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When you think of real estate as a business, you need to develop a Buy and Exit strategy suitable to your individual situation as an investor. Most people learn how to buy property at a bargain. They go about locating such property and having the wherewithal for investment and complete the purchase. However, in the absence of a decided exit strategy, they are at a loss to understand what to do after they have completed a real estate bargain deal. The trick to a successful real estate investment is to predetermine an exit strategy right at the time of the purchase. When you know how you plan to deal with the property you want to buy, you can quickly make correct decisions on the price, the nature of financing you would like to use etc. Wholesaling in real estate refers to locating bargain property and passing it on for a reasonable profit to some other person who would be the real investor. Reasonable profit in such a case can be any where from $5000 to $15000 on each sale, depending on the type of property, the overall value of the property, bargaining skills and various other factors. The profit parameters are not hard and fast and can vary, give or take 10 to 20%. There can be many reasons why wholesaling can prove to be a profitable strategy in real estate investing. It is a source to quick cash as it is possible to turn property around in anywhere from seven days to a month and a half. Even when there is no urgent requirement of liquid cash by a wholesaler, it is a good way to build up cash reserves. Wholesaling in yet another scenario can be due to an abundance of bargain property available; i.e. more than what is needed as a home to live in or as property for rental income. Instead of leaving such property alone it can be profitable to make an investment and buy it to pass it on quickly to someone else at a higher price and pocket the difference. This is an excellent way to benefit from ones property locating skills and keep them honed. Additionally, pursuing a wholesaling strategy allows flexibility for making quick decisions on retention/disposal of properties in course of locating and buying. There are other important aspects to wholesaling that need to be understood if the strategy is to be successful. Most important among them is to understand the need to make sure that the ultimate buyer in your wholesaling transaction gets the major share of the profit in the deal. The reason is that he is the one who ultimately purchases and rehabilitates the property. There has to be enough room in the deal to allow the buyer to either earn a profit through reselling or build equity post rehabilitation of the property. This in no way suggests giving away property for a pittance as profit from the deal. Then it would not be worth taking the pains which are inseparably associated with various processes involved in wholesaling. In spite varying degrees of profit margins from different wholesaling deals, it is possible to make decent overall profits.
Article Source: http://www.financemanual.com
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