Welcome to the Sanford REI Wholesaling and Lease Options Page!
Let’s take a look at Wholesaling! There are so many sites and articles on the internet regarding wholesaling in real estate. I urge you to research all you can get your hands on. An informed real estate investor is a smarter real estate investor! I honestly believe that there is no better tool to increase your wealth than investing in real estate and this includes wholesaling. Wholesaling is basically flipping paper rather than flipping the actual property. You are assigning your interest in a property to another person or entity prior to closing.
A typical wholesaling scenario looks like this: The wholesaler is the “go between” between the Seller and the Buyer. For example, let’s say you signed a contract with a seller and under this contract, the wholesaler will buy the seller’s property for $80k. Wholesaler estimates the property needs $40k in repairs but will sell for (ARV or After Repair Value) $190k once the repairs are made. Using his network of investors, he finds an investor to buy the property for $90k. He assigns the contract to this Buyer/Investor for $90k, who will end up flipping it for $190k. The wholesaler makes a $10k profit without ever closing on the home ($90k what he got from the buyer – $80k he paid the seller = his Wholesale Fee of $10k). The investor makes out too because they paid $90k, they put in the $40k in repairs, had $20k in carry costs, commission, finance charges and closing costs. Investor made $40k profit. Many Wholesalers just add a flat $5000 to every deal. We do not ascribe to this. If you are Wholesaling a $90k property versus a $900k property, there is always room to increase the Wholesale fee just as long as the Investor/Buyer can make good money flipping it!
WARNING ON WHOLESALERS: Most Wholesalers do not know what they are doing. Most will inflate the ARV (After Repair Value) while simultaneously deflating the real rehab budget! For example, take the example we did above but instead the Wholesaler tells you the ARV is $225k instead of $190k AND he tells you that the Rehab Budget is only $20k instead of $40k. Under this presentation, he is saying you buy it for $90k plus $20k for rehab = $110k all in (except for carry and finance costs). He then said the ARV was $225k instead of $190k. So under these numbers, he is saying you will make approximately $115k when in fact, you bought it for $90k + $40k of Rehab = $130k and you actually sold it for $190k, therefore, in reality you only made $60k! BIG DIFFERENCE and it HAPPENS ALL OF THE TIME!
The key to wholesaling is to add a contingency to the original purchase contract that allows the wholesaler to back out of the deal if he is unable to find a buyer before the expected closing date. This limits the wholesaler’s risk. However, if the seller will not agree to this contingency, then the Wholesaler could always keep the property and “flip it” themselves! Wholesaling is similar to flipping, except that the time frame is much shorter and usually little to no repairs are made to the home by the wholesaler. As the wholesaler never actually purchases the home. Real estate wholesaling is much less risky than flipping, which can involve renovation costs and the other costs listed above and on other pages on our Website. Real estate wholesaling also involves much less capital than flipping.
As I stated before, I look at it as “Flipping paper” but the main thing you need is a list of investors who are open to Wholesaling.
Having said that, if you are an Investor, Flipper or Wholesaler who wants to exchange contact information including email addresses for future wholesaling and flipping projects, please complete the Contact Form on the Right and do a F/U call to John Sanford at (203) 721-4710 or email him at SanfordREI@gmail.com to insure he got your Contact Form and exchange contact information right away!
Now let’s discuss Lease Options!
A lease option is a type of contract used in both residential real estate. In a lease-option, a property owner and tenant agree that, at the end of a specified rental period for a given property, the renter has the option of purchasing the property. A lease option is different from a lease purchase contract, in that a lease purchase binds both parties to the sale, whereas in a lease-option the buyer has the option but the seller does not. If your credit is not good enough to get pre-qualified to buy a home right now, NO WORRIES!!! We can help! We can do a Lease Option with you on your property as long as we have the right to sublet it! So you have another way to sell or transfer your property!
Thank you!
John Sanford – Managing Member and Real Estate Broker
Sanford Real Estate & Investment, LLC.
222 Main Street, Unit 223
Farmington, CT 06032