Wholetailing is a new way to make money investing in real estate. Like wholesaling but with a new twist and can make you lots of money. But what is wholetailing and why is it different than wholesaling?
What is Wholetailing?
Wholetailing is a combination of two different real estate investing strategies: Wholesaling and Flipping but without all the hassle and large expense of a full-blown flip. Instead of a full remodel, wholetailing would be cosmetic updates to the property, like painting the interior and updating the flooring.
Other great ways to increase the appeal of the home, and make you more money would be:
- Paint the exterior
- Spruce and clean up the front yard
- Update the hardware
- Replace the fixtures and lighting
- Even update the appliances
This will cost a fraction of what a traditional flip will cost and make you a lot more money. With a traditional wholesale property, you may make $3,000 on the deal. With wholetailing, your profit dramatically increases as you update the property.
The Problem with Wholesaling Properties
Let’s first start with the problem with wholesaling. The problem is that you leave a lot of money on the table for the next investor.
Wholetailing is just another tool in an investor tool-belt. When you learn how to wholetail, you put that extra money into your pocket because you are selling the property to the consumer.
Instead of wholesaling the property for quick cash, you is opting to wholetail as an alternative to straight wholesale.
The real estate market is an ever-changing place where new methods and techniques are introduced on a constant basis.
If you only have a few options to sell a property a decade ago, today, you can choose from different ways of making sure that your listing will be sold in no time.
Wholetailing is one of the fast-rising methods used in the real estate market.
Follow these steps to wholetailing a property:
- Find a property for sale as a normal wholesale property
- Put the property under contract with and/or assigns in the contract
- Calculate the cash flow, wholesale, and flipping profits
- Figure out how much it will cost to fix up the property yourself
- Find funding to flip the property yourself
- Fix up the property and get it ready to sale on the MLS
- List the property for sale
- Make loads of profit flipping the property
Traditional wholesaling is all about purchasing a property at a big discount and serving as the middleman because your buyer will be another investor.
While the money you will earn might not be as much as what you will earn with a rehab, wholesaling is quick with low risks involved.
Wholetailing, on the other hand, involves buying at a big discount. But, this time you will not sell to another investor and instead, you will rehab the property in an acceptable way for it to be sold on multiple listing service or MLS to earn retail profits.
You can pretty much think of wholetailing as a hybrid strategy between a rehab deal and a wholesale deal where you can enjoy the benefits of the two strategies.
The practice of wholetailing in real estate is where you look for a deal and close on it instead of having your contract rights sold to a different investor.
During wholetailing, most people close on the property fast compared to wholesaling where they need more time to look for another buyer.
More funds will be required to purchase the property in this case. However, being the actual owner, you can put the house on MLS, make it more exposed to potential buyers, and boost your net profit.
Just take note that not all properties are good prospects for wholetailing. It is recommended to look for solid and clean houses in ideal locations that someone can occupy without delay.
Fixer-uppers tend to enjoy quick sales in MLS provided that the price is right, often faster compared to retail properties. A wholetail property is something that is clean enough for occupancy but priced lower than the comps that might require some TLC.
There are times when it is better not to revamp the property with all the hottest finishes that will only maximize retail prices.
This is because there is always a great market for solid and modest houses in good areas available at lower prices.
Wholetailing a Property for Profit?
Let us try to understand the process better by dissecting the two parts of the world. The first part, whole, is the component referring to wholetailing.
This means that you will purchase a property and do just minimal work on it.
The minimal work may vary which depends on your objective and on the property itself. You can just do something simple such as vacuuming the carpet, trimming the shrubs, or cutting the grass.
You may also install a cheap rental-grade carpet or apply a fresh coat of neutral paint on the interior walls.
The main point here is that your work’s extent will be rather limited to this spectrum. You won’t do a complete rehab in any sense of the word. Basically, the goal is to make the property marketable, presentable, or livable.
Now, let’s move on to the second part of wholetailing. Tail refers to the term’s retail component.
After you have purchased the property and exert the minimal amount of effort and work on it, you will now turn around then market this on the MLS. This is when you look for a realtor who is going to have the property listed, marketing and selling it through MLS.
Wholetail is similar to wholesale although you will do some work on the property for it to become more attractive to the eyes of rehabbers.
Some of the things you can do to have a successful wholetailing property include:
- Clearing up landscaping
- Cleaning the trash
- Paining the inside and out
- Replacing the flooring
- Do a complete and thorough cleaning of the property
With wholetail, you can also bring this up to meet the buying requirements of FHA. This means that this should be functional and every mechanical system must work.
It is required by the FHA that plumbing, electrical, and HVAC should work and the roof should still some life left in it.
However, you don’t need to bother with interior details such as paint, plumbing fixtures, or carpet so it wouldn’t sell to typical retail buyers.
Benefits of Wholetailing
Probably the most obvious advantage of wholetailing is the chance to exploit the existing resource of the unused leads. The costs of marketing stay the same yet the profits increase. This is a no-brainer.
There is an obvious reason for having a property listed on the local multiple listing service. You wish to look for buyers who are willing and ready to pay more than those investors included in your current buyer’s list.
The two principal groups of people are retail buyers and investors.
Not every investor has the same criteria when buying properties. It doesn’t matter how large the list of your buyers is because it is not likely that this is going to include all people looking for a good investment property in the area.
The market of retail buyers is a place wholesalers won’t usually touch. These people will not buy more than one property from you and they require more work compared to an investor.
The advantage is that these buyers are ready and willing to pay more for their dream home. Most of them are willing to carry out the heavy lifting of handyman special on their own.
They only need a deal on the purchase price.
Wholetailing a house is the best way to capitalize on the properties that look like you cannot do anything with them at all.
Look for an agent who can work with you throughout the whole process right from the get-go. The final result is more money and more deals.
Tips to Spot Good Wholetail Deals
You might see these kinds of properties these days on multiple listing services.
Since you know that it’s a wholetail-type deal, you’ll likely see comments such as “needs TLC”, “as is” or “price reflects the condition”. This kind of verbiage is meant to indicate that it isn’t your regular retail property and it requires work.
There are many investors who are combing MLS every day to look for investment properties. Those are some of the descriptions and phrases they’re searching for.
They are searching for some wholetail-type properties that they may purchase at discounts on MLS, make investments, and either sell them as a retail property or hold them as a rental property.
That is why wholetailing is about. It is a combination of retail and wholesale. The wholesale aspect is the fact that it’s a minor rehab or light cleanup. The retail aspect involves selling it on the MLS or retail market.
Wholetailing is Not Complicated
There is a reason by wholetailing is interesting, appealing and beneficial. First and foremost, you can see that such properties will need a lot less of your work when compared to the traditional rehab.
If you think that doing full house renovation is daunting, you are lucky because it requires less work. It only needs simple shrub trimming, lawn maintenance or painting may be done inexpensively, easily, and quickly.
Such require less money in comparison to the traditional rehab. In these homes, you will get minimal rehab expense since you will only be doing a minor rehab. Then, you can price the property at discounts though it requires work.
These deals also demand less time. Traditional rehabs may take 30 to 90 days, depending on the extent of your job. On contrary, such wholetail properties are ready for market in a week or in a weekend at most.
Wholetailing also requires less experience. It’s actually a typical handyman work that you do around your own house like landscaping and simple cleanup work. This can be done without the need to have lots of experience.
Another advantage of wholetailing for a part-time or new investor is that you can earn a bit more profits or small greater margin on wholetail deals than traditional wholesale deals.
Basically, wholesale deals are sold off-market for money, but wholetail deals are sold on-market or on MLS and can involve financing from the buyer. Selling in this marketplace can help you gain a little more profit margin since you can price it a bit higher.
The reason behind it is that you’re not marketing directly to the cash investors off-market.
Typically, you’re marketing to the retail buyers or investors who are ready to pay a bit more or who are on MLS for the properties in exchange for ease of finding them off the MLS.
What do you do if you don’t have a buyers list already?
A great advantage of wholetailing is that you may leverage a real estate agent to sell the property for you while you focused on your career or day job.
Your real estate agent can do the job for you to sell the property, leverage the MLS, leverage her or his experience and network, and a real estate agent may also get the property sold for you while you concentrate on your other career.
Moreover, with wholetailing, you don’t need to purchase such properties as deep as you would if you’re into traditional wholesale deal. You may pay a bit more for the wholetail property since you’ll get a bit more.
You do not even need to have a buyers list since you can sell the property on MLS. There’s a built-in buyers list you can find there.
Tips to Find the Right Realtor for All Your Virtual Wholetail Deals
The best place to start your search is through online. Use the right keyword when searching for a realtor in a certain area. Then, list some of the first ones you prefer.
You may also ask some questions like the amount of sales they did last year and how familiar they are in the local market.
You can ask basic questions for you to start. What you should do is to feel them out to ensure they’re a good fit for your needs. Pick the realtor that you connect with. If they don’t like to scope out the property, it’s time to hang up. You should not work with a lazy realtor as it means more work for you.
If you know somebody in a certain location, you can just ask for referrals. Think of anyone you know who’s a center of influence in the place and find out who they can recommend as a realtor for you.
You should get referrals from those who are diligent, trustworthy, knowledgeable, and responsive. It is because you can be assured that they will recommend someone who is professional and does her or his job well.
Never overwhelm yourself with the process of searching a realtor for your wholetail deals. You want to look for the best realtor, but you don’t want to waste your precious time doing so.
Once you find a great one and the results are there, the only thing you should do is to have one for that certain area and you are establishing your own team the right way.
What you like to avoid is taking months to make decisions. If that’s you, the problem is not your realtor. It is actually you.
So, before it’s too late and to avoid any possible problems in the future, you should make a wise decision and move on.
Why Consider Wholetailing?
Wholetailing is ideal for those who are feeling stuck, not ready to purchase and hold, and if they think that wholesaling is complicated to buy and sell.
It may be a great exit strategy, which enables you to get to the real estate investment game.
It also removes lots of obstacles and reduces countless of risks. But, you have to take note that wholetailing might not be for everyone.
However, you can always give it a try if you want something new in real estate.