Wholetailing combines a retail sale with wholesale in real estate. Savvy investors who are used to earning a profit flipping a home can spot the importance of a wholetail deal immediately. A person can define wholetailing as acquiring a single-family or duplex home and selling it themselves to their list of buyers. The process is a little different from a traditional deal. If done correctly, a decent amount of money can be earned. Knowing what is wholetailing is very beneficial in the housing industry.
How to Wholetail Correctly
In a real-world scenario, an investor will already have a growing list of buyers. It does not matter if the buyers are newbies or experienced. The most important thing about moving a property is the buyer’s list. It is very common to come across deals in more than one way.
A property that is not in the best condition might not be upgraded by the original owner before a sale. In this case, the property can be put under a contract known as a wholesale deal. The investor who acquires the property will be hoping to sell as quickly as possible.
In order to wholetail a home correctly, the house has to be acquired for a lower amount (ARV: actual retail value). Repairs or simple upgrades must be completed for a lower amount in order to keep the profit higher. Instead of being a middleman in a traditional wholesale deal, the wholetailer is the first investor who buyers the property for resale.
How Pro Investors Use Wholetailing
A house must be located using every means necessary. From market listing, to friendly referrals to word of mouth, the first step is finding a property worth putting time into.
Once a house is found, a negotiation must be made with the original owner, and not the person who might be living in the home. In many cases, a house will be in a decent neighborhood, but it has fallen behind on repairs and upgrades through the years. If it is in a growing neighborhood where first-time buyers regularly purchase, the acquisition price might be a little higher than normal.
A calculation should be made about cash flow, repairs, taxes and other expenses prior to putting a home under contract. Once these things are calculated, an offer can be made to the actual homeowner.
The residence must then be listed on the MLS (Multiple Listing Service) in your area. Some real estate agents give access to the MLS to local buyers, but a fee is usually involved. It is typical to reach a large number of buyers who are interested in a wholetail deal for use as their first investment property.
In essence, the property is flipped in the normal way, but with the minimal amount of effort possible. A healthy profit margin can be made, and an investor can be on his or her way to their next deal.
Why Not to Sell Wholesale Instead
Every investment strategy should include a viable exit strategy. Too many people make mistakes like buying and holding, and then run into issues getting rid of the home. A wholesale deal, in the traditional sense, requires you to have a buyer ready to purchase at a huge discount. In most cases, very little money is made by passing a deal along to someone else who will resell the house themselves.
To make more money, wholetailing is a much better option. The house can be under contract in the same manner as a wholesale option, but the repairs are made to get the home into sales worthy condition on the MLS. Most Realtors will not list a property for you unless it meets their minimum guidelines for sale.
If the repairs are completed correctly, a home can be sold with minimal upgrades, and the profit potential is much higher. It is not uncommon for an investors to make 2 to 10 times profit on a wholetail deal compared to a regular transaction.
How to Find Flippable Houses
Professional agents, middlemen and others use different terms to market a house. The condition, age and other factors that affect the selling price are taken into consideration first. Once a determination is made about the value, a label is placed on the residence.
Target words like “needs TLC, investor special, as/is condition, or price reduced for fast sale” are very common to find as wholetailing opportunities for investors. These words are meant to reach a specific buyer, and reflect that work must be completed once the dwelling is purchased.
Not every buyer will be interested in making an offer even after the wholetail house is ready for sale. It is quite common for single or married couples who are just getting started in real estate to find their first deal with a flippable property. If the house can be marketed to that group of people, the chance in earning a decent profit margin is much higher.
A retail buyer, is a person who pays the retail price for houses. A wholesale buyer pays at a huge discount. Inventory can be found through buyer’s lists, Craigslist ads, Facebook posts, MLS, for sale by owner signs or other advertisements. Knowing how to spot a deal is crucial when wholetailing in the U.S. housing industry.
When Not to Wholetail a House
There are circumstances that are too extreme that will prevent you from wholetailing a home. One instance is when you cannot locate the original owner. Even if you use skip tracing for real estate, it is sometimes difficult to locate and negotiate with the real owner of a residence.
It is quite common that repairs will exceed the actual profits made on a property. With older houses or ones that are damaged from weather or fire, a lot of issues can be hidden. It is not until you start to tear apart the property when the most expensive repairs are located.
If a buyer’s list includes only people interested in wholesale properties, marketing wholetail homes to them is not a good idea. Paying for leads, keeping your list updated and paying for mailing expenses can be too much effort without the right target group of buyers.
In a slow market, it might not make sense wholetailing. Buying and holding is not the strategy here. Moving out inventory quickly, and earning a sizable profit is the main reason that smart investors use wholetailing as a go-to strategy in safe markets.