What better? Wholesaling or Rehabbing?
A lot of people always ask what’s better wholesaling real estate or rehabbing real estate? Well today I’d like to talk about this and I know I might ruffle someone’s feathers but this is just my opinion. First off what I’d like to do is describe what wholesaling and rehabbing are.
Wholesaling which is also called flipping is in my opinion probably the quickest and easiest way for beginning investors to put money in their pocket. In most cases it doesn’t take too long of time to actually start making decent size paychecks. I’m talking $10,000 and $20,000 per month. That’s a decent sized monthly account for a lot of people.
Basically wholesaling is where you find a property for a low price and turn around and sell that property for a higher price to someone else. In most cases when we talk about wholesaling properties you will find properties 70% loan to value that need repairs. These are the best types of properties to wholesale because you will be buying them low enough to flip to a rehabber.
As far as rehabbing goes, rehabbing is when you find a junk property and you fix it up and turn it into a nice property. Even when you’re rehabbing properties the goal is to still sell these properties under market value to an end buyer. That’s what makes these two strategies so appealing.
However, who wants to worry about fixing up junkie properties. Especially if this is your first time. Joe properties are not fun to deal with. There is so much that goes into rehabbing a property that if it’s not done properly you can actually spend a lot of money and go way overboard and not be able to make any kind of a return on your investment. In fact you can lose your shirt if you’re not careful.
When you’re looking for an in buyer to sell these houses to whether it’s a wholesale or a rehab deal ultimately you’re looking for a cash buyer. And here’s why. There is so much red tape anymore to get financing from a conventional institution. It is so much easier to just get it from a cash buyer.
Now some of you may not be ready to believe this yet, but there are a lot of cash buyers out there. There’s a lot of rehabbers out there that have money and they would rather do the rehabbing then you. And that’s great let them do it. There are also a lot of landlord that have cash and are willing to pay cash for properties that give them high rates of return. And this is exactly what these properties do.
One other major difference between wholesaling and rehabbing is the money factor. When you’re wholesaling a property you do not have to use your own money you. You can get financing or better yet use transactional funding to fund your deal. With transaction funding your credit or income is irrelevant. It does not matter. On the other hand with rehabbing you need a short-term loan but you need to qualify for it unless of course you have the cash.
For these reasons I believe that wholesaling is a better strategy than rehabbing – especially when you’re just starting out.