This will enable you to get a full understanding of everything we’ll discuss.

What Does Wholesaling Real Estate Mean?

This term refers to the process where an individual (a wholesaler) finds a property (often undervalued), gets the property under contract, and then sells the contract to someone else. The wholesaler will typically sell the property at a higher value to make a profit. The person they sell it to can renovate the building and either lease or sell it to make back their money.

The wholesaler’s primary duty is to scout for properties that can go for cheap. This is why the houses they often go for are mostly distressed properties. You can visit https://www.distressedpro.com/ to learn more about distressed properties. A lot of investors do not mind working with wholesalers even when they know that the contract the wholesaler has for the house is cheaper than what they are offering.

This is because they know it can be quite a hassle to get these properties by themselves. So, the profit the wholesaler gets from the deal is simply their payment for getting the deal for the investor. However, the wholesaler must not be greedy for this process to go smoothly. The price they offer the new investor should be low enough for the investor to make a good profit too.

Wholesaling Real Estate Advantages

Before you dive into any sort of business, you typically want to be sure that it would be worth your while. Thankfully, the investment method in question comes with several advantages. If you are still wondering whether this path is something you can take, the following advantages it offers can tip you in the right direction.

Not As Risky as Other Methods

One good thing about this option is that you do not have to spend a penny out of your pocket. This is unlike other investment options in this industry, where you need capital to earn. Because capital isn’t needed, being a wholesaler is a completely risk-free venture.

Profitable

This investment method can be quite profitable as you stand the chance of earning a large commission. The right deal can help you make a huge sum of money within a short period. Wholesalers typically make anything between 5,000-30,000 dollars per deal depending on the property’s location.

Gather Real Estate Investment Knowledge

Wholesaling in this industry can also help you become very knowledgeable in the field. As your experience grows, so will your expertise. It can also help you build a network of investors that you won’t just work with but can also learn from. The sweetest part is, you’ll be doing all of these without buying a property or investing your money.

Gather real estate investment knowledge

Wholesaling Real Estate Disadvantages

Sadly, this wonderful business venture also comes with some drawbacks. These drawbacks can be intense enough to make you frustrated and stop the business after a few months of starting it. Before you go ahead, consider the following disadvantages, and evaluate if you can deal with them.

It is Not as Profitable as Other Investment Options in this Industry

It’s great that this option comes with zero risks, but this also means that it isn’t as profitable as other investment options in this industry. For example, house flipping requires the investor to buy the property with their money before they renovate it and sell or rent it out. While the investor will spend a good sum of money to do this, it also means that the profit they’d be getting would be much more. Wholesalers technically only get commissions to help investors get good deals.

Success Isn’t Guaranteed

Every business comes with the risk of failing. However, this risk is heightened in certain types of businesses. In this business venture, there’s no guarantee that you’ll succeed at it.

You may be lucky to find and close a deal within one week of starting. Or you may go weeks and even months before you close a deal. The good thing is that you aren’t investing money (just your time and effort), so when the going gets tough, motivate yourself to keep trying. Once you close your first deal, developing strategies to help you close more deals will be easier.

Finding Sellers and Buyers Can Be Quite a Hassle

Convincing sellers can be quite difficult because nobody wants to lose their properties at a giveaway price. This means that you’ll get turned down a lot when you approach a seller with a deal. Even when you successfully get a seller, finding a buyer can be another challenge; especially when you are new to this. But if you keep at it, all of these will get easier with time and experience.

Conclusion

Wholesale real estate is a great way to make money with zero financial risk. However, whether it is something you want to do or not is left for you to decide. Thankfully, if you start and the challenges are overwhelming, you can stop without losing any money.

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