Rehabbing and selling a property to a retail end-buyer is usually the most profitable part of short-term real estate investing. Once rehabbed, the investor will then sell the property by using the Multiple Listing Service or by For Sale By Owner (FSBO) to someone who wants to live in the property.

The time to complete the rehab depends on the extent of the rehab and the ability of the investor to get end-buyer financing. Most often the property will have the kitchen and bathrooms updated and the appliances replaced to get the maximum resale price. While the rehab may be completed quickly, in four weeks or less, the issue for an end-buyer getting conventional financing is that his lender may have a seasoning requirement.

Unfortunately, these seasoning requirements by conventional lenders can be anywhere from 90 days to one year. This seasoning must be taken into account when dealing with an end-buyer. The simplest solution is to change lenders for the end-buyer, just check before you sign a contract with any buyer. The loan insurers have fluctuated between 90 days and no seasoning requirements, the issue is that conventional lenders, national and regional banks, can have much more stringent seasoning requirements.

Wholetailing is different from regular rehabbing in that the property is carefully chosen for minimal rehab, preferably only one week’s worth of patching and painting of the kitchen and bathrooms and no replacement of appliances or renovations. The key is to find the right property and often this can be done by looking at properties listed on the MLS that are coming up to their listing expiration. These sellers are motivated in many cases since they have been waiting for 6 – 9 months and had no results.

If the investor offers 75% to 80% of the former listing price and resells it at 95% of the listing price, the investor will make about 20% of the sale price, i.e., for a $200,000 property, the net profit should be $40,000+. The market in the area must be stable and not declining as in many parts of the country. Effectively the investor is buying “wholesale” from the seller and retailing the property with minor repairs.

An additional possibility is to work with the homeowner by partnering on the sale of the property – thus not having to put any money in the deal. Typically, the homeowner will receive ½ of the net profit on the deal. The seller gets out of the home he couldn’t sell, the investor does a deal with little or no money, and the end-buyer is purchasing directly from the homeowner so there is no seasoning requirements for the end-buyer.

In summary, rehabbers can profit from learning to wholetail properties that need very little work. The best method of selling these properties is to use a FSBO program that uses extensive marketing techniques. Using the MLS will essentially put a glass ceiling on the sale price as the end-buyer’s lender will look to see if the property has been listed. The lowest listing price will become the most a bank will loan as it makes sense since at the lowest listing price the property didn’t sell. Using an option contract and partnership agreement with the seller allows an investor to do a deal with no money, no credit and no risk and with no loss of profit potential.

By: Dave Dinkel

About the Author:

1. Home Buyers and Sellers Real Estate Glossary
2. For Sale By Owner and MLS Listings
3. Real Estate 101 – Firing a Bad Agent
4. Home Selling a FSBO – How to List Your Home on the MLS and Receive a CMA Without a Realtor Listing
5. 20 Questions You Must Ask Your Next Agent Before Signing On the Dotted Line
6. Warning to Homebuyers – Some Realtors Are Relisting Homes to Make Them Appear as a New Listing
7. Bend Oregon Bank Foreclosures Are Selling Fast
8. MLS – Multiple Listing Service & The Competition Bureau
9. Alaska MLS
10. Mystery Listing