What Is Wholetaling in Real Estate?
When we talk about real estate investment, creativity is a skill that has helped many real estate investors to come on top and grab the best deals on the market. These creative strategies should be aimed at maximizing profit while minimizing risk. One of these creative strategies that have become very popular in the past few years is wholetailing. In this article, we will define wholetailing in real estate and how you can take advantage of it.
What Is Wholetailing?
Let’s start with a practical example: Picture a scenario where you come across a property with great potential. Its shape and conditions are decent, but it could use a little TLC to reach its full market value. But, instead of doing a whole renovation or flipping the property to another investor, you choose to do wholetailing.
Wholetailing is basically a hybrid approach that combines elements from wholesaling and flipping. How does that work? Unlike traditional wholesaling, which assigns the contract to another buyer for a fee, or flipping, which is doing extensive renovations, wholetailing strikes a balance. In a wholetail deal, you buy the property, make minimal updates and repairs, and then sell it on the multiple listing service for a profit.
The Benefits of Wholetailing
We can list many wholetailing benefits that have made this process very popular among real estate investors. The first on the list would be the potential for high profitability with relatively low effort. In wholesale, you make a modest fee of a few thousand dollars, but with wholetailing, the profit margins can increase because you are selling the property directly to end buyers.
In addition, wholetailing is a lot faster and less risky than traditional flipping. There is no need to spend months on extensive renovations; you just need a couple of weeks to complete the wholetail deal. The fact that you will expose the property in a shorter time to market fluctuations and costs will make your investment process much more streamlined and efficient.
Variations and Flexibility
However, you must remember that wholetailing isn’t a one-size-fits-all strategy. The approach is individual, and as we mentioned before, much creativity needs to be put into the planning. Consider the property condition, the investment goals, and the market dynamics to plan the wholetail process. For example, you can only make cosmetic updates to improve the property’s visual appeal, like painting, landscaping, or updating fixtures, and then offer it to the right target buyers.
Or, you can go for a more hands-off approach, which is a situation where you focus solely on cleaning out the property and listing it for sale. Again, the strategy should be flexible and adaptable to current market trends.
How Do You Find Wholetail Opportunities?
If you think that wholetailing requires doing out-of-the-box marketing tactics, you would be wrong. Instead, it’s about leveraging existing lead generation methods to identify suitable opportunities. You can go through direct mail or advertising, but the goal remains: finding properties that align with your whole tail criteria.
While wholetailing has many benefits, it’s still vital to see it as part of your broader investment portfolio. You shouldn’t rely solely on wholetailing as it will limit your potential to find other lucrative opportunities. But, if you integrate it with wholesaling, flipping, and long-term buy-and-hold investments, it can bring you financial success.
A Real-Life Practical Example of Wholetailing in Real Estate
Let’s take a property listed for $100,000 in a desirable neighborhood. The market research has shown that the after-repair value will be $200,000. But you still need minimal updates, repairs, and improvements like painting, landscaping, and updating fixtures, which will cost approximately $5,000.
Now, let’s break down the numbers:
- Purchase Price: $100,000
- Estimated Repair Costs: $5,000
- Total investment: $105,000
Now, if we are to list the property on the MLS for $195,000 after completing the improvement and taking out the closing costs and agent fees of approximately 7%, the net amount received from the sale amounts to $181,350.
Next, let’s subtract the total investment investment from the net sale proceeds to calculate the net profit:
- Net Profit = Net Sale Proceeds – Total Investment
- Net Profit = $181,350 – $105,000
- Net Profit = $76,350
In this scenario, you will get a net profit of $76,350 from the wholetail deal.
Essentially, wholetailing is a profitable approach to real estate investing. Consider it as part of your portfolio, alongside REITs, for diversified success. You can unlock new opportunities for success by leveraging the speed and simplicity of wholesaling with the profit potential of flipping. However, wholetelling should be considered only as an extended approach in your real estate investment portfolio.
Need A Massage? Learn How To Give One To Yourself And Your Loved Ones
Receiving a massage, whether it’s given by someone else or self-administered, can help loosen your muscles and establish a better connection not only with your body but also with the people you love.
