What if you were told you can earn big money through real estate investing, without actually investing a dime? The natural reaction would be to wonder if it’s a scam. However, nothing is farther from the truth. This is called the No Money Down Deal, where you would not have to shell a single penny from your pocket when you buy and sell a property. This article will focus on one such technique – Wholesaling houses.
Wholesaling houses allows a real estate investor to transfer properties from motivated sellers to interested buyers even if they do not have the required funds. This can be done in either one of the following two ways.
Assigning the contract
You, as the real estate investor (or middleman) must be able to find motivated sellers and interested buyers. The first step would be to find sellers. There are many ways to let sellers, in and around your area know that you are an investor that is willing to help them sell their property. A few of them are:
- You can post an ad on Craigslist
- Post an advert in the local newspaper
- Use the power of social media
The main factor to consider is that, all sellers would want to sell their properties “as-is”, without spending anything on repairs or modification. You need to keep this in mind when you are asked to make an offer on the property. The sellers are going to be willing to accept an offer for a little less money, if that means they can sell the property in “as-is” condition. Once the offer has been accepted by the seller, you would have a contract to buy the property.
This is “No cash down method”, so you can wholesale the property once you can find an interested buyer. You can find buyers using any of the above listed methods. When you post your offer on the property, you can do this in a way that you get a little profit out of the deal. This depends on various factors like, the area in which the property resides, the buying power of the people contacting you etc.
Once you get a good offer, you would need to sign an agreement that would assign the rights to the property from you to the buyer. After the assignment agreement is signed, the buyer would bring the cash as agreed between you and them. Then the money is paid off to the original seller, as per the agreement between you and them, the rest of the money would be the profit you make out of this deal. This way, you can make a profit by just assigning the contract to the buyer without actually investing money yourself.
For example, you meet seller who is willing to sell their property to you for $35,000. You would have a contract to buy the property for the said amount. Then you would need to find a buyer and make an offer. Let’s say you are then able to convince a buyer to buy it from you for $45,000. Then you would need to sign an agreement to assign the rights to the property to the buyer. The buyer then brings the $45,000 out of which $35,000 is paid to the original seller and you can make a profit of $10,000 from this deal.
Double closing
The other popular way to wholesale houses in the No Money Down Deal method is – Double closing. This also involves finding sellers and buyers using any of the methods listed above. The first step would be to find a seller and sign a contract after agreeing to an offer. This is called the A-B closing, which is signed between the original seller and you.
Once a suitable buyer is found, the next part of the contract is signed. This is called the B-C contract which is between you and the buyer. So, you essentially seal the A-B contract deal with the money you make from the B-C contract deal.
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These 2 deals usually happen in the same place, 10-15 minutes apart. First you would need to close the A-B contract. The money for this can come in one of the many ways.
- You can let the buyer know that this is a double close deal and ask them to bring the money in as escrow, earlier on the day of the deal. Both the A-B and B-C deals can be closed with this money.
- You can borrow money from a transactional dealer to make the A-B deal and pay them back with interest once the B-C deal is closed.
Once both the deals are completed, you can walk away with a profit without actually investing anything.