Making $10,000 Wholesaling Rundown Houses
Looking for a way to make an extra $ 10k or more? In this blog, we'll dive into how wholesaling real estate can be a side hustle that can earn you your first $100k in 12 months. We'll dive into what types of run-down houses you should be taking a look at and how our CEO David Lecko started in real estate. Without further ado, let's dive right in.
Wholesaling Real Estate Overview
Wholesaling real estate involves finding rundown properties, getting them under contract, and then passing them off to an investor who provides the funds to purchase the property. The wholesaler earns a finder's fee for connecting the investor with the deal. This allows wholesalers to profit from real estate without needing to put up their own capital.
When David first started investing, he was trying to purchase a rental property, not wholesaling. But the story of how he searched for his rental provides insight into how investors view potential deals. Understanding this thought process makes it easier for wholesalers to identify properties that could earn them a $10,000 fee.
Case Study: A Personal House Hunting Journey
David's former boss owned five rental properties in the Midwest. These properties provided a steady cash flow of about $500/month each. Intrigued by this passive income stream, David decided to shift his investment strategy towards buying a cash-flowing rental property.
After searching on Zillow, David found that most listed properties wouldn't cash flow based on estimated rent and expenses. Feeling discouraged but committed to finding a deal, he attended a real estate meetup for advice. He learned he needed to look for off-market, rundown houses and ask owners if they'd consider selling.
After months of driving for dollars, driving around identifying run-down houses, David finally got a call back from an owner interested in selling his dilapidated property. The house had extensive issues - a tattered tarp for a roof, a cramped bathroom, an awkwardly placed water heater, and a leaky tub. But David saw the potential.
Constructing an Offer
To determine his offer price, David researched recently sold comparable homes that, once renovated, were worth around $100,000. He estimated repairs would cost about $50 per square foot, or $65,000 total to fully renovate the house.
Factoring in total purchase and rehab costs allowed David to calculate a reasonable offer price that would still allow an investor to profit. He offered $4,782 for a property that would ultimately have an after-repair value of $120,000.
The Wholesaler's Big Payday
Instead of purchasing the property himself, David could have wholesaled the deal and earned a nice finder's fee with such a discounted purchase price. With $50,000 in potential equity between the purchase and after-repair valuations, a 15% finder's fee would equal $10,000. This illustrates how wholesaling rundown houses can generate five-figure paydays.
Key Insights for Wholesalers
When searching for potential wholesale deals, look for houses with issues like broken windows, bad roofs, and peeling paint. Target neighborhoods where after repair home values are $100k or more to ensure profitable deals. While driving these areas, note addresses and take photos of run-down houses meeting these criteria.
As David's house-hunting story illustrates, deeply discounted properties in decent areas offer investors the chance to create equity through renovations. Using a 15% rule of thumb, wholesalers can estimate potential finder's fees. For a house purchased at a discount with an after-repair value of $160k, a wholesaler could earn around $24k.
The framework of finding discounted properties in solid neighborhoods and connecting them with ready investors is a proven path to earning sizable fees through wholesaling real estate.
Wholesaling rundown houses is more than just a quick money-making strategy; it's a journey into the dynamic world of real estate investment. Through the experiences and strategies of David Lecko, we've seen how determination, market insight, and a bit of creativity can open doors to significant financial rewards. The key takeaway is that success in real estate wholesaling lies in your ability to identify undervalued properties and understand the nuances of the market.
Remember, each rundown property is not just a structure; it's a potential goldmine for the savvy wholesaler who can envision its transformation. By targeting the right properties, negotiating effectively, and connecting with the right investors, you can turn a rundown house into a lucrative deal. And let's not forget the importance of persistence and resilience. The road to earning your first $100k in real estate wholesaling is paved with challenges, but as David’s journey shows, these challenges are surmountable with the right approach.
As you embark on your wholesaling adventure, keep in mind that every successful deal not only brings financial gain but also valuable experience and a deeper understanding of the real estate market. Stay committed, keep learning, and soon, you'll be sharing your own story of how you turned rundown houses into profitable investments. Happy wholesaling!
About Samantha Ankney
Samantha has been a media specialist for DealMachine for 2.5 years. She produces, edits, writes, and publishes all media that is distributed to the DealMachine and Real Estate Investing community.