Wholesale Real Estate: Why Investors Should Consider it for Portfolio Growth
Wholesale real estate investing is a compelling opportunity for investors seeking portfolio growth and increased returns in one fell swoop. Many who wish to get into real estate investing are often frustrated by how slow the process can be and the amount of capital required upfront. Wholesale real estate investing can be a viable way to address both issues.
Whether you're an investor looking to diversify your portfolio or someone new to the world of real estate, there are a number of key reasons why you should consider integrating wholesale real estate into your larger investment strategy.
The Profit Margins
The biggest reason investors should consider wholesale real estate for portfolio growth is the increased profit margins it is known for. By design, the process works by acquiring properties at significantly discounted prices. Yes, they're usually distressed, but you're not flipping a house—you're finding the right buyer for it.
Doing so with this approach can unlock more significant profit margins than traditional real estate investing, all while accelerating the growth of your larger portfolio exponentially.
Leveraging Your Existing Networks
Another primary reason investors should consider wholesale real estate is that they can succeed by leveraging their existing networks.
For example, say you've been investing in real estate in a more traditional capacity for a year or two. By now, you've undoubtedly built up a list of connections—potential buyers and sellers who are active in the market—that you know how to deal with and feel comfortable with. Not every property they come across will necessarily fit into their investment strategy, but once you expand into wholesale real estate, it might fit into yours.
You should still do your due diligence and find properties for yourself. But your existing network can become an even more valuable resource in a new way once wholesale real estate investing becomes a part of your plan.
The Beauty of Off-Market Deals
Many investors also love the fact that, unlike traditional real estate investing, a wholesale approach gives them access to off-market deals.
When a property isn't listed on the MLS, this naturally means that fewer people know about it. The proverbial "ticking clock" hasn't started once that property listing goes live. Buyers and sellers, therefore, not only have more time to negotiate a better deal for one another, but they can do so in a way that isn't artificially impacted by any outside pressure.
Because of that, wholesale real estate investing also puts people in a better position to negotiate more favorable terms and conditions for themselves than they'd likely otherwise be able to. If you're negotiating with a seller, you naturally only have so much leverage once that listing goes live. The amount of power you can apply to the situation will diminish rapidly as every new person becomes aware of and interested in the property in question.
Sellers are also more motivated to negotiate when they know they won't have to spend time working with inexperienced buyers or deal with the stress of having a deal fall through at the last possible minute. It's a win-win situation for everyone involved, especially given the state of the properties usually involved in these transactions.
Re-Defining Passive Income
Finally, wholesale real estate isn't just a great way to grow your portfolio - it's also a legitimate chance to generate a long-term passive income through rental properties acquired at wholesale prices.
In many cases, wholesale real estate professionals will specialize in rental properties for this exact reason. Ideal properties can be found in various ways, including leveraging websites dedicated to properties in pre-foreclosure, foreclosure, or already at auction. You may even get lucky and locate properties on Craigslist or social networking sites. You always want to look for a property that A) has an enthusiastic seller and that B) is being offered for below the fair market value.
The most crucial thing to remember here is that you must be aware of all regulations governing this type of real estate transaction. A rental property will likely already have tenants, and those tenants have lease agreements that may not renew monthly. This and factors like what wholesalers can do in a particular jurisdiction will impact the steps you should take when investing in rental wholesale real estate properties.
A Creative Strategy That Fosters Long-Term Success
Ultimately, it's important to understand that wholesale real estate is not quite like traditional real estate investing - but that is very much to the former's benefit. Virtually every market in the country has distressed or otherwise discounted properties just waiting to be turned into an opportunity by someone who knows what they're doing. With the right approach, you can become that person.
The key takeaway is that by considering wholesale real estate as a strategic addition to your portfolio, you can tap into a niche market that many others are either woefully unaware of or outright ignoring. This presents some undeniable and unique advantages for long-term growth and financial success, especially within the context of the other elements that make up your long-term investment strategy.
