Real estate wholesaling is a fast-paced business strategy that involves the contract assignment for a property to an end buyer. One of the key elements in this process is "double closing." This term might sound complex initially, but it's a straightforward concept once you get the hang of it.
What is Double Closing?
Double closing, also known as "simultaneous closing," is a real estate transaction strategy where the wholesaler acquires a property from a seller and then immediately sells it to an end buyer. It involves two separate transactions - first between the seller and the wholesaler, and second between the wholesaler and the buyer.
In other words, the wholesaler temporarily becomes the owner of the property before selling it off. This period of ownership can be as short as a few hours.
The Process of Double Closing
Here's a step-by-step breakdown:
1. Property Identification: The wholesaler identifies a potentially profitable property and negotiates a purchase agreement with the seller.
2. End Buyer Search: Parallel to this, the wholesaler looks for an end buyer interested in purchasing the property.
3. First Closing: Once both parties are lined up, the wholesaler completes the purchase of the property from the seller, officially becoming the owner.
4. Second Closing: Immediately following the first closing, the second closing occurs where the wholesaler sells the property to the end buyer.
5. Profit: The wholesaler makes a profit from the difference between the price they bought the property for and the price they sold it at.
Benefits of Double Closing
Double closing offers several benefits:
Privacy: The purchase and sale prices remain confidential since the end buyer and the seller are not involved in the same transaction. This can be advantageous when the wholesaler wants to keep their profit margin private.
Control: The wholesaler has more control over the process as they officially own the property, even if it's just for a short time.
Flexibility: It allows for more flexibility in terms of financing. Since the wholesaler is the temporary owner, it can be easier to secure funding.
Considerations for Double Closing in Wholesaling
While double closing has its benefits, it's not without considerations:
Closing Costs: Double closing involves two separate transactions, which means two sets of closing costs. This can eat into the wholesaler's profits.
Funding: Wholesalers need to have the funds available to purchase the property initially, which can pose a challenge for some. Note: It has been done without funding the deal first. Check with your title company or closing attorney :)
'1' Day Funding or Short-Term Funding: You may want to consider reaching out to companies such as Lima One Capital for further information.
In conclusion, understanding the concept of double closing is crucial for anyone looking to enter the wholesaling real estate business. It's a strategy that, when used correctly, can lead to significant profits and success in the industry. Always remember to conduct due diligence, understand your financial capabilities, and consult with a real estate attorney or expert when necessary.