Even before discussing the ways of how one can do the due diligence while buying from a wholesaler. Let us have a brief look at the concept of due diligence. It is basically the process of researching information about a particular situation before entering into any kind of agreement to buy or sell the property. One of the most common places where due diligence is performed is the real estate transaction. You need to understand the importance of it and how the lack of it can cost you in the long run. Now, you must be wondering the importance of due diligence in real estate. Initially, every seller that is motivated seems to feel like a good fit for your real estate wholesaling program. Sometimes, there is a lot more in the story that can affect the overall picture. Most of the time, the seller only gives you the information that they really want you to know. Some of the things that are important that might affect your monetary transaction are left out. Thus, it is considered important to do diligent research i.e. due diligence before you happen to make any offers. Let us have a look at the steps that you can take in order to do the due diligence when you happen to buy the property from the wholesaler.
Make sure that you call the wholesaler and verify the property address, and look for the proof and look that the wholesaler actually has the property under contract You need to understand that wholesaling is a competitive and successful game and most of the wholesalers are great at playing this game. While making the purchase, make sure and look for that there is no stacking up of the wholesalers and look for the direct person who has the property under contract.
While conducting the due diligence make sure that you estimate the after repaired value i.e. ARV You need to understand and know that the ARV is the basis of your deal. It refers to selling at a price at which you can sell the property rehabbed to the standards of the neighborhood in the span of 30-60 days or less. You can initiate by running comparables i.e. comps. If you have a retailer then this is something they will be able to do for you, but at the end of the day, you will be totally responsible for the value.
Do the math for your own good Though most of the wholesalers price their properties appropriately, there are very few that price them too low. And there are others who happen to price their products way too high in order to maximize their profits. It is completely up to you to determine how much you can pay at the most no matter what amount the property is priced at. Then you must be aware of the strategies that you can apply and of course the formula that you can use for various buying and selling strategies depending on what you have learned in your real estate education and schooling. Thus, you can use the formula and also stick to it. This will help you to minimize your risk and you will have at least two exit strategies for your property. For instance, your exit strategy number one could be that you rehab and sell your property for your profit, and strategy number two could be that you could sell it to another investor if your strategy number one does not go well planned.
Make arrangements to visit and see the property You should make an appointment or take out time to visit the property. Go and visit the area before or after the appointment and have a look at the neighborhood in general. Also, check if there are other properties for sale in that area because this will reduce your chances of selling the property or it might take longer than usual to sell the property. Make sure while doing the due diligence you pay close attention to the structure of the property and if you are new to the real estate business then do not mind paying a few bucks to a contractor and taking him along so as to pay close attention to the structure of the building.
Ask the wholesaler how the sale of the property is going to be accomplished If things happen to move in a positive direction then it is correct to ask the wholesaler how the sales will be accomplished. Well, there are several techniques for the same but space will not allow you to get into each and every technique. Thus, you need to make sure that you check with your real estate mentor or a trusted and experienced real estate investor on what is needed and what is your role and the role of the wholesaler in it. Some of these techniques include LLC assignment and double close.
Earnest money Most of the time you are already aware of the amount of earnest money that the wholesaler is asking as it comes up in the general conversation about the deal. Well, if the amount is too much, you can always ask for the extra time and then make use of that time to have a glance and conduct research on the property for your own good. This will save you from investing money if the property you are thinking of investing in is not too good.
Inspection Inspection is not a bad idea if you are looking forward to investing in a property and spend your money on the same. This can be considered a great idea especially if you are new to the real estate business.
These are the strategies that you can opt for while you happen to do the due diligence while buying a property from a wholesaler. These tips and ways can help you to invest in the best property and also you will save yourself from investing in some property that might not serve the purpose or might not be good for you. By doing the same you will be able to avoid committing any big financial mistake by learning everything about the property that you are going to invest in. If you need help with this then you can consider seeking help from Better Capital and get the best help with real estate investments. For more information on the same, you can visit our website at https://www.bettercapital.us/about and get the best help with your real estate issues.
