The potential downside – that is to say, the money you can lose if things go wrong – is greater now than it was a few years ago, before the banking collapses of late 2008, so people who would previously have considered buying a house to make a profit are now thinking twice. This has had numerous knock-on effects, not least the overall drop in house prices that are leading to families staying put where they might previously have looked to upgrade.
There is, however, an opportunity for those speculators who have an iron nerve and the borrowing power to buy new property. The drop in house prices is excellent news for real estate speculators who are prepared to purchase a property in the expectation that the market will hit bottom soon and start to increase pretty rapidly. There is a buzz around the practice of “wholesaling,” where a speculator purchases houses specifically for the purpose of a quick turnaround sale. It requires real market awareness and a lot of nerve, not to mention the scope for enough borrowing to buy these houses. But for anyone who satisfies these requirements, wholesaling is an option to make yourself a bit of money.
Wholesaling in the housing market is based on the same principles as the practice of the same name in the retail market – you buy something for a knockdown price and then use presentation and convenience in order to sell it on for a profit. The idea behind this kind of wholesaling is that the profit is not as large as it would be on a large scale redevelopment, where a lot of work and a vision can pull in profits in the six figures. The way that this kind of wholesaling makes you money is a little bit at a time, but far more often as it takes a lot less time to turn over a sale.
If you buy a house at a bargain price – which is more than possible at the moment in light of the depressed market – then you can realize a profit on it very quickly, as assiduous purchasing can see you get a price that is significantly less than its actual value. This means you can sell it at a bargain price – or what the purchaser will consider a bargain price – while still realizing a profit between $5,000 and $15,000, or more if you do a very good job making it desirable.
Though that may not sound like a profit to get your pulse racing, bear in mind that a large-scale redevelopment can take several months. A comparatively small job taking seven to ten days that realizes a decent profit, when replicated numerous times, can make you better money than a single large project.