Wholesaling Real Estate — A Life Skill
I’m glad you’re interested in wholesaling real estate. In order to get started we must understand the concept of what we are doing. To accomplish this we will define the terms real estate & wholesaling. Wholesaling is selling goods at low prices that will be retailed by others. The definition of real estate is a little more intricate. Real estate is often used interchangeably with the words real property and land. Land is the earths surface extending downward. to the center of the earth and upward to infinity. Real property is defined as the land itself, the improvements to the land, the interest, benefits and rights inherent in the ownership. Real property is also described as a bundle of legal rights. This is the legal relationship between the owner and the property. A purchaser of real estate is actually buying the rights of ownership held by the seller. These rights include right of disposition, enjoyment, exclusion and control. We will use the definition of real property when we refer to real estate.
Real estate values can be affected by many variables, economical or physical. The economic variables affecting the value of properties are scarcity, location, improvements and permanence of the
“Physical variables include the immobility, indestructibility and uniqueness.
Now that we know what real estate is we can now discuss owning a parcel. Owning a parcel and owning a mortgage secured by a parcel are two different things. Interesting to note in the word mortgage “mort” is latin for the word death. “Gage” refers to the old French word meaning to pledge. Taking the death pledge unfortunately is the only way most families can attain home ownership. If you currently are mortgaged, hopefully you are not underwater. If you are not mortgaged, hopefully you have your credit in order. You will be able to learn the wholesaling business, get an understanding for real estate, earn some income and put yourself in a position to help better the lives of your own and the individuals around you, if you so choose.
How to own Real Estate
Unlike personal property, when you purchase real estate you will receive a title. The title is the right to ownership of the land. The word title is also used to refer to the documentary evidence of the right of ownership. The term title has two functions. (1) Represent the bundle of legal rights earlier discussed. (2) Enable a person the ability to recover or retain possession of a parcel of real estate.
Each of the title methods has its advantage and disadvantages. Depending on an individuals particular situation when you purchase real estate it is important to think about how you will “take title” or who’s name and how those names will appear on the title. Ways of taking ownership include sole ownership (ownership in severalty) or joint ownership. (co ownership, community property) where title is held by two or more persons at the same time. The form of ownership matters because when wholesaling it is important to get a contract with the person who is listed on the title.
Ownership in severalty occurs when title to real estate is vested in one person. This person is also referred to as the sole owner. There are several forms of co ownership and they differ from state to state. In North Carolina there are 3 forms of co-ownership. First is tenancy in common, second is joint tenancy & third is tenancy by entirety.
A deed is a written instrument by which an owner of real estate intentionally conveys right, title or interest in the parcel of real estate to another. The owner is referred to as the grantor, the person receiving title is the grantee.
There are three forms of deeds. General warranty, special warranty and quit claim. A general warranty provides the greatest protection. With a special warrantee deed the grantor warrants that he or she received title to the land and that the property was unencumbered during the time he or she held tittle. A quit claim deed provides the grantee with the least amount of protection. This form of deed quits the claim of interest in the property if any to the grantee.
In a title theory state when financing is involved in the purchase of real estate a mortgage/ deed of trust is used to convey title. A mortgage consisting of a promissory note and a deed of trust is a security instrument pledged for the debt. A borrower (mortgagor) borrows money from a lender (mortgagee). The borrower retains equitable title to the property. The trustee can initiate the power of sale foreclosure to sell the property if the debt is not paid per terms of the note.
Wholesaling Real Estate
Now that you know what real estate is and what wholesaling is let me give you an example of how the wholesale business works. Some may call you a “middleman” some will call you whatever other name they can think of. The reality is most of the time that person calling you a name is jealous because they aren’t making the money you are making. I will say this however, this book is written as me curating my knowledge and experiences in this industry in a concise way for you get the beginner building blocks needed to start generating revenue. I ask that you please continue your real estate education as you progress as a wholesaler. There are wholesalers in the business that give “the good ones” a bad name. If I come across you out here, I’m cutting your head off.
In a wholesale transaction there are 3 parties involved. You, a seller and a cash buyer. The seller obviously is the person with the property for sale, you are the wholesaler and the cash buyer is the end user/owner of the property that we will sell our property to. In our scenario, a seller has a property that has seen some better days. Completely renovated their property is worth $100,000. You contract to buy this property from the seller at $50,000. Next you get a contract with your cash buyer to buy the property for $60,000. After you have this contract signed you take your contract with your seller and your contract with your buyer to a real estate attorney or title company. You then instruct them to do whats called an assignment of contract. At this point your cash buyer will wire in $60,000 to the attorneys office. $50,000 goes to the seller, the buyer gets a property worth $100,000 for $50,000 and you make $10,000. Those are the simple but beautiful mechanics of a wholesale transaction. You can wholesale one property per year or you can wholesale one per month. Or you could wholesale one per week, its truly up to you.
I hope that you are excited and can start see the power of what this business can do however you may be asking yourself a number of questions at this point. I will try to answer the most common questions I’ve encountered but if you have any other more specific questions please free to email your questions, concerns, suggestions or feedback to firstname.lastname@example.org or submit your inquiry via mail to DLA Home Solutions at PO Box 893851 Temecula CA, 92563.