The Pros and Cons of Real Estate WholesalingMar 16, 2022
In the industry of real estate wholesaling, it’s a great opportunity to learn how to get properties under contract below the market value for a profit. Moreover, wholesaling also allows people to venture into the real estate industry, especially those who have limited capital to make investments. However, there are always two sides to the coin. Real estate wholesaling also has pros and cons, and here are some of them below.
Pro: Learning How Real Estate Industry Works
If you’re interested in wholesaling, you will easily get involved in the real estate industry. As time goes by, you will find yourself working with people who have been enjoying a successful career in this industry, and you will eventually learn from their experiences and failures along the way.
So if this happens to you and you know what and how to use the right resources, you will then learn how to find leads, do due diligence on the property, establish confidence and trust with the investor, and find the current market value of the house. Besides that, you will also learn how to estimate the ARV or the After Repair Value of the house, build profitable relationships with real estate brokerages, and eventually build a buyers’ list who can help you close a deal quickly.
Pro: It Requires Minimal Capital
Another advantage of real estate wholesaling is that it requires minimal capital to start. Wholesaling will make you creative when it comes to finding the funds you need to acquire a property to buy. Other investors will purchase it with bank financing, cash, or even with a hard money loan.
But if you have limited access to these fund sources, limited capital for a downpayment, and don’t have the best of credit, it’ll surely be a great challenge for you to get your loan approved by the bank. However, with wholesaling, you don’t necessarily need all of these. It’s because you don’t need to have good credit before you can assign the contract of the house to an investor or buyer.
Pro: Earning a Lot in a Short Period of Time
Once you have access to the right resources and have your system in place, you will consequently earn more money in a short period of time. You will also learn how to find more properties to be under contract and assign them to your buyers’ list quickly. Typically, house flippers will usually take a couple of months before they can earn a profit, from the time of property acquisition to the process of repairs and renovations, up until they put the property back on the market. However, wholesalers just have to wait for seven to thirty days to close the deal and assign the contract to another buyer. That’s how easy and simple it is with real estate wholesaling.
Con: No Buyer
The moment that the wholesalers get the property under contract, the said contract also comes with the date when they need to find an investor or buyer to close the deal. But if the wholesaler gets a particular property under contract for a price that is too high for the investor to earn a greater profit, that’s the time when the wholesaler may find it difficult to find an investor for the property. Besides that, as mentioned above about the marketability of the property’s location, it’s also another factor that may affect how easy and difficult it is to find a buyer for the property.
Con: Uncertainty of the Income
Another downside in real estate wholesaling is that the income can be unpredictable. It’s not like having a regular job where you will get your check every fifteenth and end of the month. As a wholesaler, you have to be responsible enough to stay consistent and diligent with your day-to-day expenses up to your monthly finances. With that, it would be a perfect idea to save a particular portion of your income earned in wholesaling for a rainy day, especially when you know that it may take another few months to close another deal.
Con: After the Contract is Assigned, You Have to Start Over
Essentially wholesaling is like creating a job. You have to repeat the process over and over again to continue making a profit. Unlike buying and holding property to create passive income where you work once and get paid over and over again until you sell the property.