Hi, people… Sperber here. A good number of you have written in with questions about one of the hottest investment trends going on right now, co-wholesaling.
So today, I am going to teach you guys exactly what co-wholesaling is and how to do it by answering some of these great questions.
Let’s get to it…
You’ve Got Questions, and I’ve Got the Answers…
I’m a newbie to real estate investing… I keep hearing the term “co-wholesaling” and I can’t put my finger on exactly what it means. Everyone seems to have a different definition for it.
Can you answer what co-wholesaling is for dummies?
Lynette McKenzie from Rochester, New York
Sure, Lynette. No problem.
You’re correct in that this term is becoming more and more popular today.
Basically, co-wholesaling is working with another investor to do a joint-venture wholesale deal.
There is two different ways you can do this:
Way #1: Go through other investors to find deals for your cash buyers (usually through your cash buyer’s list).
Way #2: Go through other investors to find cash buyers for your deals (usually through their cash buyer’s list).
Notice these 2 ways are the same, just reversed.
Why would you co-wholesale vs. wholesale? How is profit determined in co-wholesaling?
Rich Wright from Louisville, Kentucky
Co-wholesaling is great when you don’t have all the resources you need available and is a great way to get your foot in the door of the investing world.
For instance, you may not have any money, but you have time. Spend your time finding great deals and co-wholesale the deal with another investor to handle the financial part of it.
Likewise, if you have built rapport and have a cash buyer’s list (but don’t have the time to find deals), ask other investors if they have any deals that you can share with your buyer’s list.
There are 2 common methods for profit sharing in co-wholesaling:
Mark-up: If you’re the seller, you mark-up the other investor’s price and keep the difference. The other wholesaler may tell you what to mark-up the price to, or they may leave the price to your discretion.
Split it down the middle: Both wholesalers split the profit down the middle.
Is there a greater risk in co-wholesaling? Is any additional paperwork required?
Tim Groner from Mobile, Alabama
Yes, there is always a risk that the other investor could go behind your back, pull-out, change prices, and perform other shenanigans. Although many investors place their trust on a gentlemen’s word, it’s always a good idea to protect yourself with paperwork.
Paperwork used in co-wholesaling:
Purchasing/selling agreement: The purchase and selling contracts that are, of course, needed.
Assignment Contract: Hands over the rights from one person to another.
Option or Flex Contracts: Provide flexibility through different options. This is the best contract to use so both investors have equitable rights and flexibility to sell.
To reduce the risks, I also recommend:
- Maintain a phenomenal relationship.
- Record an affidavit of equitable rights.
Does co-wholesaling require a real estate license?
Thanks for all your help!
Tonya Patterson from Atlanta, Georgia
Nope. You don’t need a real estate license for co-wholesaling any more than you do for wholesaling.
What is the difference between co-wholesaling the front end of deals and bird dogging?
Lou, great question.
The difference between a co-wholesaler that finds deals and a bird dog is that the bird dog has nothing to do with the contract, they are just “tipping you off,” per say.
Keep it real. Keep it classy.
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