Real estate investors may be losing money without knowing it. They get leads on sellers that they don’t think will pan out and they ignore them. Meanwhile, by wholesaling those leads out of state, they could be closing deals they never realized were profitable, relatively risk-free, and right at their fingertips the whole time.
Investors should be wondering what out of state wholesale real estate is, why they should be interested, and how to sell wholesale properties out of state. Out of state wholesale property investments carry little risk and give investors the ability to expand to less competitive markets out of state.
This article should serve as a guide for wholesalers to learn more about out of state wholesale properties and to make smart choices on their next investment. This video also provides a summary of some of the advice presented here.
What is Wholesale in Real Estate Investing?
Wholesaling properties does not involve selling multiple houses at the same time. Instead, it refers to contracting a home with a seller, shopping the contract around to buyers, and then giving it to one of them before the homeowner’s contract ends.
What are the benefits of wholesale properties? Basically, by selling wholesale properties out of state, you are essentially an unofficial agent between a desperate seller and an unknown set of buyers. Finding the right one to pay more than the house is worth in exchange for a good investment nets the wholesaler their profits. For wholesalers, the risk is very low.
It’s not a viable course for every real estate investor, but those who are savvy and ready to get into the business, even if they don’t have the proper finances or licenses to apply to a firm, may find wholesaling to be fortuitous.
Wholesale does not have to be limited to in state properties. You can also wholesale properties out of state as well.
The wholesaler and homeowner agree on a price and then the wholesaler shops the house around in their network at a slightly higher price. Since the property is out of state, they don’t have to do home appraisals in person—the wholesaler contacts the seller through modern virtual meeting apps like Skype, Zoom, and others. The wholesaler can take virtual tours of the property and even send documents over to be signed all from out of state.
They can then give the contract to a promising out of state investor, who probably wants the house as a fixer-upper to resell later. Since the seller’s contract has been passed to the investor, the homeowner can take the money made from selling the contract, minus the extra that goes to the wholesaler’s profit.
Why Wholesale Out of State?
Why do investors do wholesale deals out of state? Because wholesaling out of state is beneficial to everyone involved. Investors get a property that they’re interested in, which they can then fix up or resell for more. Desperate property owners get to unload their house through the wholesaler’s seller contract and no longer have to worry about the property. And wholesalers get to keep the profits on the exchange without having to do a physical closing, visit the property, or meet in person at all.
Get Access to a Less Competitive House Market.
Competitive real estate market can become difficult for wholesalers, homeowners (sellers), and investors (buyers). Prices rise and as they do so, a competitive market can make sellers and buyers desperate. Wholesale investments out of state are a way out of this predicament.
They allow investors to gain access to properties outside of their overly competitive market and they allow sellers to find willing investors looking for fixer-uppers. The wholesaler connects them so that everyone concerned can avoid being squeezed out by a competitive market.
Lower the Risk of Real Estate Investment
This makes a wholesale contract a low-risk investment for the wholesaler. Since wholesalers haven’t signed on to take responsibility for the sale like a conventional real estate agent, they only have to find a willing investor. So long as they don’t pass their due diligence deadline before finding a buyer to take the contract and invest in the property, the wholesaler doesn’t even have to do multiple closings on the property. This saves them a huge headache.
Less Emotional Stress
Renters, flippers, and investors are looking for opportunities to invest cash in properties out of state. The wholesaler’s job is simply to use their professional network to find these cash buyers, all without leaving their own state. Once they do, they will have access to a less emotionally stressful market out of state where they can rely on other professionals in their network to research the area and keep them informed. Since the property isn’t near the wholesaler, they don’t have to worry about a lot of the in-person nitty-gritty of a traditional property sale.
Easy Access of a Property Using Modern Technology
When wholesaling out of state, cash buyers can view the property in place of the wholesaler. Modern conference and messaging technology has made this process easy—buyers can tour the property and confirm its condition with the wholesaler using Skype, Zoom, FaceTime, or other business-oriented messaging services. Wholesalers can request virtual tours and even send contracts to be signed virtually.
Using this technology, wholesalers can market, assess a property, find buyers, make negotiations, send the contracts, and close the listing all from a cell phone or computer in a different state.
How to wholesale out of state
In order to wholesale properties out of state, you don’t need a license, but you need a network of professionals that can help you find listings. Once a house is under contract, you need to start marketing it to buyers. Here are a few steps that any out of state wholesalers should follow from the beginning.
Be Transparent with Sellers
Make sure the seller knows what wholesaling is and that you will be making a profit from selling the contract on their property. This helps to avoid confusion and conflict later. Since you aren’t meeting in person, transparency in communication is even more important. In my experience, the seller won’t be offended that you’re trying to make a profit through wholesaling. New investors worry about this, but it’s never been a problem for me if I’m up front and explain what I’m doing.
Figure Out if you Need to Do Multiple Closings
In some cases, you may need to close twice: once by buying the property off of the homeowner and then by selling it to the investor. This is not advantageous to the wholesaler, since these costs eat into their profits. You would only do this if you felt like you had a seller that will debate your profit margin. This is why it’s essential to be clear, verbally and in writing, about how much you’ll be making on the sale.
Know Your Buyer
The type of buyer will influence the investing and closing process. If they pay in cash, they may pay the wholesaler an assignment fee, which is the easiest way to profit from an out of state wholesale property deal. If the investor is buying the house with a loan, this can mess up the closing process. They probably won’t pay the assignment fee in that case.
Selling to all-cash investors is a good rule of thumb for all wholesalers.
Out of state wholesale property sales are advantageous for desperate homeowners that want to close a deal in a competitive market. It gives investors opportunities to find properties they wouldn’t have seen otherwise. It also gives new real estate professionals the chance to do wholesale investment sales out of state, which can be profitable and hassle-free when done right.
Transparent communication with sellers about the profit margins is essential. Closings go smoothly only when everyone is on the same page. The out of state investors also should be on that page, and for a savvy wholesaler, all-cash buyers are the way to go.
Use this guide to get started forming a professional network out of state and drumming up buyer interest around properties that you think will sell better outside of their competitive market. For many professionals, out of state wholesale real estate is their most profitable venture.
Learn how to make money doing wholesale deals and how it all works by attending our next webinar.