When wholesaling real estate, this method of closing requires a lot of working capital (i.e. – cash) on hand, but it gives you the most control over the process.
Benefits of Wholesaling Through a Traditional Close
When you buy a property and close it the traditional way, it’s your property, so you can literally do whatever you want with it.
You can show it anytime. No one can accuse you of breaking the law for selling your own property. You never have to worry about the buyer knowing much you paid for it – it’s literally the best case scenario, except for the two big drawbacks.
Drawbacks of Wholesaling Through a Traditional Close
With a traditional close, you actually get all the benefits of doing an assignment and/or a double close, with none of the drawbacks except for two important details.
1. You Need the Funds to Buy all of Your Inventory
If you don’t have access to the cash you’ll need to buy a property and close quickly, wholesaling through a traditional close is going to be difficult (if not impossible) to execute on a consistent basis.
For this reason, some wholesalers will start their business by wholesaling through assignments or through double closings, and once they build up enough cash, they’ll be able to start closing traditionally (which irons out a lot of wrinkles in the process).
2. If You Buy a Bad Deal, You’re Stuck With It
This issue boils down to your own due diligence and experience.
When you do the appropriate homework on the property (understanding what it’s likely to sell for to another investor, any major issues or “gotchas” that may come up in the process, knowing how long it will take to sell in your current market conditions, etc) and you understand how much risk you’re taking on with each deal, this problem will become less and less of an issue, but even so – this method is very unforgiving.
If you make a bad purchase, you’ll have to pay the price for making the wrong decision.
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