What can real estate investors do when high closing costs crush deal potential when wholesaling houses?

Borrowing costs and other real estate related costs are on the rise adding to the challenge of closing costs digging into profit spreads. This can make up a substantial percentage of the spread on cheap foreclosures and be tens of thousands of dollars or more on bigger deals. So are there any options for reducing these deal killing expenses?

What some real estate investors aren’t aware of is the vast disparity in the amount of closing costs between different states. Do you know which states are high closing cost states, and where yours ranks?

There can also be a substantial difference in between different areas. This is perhaps most notable in higher end areas where third party service providers charge more and taxes are out of control, as well as disaster prone zones where insurance rates are sky high.

Some of those wholesaling houses don’t even try to negotiate closings costs. However, while you may get better service when fairly compensating vendors some will ask for the world unless you at least ask for a discount. You won’t know unless you ask. Investors that are wholesaling significant volumes of houses also hold a lot of power and can easily negotiate reduce rates on real estate commissions and more, and can find many eager for their business when shopping around.

Wholesalers that find having to come up with cash for closing costs restrictive have other options too. Flipping houses using transactional funding can provide the additional funds needed if the value is there resulting in 100% plus financing.

Some investors may even find partners willing to put up the money needed to close in exchange for a modest return providing they can recoup their capital quickly.  For those using their real estate licenses for transactions there are also services like Commission Express which offer commission advances which could be used to cover these expenses.

However, there can be an even easier way to both slash closing costs that dig into profits when wholesaling houses and avoid having to come up with all that cash at closing. This is sticking to assignments or flipping real estate contracts. Wholesaling contracts can be far more profitable than many realize. It can also be a fantastic first step into the industry for those that are light on cash and need faster paydays.

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