There is no controversy about the reality of real estate wholesaling as an essential form of real estate investment. Before diving into real estate wholesaling in New Jersey, you must be familiar with the benefits, risks, and legal concerns involved. Although you can make a lot of profit in real estate wholesaling, it is not all roses and cake.
Real estate wholesaling involves you as a wholesaler finding a property that is up for sale by a seller and passing on the deal to an investor who is the end buyer. What you need is to have a list of buyers, potential properties, and financial sources.
You may be more interested in the benefits than you are in the risks and legal concerns because the benefits imply that they are beneficial, but at the same time, they are important things you should know.
Benefits of Real Estate Wholesaling in NJ
There are many benefits in wholesaling real estate in New Jersey, and you can be raking in thousands of dollars as soon as you start. You can make a thousand dollars and more in just one deal.
So, what are the benefits of real estate wholesaling?
Earning a large sum of money within a short timeframe
In real estate wholesaling, you can make a lot of money quickly. You can make thousands of dollars on one deal.
For instance, a seller may want to sell his/her property for $50,000 dollars. As a wholesaler, you get the deal and call one of your top-rated buyers about the deal. Then you sell it to them at $55,000 or $60,000 based on the property’s value.
You would’ve earned $5,000 or $10,000 in an hour or a day. That is without going through the stress of a 9 to 5 job.
Minimal capital to begin
It is a myth that you don’t need capital to start your real estate wholesaling business. You need capital to start. The good news is that you don’t need to have millions before you can delve into real estate wholesaling in New Jersey.
With your minimal capital, you can make millions in a year. If you have a problem with getting capital you can borrow money from legitimate money lenders or friends.
You need money to buy properties in case you want to engage in a double closing. This involves that you buy the property first before reselling it to a buyer.
No repairs cost
Real estate wholesalers usually connect a seller to a buyer and often time don’t necessarily purchase the property.
They find a buyer who is also an investor. They will bear all repair and rehabilitation costs of the property. You don’t have to worry or bother about repairing the house before you sell it.
The only problem is that you don’t get to make as much profit as if the house is in perfect condition. But not to worry, you still get to make a profit from the deal.
Minimal risks
There is no risk-free business. This is also true with real estate wholesaling in New Jersey, or anywhere. The business has minimal risk as long as you do not hold onto houses for long and you are done with a deal within a few days.
You just need to strategize and plan so you don’t suffer loss in this business.
Flexible working time
In real estate wholesaling, you get to plan how you want to work. It is different from the usual 9 to 5 jobs, and you enjoy flexible work location as well.
You may be driving through a street, and you come across a property that is up for sale. Another option is to work with bird dogs or deal scouts who get deals for you. This way, you don’t have to put in as much time.
You can start, negotiate, and close a deal on your laptop in your home. This gives you a flexible work time and can do other things while making millions easily.
High demand
Properties are always in high demand in NJ. There is always a banker, investor, company that is looking to invest in properties. That will get the profits in the long run. Some people are interested in looking for residential properties.
As long as you have a plan and know how to leverage the many opportunities available in real estate wholesaling, you will enjoy many monetary benefits in this field.
Volume potential
There is no limit as to how many houses you can sell in a week, month or year. You can sell as many as you want as long as there are properties, sellers, and ready buyers. No law regulates the number of houses you can sell in New Jersey.
You can make a lot of profit from selling as many as you can.
High return on investment
You can invest a small amount of money and get a lot of money back in return. The benefit of this is that you control your ROI as a real estate wholesaler. If you want to work hard, you can make as much as 50% or 70%, depending on you. There are many opportunities you can get to make passive income.
Risks in Real Estate Wholesaling in NJ
There is no risk-free business. As a real estate wholesaler in New Jersey, there are risks you have to know about and prepare for if you want to make it big in the state. The risks are:
Not having a buyer
One risk of real estate wholesaling is not having a buyer. Wholesaling real estate is a smooth ride if you have a lot of buyers on your list. You can see a lot of properties up for sale, but without buyers, there is nothing you can do.
Building your list of buyers can be work because they need to trust you or have had deals with you to keep working with you. First, you should have a list of buyers who are always available to buy properties when they are available.
You can also group your buyers to different lists based on their property interests, so when you have a deal that pertains to one of the groups, you can reach out to them.
Unstable income
Income in real estate wholesaling is not guaranteed. Unlike 9 to 5 jobs that you are certain that you will be getting a paycheck at the end of the month, you get your income per the deals you close.
In times when the real estate market is unstable or unforeseen circumstances arise, you may experience unstable income. There are times when money won’t flow in as you should. Business can be slow at times. You may want to plan ahead of that by having a side income or having a working savings plan.
Deal failure
Real estate wholesaling can be a smooth ride but is filled with risks, especially when a deal fails. A seller or buyer may pull out of a deal.
In a situation where you make a double closing contract, you buy before selling it to another buyer, but you cannot get a buyer on time. You may lose a lot of money.
You can also be in a situation where you couldn’t get a buyer for a seller before the end of the deal, and the deal goes to another wholesaler who has a ready buyer.
Market instability
The real estate market is unstable, and it is a problem every real estate agent faces, including real estate wholesalers. The price of properties can go up or down at any time. This could mean a lot to you.
This could mean that you are missing an opportunity when prices are high, or you make a loss when properties are low.
Legal Concerns in Real Estate Wholesaling in New Jersey
Is real estate wholesaling in New Jersey illegal? Do I need a license before I can become a real estate wholesaler? What are the legal issues in real estate wholesaling? You may have these questions on your mind and want answers to them.
First, you should know that real estate wholesaling isn’t illegal in NJ, and you don’t need to be a real estate agent to become a wholesaler in the state. You also don’t need a license to operate as a wholesaler in New Jersey, but you may decide to get a real estate agent license.
However, when you want to close a property deal, you should consider whether you want to disclose something to the buyer. You don’t want to lose your buyers due to a lack of trust in you, or worse, get dragged to court for not being truthful about the deal in saying and contract.
Under the common law of New Jersey, a statute protects buyers against sellers who fail to disclose facts or hide cogent information regarding the property they want to buy.
In a situation where you don’t disclose important information to your buyers, your silence may be considered fraudulent, and that will definitely cost you something if it ever makes it to court.
As a wholesaler, you must disclose known, latent, and material defects, if there are any, to your buyers. In your contract of sale with the buyer, you must include all these defects and ensure that the buyer knows what he/she is getting into.
Sometimes, disclosing property defects may make buyers back out of a deal, but that won’t affect your credibility and will make buyers trust you more. If you didn’t disclose your defects in a defective property, you may lose your credibility and buyers.
You can make a lot of money from real estate wholesaling if you leverage the opportunities. You can make millions or struggle as a real estate wholesaler if you don’t know what you are doing.
Prepare for the risks involved in wholesaling, and prepare ahead for it. Be familiar with legal issues, and avoid anything that can make you lose your credibility as a competent and trustworthy real estate wholesaler.
As long as you are running your wholesaling business the right way, which also involves the legal aspect, considering the risks, you will be a boss in no time.
