Who Buys Wholesale Real Estate Properties?

By Dave Dinkel

I get comments from realtors and a few other investors all the time about our wholesale deals. The most frequent one is, "Who would buy this junk?" I guess their core thoughts are that only stupid people with too much money to spend and who definitely don't know what they are doing, buy wholesale houses that need substantial work to be habitable. These properties are lovingly referred to as "Junkers" in real estate investing jargon.

Actually, they could be right about a few of these investors, but the successful investors keep coming back and buy junkers over and over again because they make money on these properties.

There are three main exit strategies for investors to sell these properties which include:

1. Selling them to rehabbers who will fix the properties and retail them to end buyers. Retailing is where the largest profit margins are, but requires money to buy the properties, pay for the rehab and all carrying costs until it is sold. Investors often borrow hard money or get partners who fund these deals.

2. Selling to Investors who want to be landlords and who keep the properties for cash flow. Buying these properties requires cash or borrowed funds to buy and hold but should return a higher net return than competitive investments such as certificates of deposit or the stock market.

3. Selling to other investors who flip the properties to either of the above buyers and take a relatively small profit. This method requires little or no money to do if done with an Assignment of Contract to the end-buyer and by using the end-buyer's deposit as the down payment to the wholesale seller. This is truly one of the no money, no risk, no credit deals that are touted by real estate investors.

I looked at a large cross-section of closed wholesale deals to get a better look at who were the actual end-buyers. I had to make some assumptions about a few sales but overall following is the outcome of my research. These numbers are approximate and could vary greatly over a longer time period and in regional parts of the country. This data represents 812 closed sales of who purchased these wholesale deals:

Rehabbers - 37%
Other Wholesalers (to re-sell the deals) - 40%
Landlords (multi-family units) - 22%
End Buyers (to live in the property) - 1%

In summary, there are ways to do real estate deals with little or no money. The buyers are predominately rehabbers, other wholesalers and landlords looking for investment properties. The important key to anyone doing wholesaling is to build a powerful buyers list as quickly as possible and keep the list in two parts - niche buyers (contractors, rehabbers, other wholesalers, landlords, etc.) and one massive general list. Email all properties to your specific niche list and your general list as you never know when one investor wants something different or one will refer a property for you.

Dave Dinkel has been a real estate investor since 1975. Dave's focus in the past few years is educating the public in a manner that doesn't' amount to paying for a master's degree. Dave's recent contribution to this end is his e-course called "48 Ways to Create a Massive Buyers List" which can be seen athttp://www.MakingaBuyersList.com Article Source: http://EzineArticles.com/?expert=Dave_Dinkel