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2 Ways to Fund a Wholesale Real Estate Deal With Minimal Cash

2 Ways to Fund a Wholesale Real Estate Deal With Minimal CashWholesaling in real estate investing, also called contract flipping, is purchasing a home and reselling it to a buyer in a short period of time and without any repairs or rehab work.  Before getting into the funding, what are the other necessary components of the deal?

The Buyer

Most wholesale deals are sold to rental investors or fix-and-flip investors.  The wholesaler’s value is in the skills and resources to locate deep discount homes that can be sold to another investor with a profit in the middle.  Rental investors want a ready-to-rent property that they can buy below market value, usually a 5% to 10% discount.  They want to lock in equity at the closing table.

The fix-and-flip investor may be selling to a retail buyer, but more often they are fixing up the property to sell it to a rental investor.  Knowing this, the wholesaler will need to locate properties that have enough room in the middle for their profit, but also for the rehab work and a profit for the fix-and-flip investor.

The successful wholesaler will network to meet and build relationships with both types of investors.  The wholesaler will build out a database, a buyer list, with these buyers, their neighborhoods of interest, price ranges, and general requirements for the properties they want.  The first step is the tail end, as you want buyers before you locate properties.

Funding with an Assignment Contract

Assignment contracts are not legal in all states, so check your state laws before working with this type of contract.  The assignment contract is very much the same as a normal purchase contract, except the Buyer(s) box has the wholesaler’s name and a phrase similar to “and/or assigns or assignees.”  This means that the seller is being informed that the buyer/wholesaler’s intent is to assign their rights and obligations in the contract to someone else.

The wholesaler put up a small amount of earnest money, generally a few hundred dollars, when the contract is signed with the seller.  Then an assignment contract is executed with a buyer for enough money to fund the purchase and some profit for the wholesaler.  When it is signed, all of the wholesaler’s rights and obligations in the contract pass to the buyer.  The wholesaler is out of the deal, attending closing only to get a check for their profits.

Funding with a Transaction Loan

There are companies out there that specialize in lending to real estate investors, and they do what is called a transactional loan to fund a wholesale deal.  The loan is for the amount of the purchase of the property from the seller.  Then the transaction lender attends the closing to the buyer to collect their fees for the loan and their investment to buy the home.  The wholesaler gets what’s left as profit.

The fees and interest charged by these lenders are high, but when it is the only way to get a deal done, and the numbers work, then it is worth it to the wholesaler.  As with the assignment contract, the only money invested by the wholesaler is the earnest money deposit.

Wholesaling can be a fast-turn profitable business with minimal cash at risk.  Learn the process, build a buyer list, then work hard to find properties that fit the bill.

Hot Key West Business Opportunities

101600 Overseas Highway $20,000,000

101600 Overseas Highway KEY LARGO, Florida

3 Beds 3 Baths 3,717 SqFt

139 Seaside Avenue $10,500,000

139 Seaside Avenue KEY LARGO, Florida

5 Beds 7 Baths 6,740 SqFt

1622 Overseas Highway $9,900,000

1622 Overseas Highway MARATHON, Florida

3,400 SqFt

517 Duval & 518 Bahama Street $7,500,000

517 Duval & 518 Bahama Street KEY WEST, Florida

4 Baths 7,854 SqFt

3428 Roosevelt Boulevard N 1,2,3,4,5,6 $5,995,000

3428 Roosevelt Boulevard N 1,2,3,4,5,6 KEY WEST, Florida

7 Baths 8,046 SqFt

$5,250,000

Key Largo, Florida

2 Baths 4,680 SqFt

96180 Overseas Highway $3,999,999

96180 Overseas Highway KEY LARGO, Florida

3 Beds 3 Baths 1,445 SqFt 0.960 Acres

919 - 921 Duval Street $3,750,000

919 - 921 Duval Street KEY WEST, Florida

9 Beds 6 Baths 4,173 SqFt

155 Atlantic Circle Drive $3,675,000

155 Atlantic Circle Drive KEY LARGO, Florida

3 Beds 2 Baths 2,694 SqFt

101350 Overseas Highway $3,250,000

101350 Overseas Highway KEY LARGO, Florida

2 Baths 6,674 SqFt

100150 Overseas Highway $2,400,000

100150 Overseas Highway KEY LARGO, Florida

2,436 SqFt

325 Calusa Street 231 $2,000,000

325 Calusa Street 231 KEY LARGO, Florida

3 Beds 3 Baths 1,571 SqFt 0.040 Acres

218 Bristol Court $1,999,000

218 Bristol Court Tavernier, Florida

3 Beds 2 Baths 1,628 SqFt 0.150 Acres

23 Tortuga Drive $1,950,000

23 Tortuga Drive KEY LARGO, Florida

10 Beds 6 Baths 4,091 SqFt 0.450 Acres

23 Tortuga Drive $1,950,000

23 Tortuga Drive KEY LARGO, Florida

10 Beds 5 Baths 4,091 SqFt

Are You Looking for Commercial Property in the Florida Keys?

Use our site to search commercial real estate in Key West and all of the Florida Keys. Unlike the “big name” sites out there, our site is directly connected to our local MLS and is updated with new properties every HOUR. By creating a Property Manager account you can stay on top of the newest businesses that go up on the market and get Price Change alerts so you can stay ahead of other buyers and beat them to the best deals!

In the meantime, check out these 1-click searches:

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Newest Key West Commercial Properties on the Market

If you missed it last time this property is back on the market. A rare opportunity on Lower Matecumbe. The potential is limited only by the imagination. This prime location on US 1 with open water ocean views is zoned NC (Neighborhood Commercial.) Also listed as a Multi-Family dwelling. Originally permitted by Monroe County as a 3 unit apartment building, today it has a 2 bedroom 1 bath unit upstairs with a good monthly rental history. A 7-day vacation license from Islamorada is possible. Downstairs has an office with an ocean view with a kitchen/dining room and a bedroom and half bath. The 6900 sq ft lot is fenced on both sides and the rear for privacy, an outdoor shower, washer and dryer and trailer storage while the front is open for parking and presently a rental business for kayaks and bicycles. The office with a view is occupied by a Mai D'cor a home design center. Zoning allows for a variety of other ventures in this perfectly located residential/commercial property $1,590,000 Active

74452 Overseas Highway ISLAMORADA, Florida

3 Beds 2 Baths 3,346 SqFt

Rare opportunity to own a versatile property in the heart of Key West's vibrant Truman Waterfront. This property has been home to several Grocery Stores making it the perfect investment for those who seek flexibility and multi-purpose functionality. Loaded with potential, this property sits on a large 94.6 X 43 foot lot approximately 4067 square feet. Located on the corner of Truman Avenue and Emma Street with a 1200sf building being sold ASIS. Many possibilities with the NEW Truman Waterfront Park, Amphitheater, Fort Zachary Taylor beach park all nearby. Future use based on city approval. $1,400,000 Active

200 Truman Avenue KEY WEST, Florida

1,200 SqFt

Hard to find small office space available in Old Town! Freshly updated professional offices 290sf for $1300+ per month. Join the friendly business environment at Key West Theater catering to local small business owners. Wifi, electric and water included, sales tax is in addition to the monthly rent quoted. $1,300 Active

524 Eaton Street 208 KEY WEST, Florida

2 Baths 16,470 SqFt

Hard to find small office space available in Old Town! Freshly updated professional offices 170sf for $1000+ per month. Join the friendly business environment at Key West Theater catering to local small business owners. Wifi, electric and water included, sales tax is in addition to the monthly rent quoted. $1,000 Active

524 Eaton Street 211 KEY WEST, Florida

2 Baths 16,470 SqFt

View All

Posted in: Buying Commercial Real Estate, Commercial Real Estate, Sellers, Wholesaling Tagged: Fund a Wholesale Real Estate Deal, Wholesale, wholesale funding, wholesaling real estate

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