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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

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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

Large commercial building in good shape with Dade County pine ceiling, zoned mixed use commercial, located in up and coming part of Marathon. Property has almost 19000 square ft of fenced in area with plenty of room for parking and located directly on US 1. There is a second building in back that has a bathroom, and living/bedroom area, that can be office space or storage. Lots of potential for the building and land. $1,650,000 Active

1825 Overseas Highway MARATHON, Florida

1 Beds 2 Baths 2,796 SqFt

Excellent Opportunity to lease small retail/professional space in Old Town Key West directly on Truman Avenue with approximately ~600sf. Join the charming & friendly business environment that Historic Downtown has to offer, catering to a diversity of local dining, shopping & specialty services. Visible storefront with display windows and heavy traffic flow. Sales tax and shared water expense are in addition to monthly base rent quoted for a minimum two-year lease agreement. Vacant and easy to show. $1,850 Active

1100 Truman Avenue A KEY WEST, Florida

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White Sands Inn is located in Marathon, FL on the Atlantic Ocean with views that will take your breath away.  Unfortunately, hurricane Irma took it's toll on the first floor of this little motel.  The owners have made most major repairs but ran out of money to complete the motel.  Currently being sold as-is with the new owner to complete the first floor.  The second floor was not damaged and occupied.  All reasonable offers will be considered.  Don't let this deal get away.  Seller has all plans and estimates to pass on to the new owner.  Most of the major work is completed.  Call for details.  Please do not visit the property without an appointment.  Property comes with 1 market rate (single family building right) and 4 transient motel rights. $1,450,000 Active

57622 Overseas Hwy Highway MARATHON, Florida

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Offered for sale is Vaca Cove a 7 unit vacation rental property located in Marathon, FL.  The property is comprised of 7 stilted waterfront homes, dockage accommodating up to 40' boats per home, resort sized pool, fishing dock/kayak launch and built in 2016.  Each home is 1,740 Sq. Ft., 4 bedroom, 3 bath, open floor plan living area, large laundry, water front porches with open water views, private spas and covered parking.  This is an active vacation rental property with established management and increasing numbers.  Please do not go to property unscheduled.  Call for more information. $6,900,000 Active

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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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