Distressed to Deal-Worthy: Uncovering Hidden Gems in Wholesale Real Estate 

When most people consider getting into real estate for the first time, they do so within the context of reasonably straightforward transactions.

You’re a seller looking to unload a house for a better price than the one you paid. Maybe you put money into it as a “flip;” perhaps it has been in your family for generations. Or, you’re a buyer looking to get in on a great new area that is underdeveloped, and you want to do so at the best price possible. These scenarios can undoubtedly be exciting, but they’re also fairly commonplace.

The world of wholesale real estate, however, offers something fresh and new even for the savviest of investors out there. It’s a unique part of the industry filled with hidden treasures waiting to be unearthed. The more you understand how wholesale real estate works, the more you realize how true that statement is.

The Art of Wholesale Real Estate: Breaking Things Down

Wholesale real estate investors, known as “wholesalers” for short, are essentially the middlemen who begin a relationship between a buyer and a seller. In an over-arching sense, a wholesaler finds a property they’re interested in and puts it under contract with a seller. Then, they find a buyer who is interested in it as well.

The goal is to find a buyer willing to take the contract for a higher price than the wholesaler negotiated. The difference between the two values is what the wholesaler keeps as profit.

It’s a situation where essentially everyone wins. A seller gets to unload their home for a price they’re happy with. A buyer gets a property to do whatever they want with. A wholesaler hasn’t just made money – they’ve also doubled the number of people in their professional network (assuming everything about the transaction goes successfully).

Most of the time, wholesalers look for properties that can be politely described as “distressed.” As stated, “flipping” a house is certainly nothing new. But that’s different from what a wholesale real estate investor is after. What they’re trading in is a property’s potential that is just waiting to be unlocked – that’s what makes it such a “hidden gem” worth capitalizing on.

Uncovering Diamonds in the Rough, One Step at a Time

The number one way to find hidden gems in wholesale real estate is to know what you’re looking for.

You need to go beyond finding houses with simply overgrown lawns or desperately needing a fresh coat of paint. Yes, these are signs that the current occupant (if there is one) may be falling behind on their household chores. But these are also very easy (and not necessarily expensive) fixes.

Instead, you need to dig deeper. Look for homes with windows that have been boarded up. Try to find properties with a “For Sale” sign in the yard for an extended time. Pay attention to how filled the mailbox is or whether the gutters seem secure to the house. These are signs of distress and are a great starting point on your journey.

At that point, you’ll want to contact the seller directly and start with the negotiation. If you’re not sure who the seller is (remember, in wholesale real estate, you’re not necessarily going to be able to find someone on Zillow or Redfin), you could always look at public tax records.

The best thing to do is to reach out, express your interest, and make an offer you’re comfortable with. To arrive at that number, you need to do your due diligence. Before you even pick up the phone and make a call, you need to look at comparable properties in the area. You need to understand things like the potential for rental income. You need insight into the area and its attractiveness to potential buyers.

You should also explain why partnering with a wholesale real estate professional like yourself will ultimately be good. Distressed properties aren’t necessarily the easiest to sell on the best days, and there are certain times when the market will dictate that they won’t get much attention. But that’s not the seller’s concern – that’s yours. Go into detail about how you’re prepared to handle the entire process and show them that this is a way to simultaneously accomplish both of your goals.

Once you get the property under contract, you can find a buyer. The best thing to do is to market to cash buyers, as they tend to be the ones who are more interested in purchasing a property “in any condition.” To get started, you should contact a realty professional in your area to see if they’re willing to share information about cash purchases they’ve been a part of. You’d be surprised just how willing people are to help.

Once you can find a property that meets the conditions mentioned above and go through this process, you’ll be turning those hidden gems into wholesale successes in no time. Just remember that in wholesale real estate, consistency is king. You must be willing to keep at it if you’re going to generate the types of long-term returns you’re after.

A Unique Process that Requires Creativity and Strategy

Going from distressed to deal-worthy within a real estate transaction context is hardly a new concept. But when discussing wholesale real estate, you must view things through a decidedly unique lens.

One must look beyond the overgrown lawns and the peeling paint. The true hidden gems require a keen eye to know how to find them in the first place and a strategic approach to know what to do with them over the long term. Finding distressed properties that can turn into profitable deals is investors’ dream everywhere. Doing so within the unique framework of wholesale transactions is an approach that can serve you incredibly well once you get the hang of it.