Wholesaling is a popular real estate investing strategy that allows anyone to earn fees simply by scouting deals on behalf of another real estate investor. With a population of over 732,000 and more than 327,000 housing units, there is ample opportunity to wholesale real estate in Alaska.
But it's crucial to learn the basics if you want to be successful in this business. Here's a closer look at how to wholesale real estate in Alaska.
Wholesaling real estate is a practice that involves finding distressed properties being offered at a discount, getting the home under contract, and flipping that contract to a cash buyer who is looking for an investment property.
Wholesalers look for motivated sellers or homeowners who want to sell their property quickly. As a wholesaler, you'll reach out to these motivated sellers and offer to buy their property at a discount in exchange for a fast closing.
You'll get them to sign a wholesale contract, locking them in at a certain price. Then, you'll turn around and find a cash buyer looking for an investment property. House flippers and rental property owners are always looking for discounted properties. So, if you price your offer correctly, you can sell them the purchase contract at a markup and collect a substantial fee by acting as an intermediary.
There is plenty of opportunity for wholesaling in Alaska, whether you live in Anchorage or out in the Bush. Wholesaling real estate is a great strategy for beginners because it doesn't require good credit or money saved for a down payment. But it's essential to master the basics before you look for wholesale properties, so you don't make any costly mistakes. Follow these basic steps to get started.
Read Also: Wholesaling Real Estate For Beginners
Here's our simple step by step process for wholesaling real estate in Alaska:
The first step to wholesaling is finding a wholesale mentor to show you the ropes. There are no formal requirements to become a wholesaler, so you don't need a particular educational background or company affiliation. But, it is a skill that takes time and patience to master, and finding a mentor can help you avoid common mistakes that will prevent you from closing deals.
A mentor will not only help show you the ropes but can also introduce you to people in their network who can help your wholesale business. You may decide to go about it alone if you feel confident in your ability to find and negotiate deals. But, finding a mentor offers a variety of benefits that you shouldn't overlook.
Wholesaling is perfectly legal in the state of Alaska. However, certain behaviors are prohibited. So you must familiarize yourself with local wholesale laws before you get started. Otherwise, you may run into trouble.
The Alaska Real Estate Commission is responsible for administering and enforcing the laws concerning real estate activity and licensure in the state. Familiarize yourself with the Alaska Statutes and Regulations - Real Estate Commission to better understand what activities require licensure so you avoid any penalties or legal consequences.
It would help if you also looked through the contracts you'll use for wholesale properties. According to Alaska wholesaling laws, the equitable rights of the real estate wholesaler are delineated in the terms denoted in the contract of sale or purchase agreement. Two standard documents you should review before wholesaling houses include the sale and purchase agreement and the assignment of contract.
The sale and purchase agreement is the standard document used to officiate the purchase of any property. The assignment of contract is a document used to transfer ownership rights and responsibilities over to the end buyer. Make sure you understand them well and know what each is necessary.
Next, it's essential to familiarize yourself with the local market and the different terms used by real estate professionals. Every real estate market is different, so you must study the different price points and conditions affecting housing in the area.
For instance, the real estate market in Fairbanks may be totally different than it is in Ketchikan. So it's essential to familiarize yourself with local market trends to know how to price offers and find good deals.
Study local housing prices, interest rates, market trends, zoning laws, demographic data, school districts, and anything else you feel is relevant. The more informed you are, the easier it will be to find and close real estate deals.
You may also consider joining a local real estate organization to help find mentors and other resources.
Larger organizations you may consider joining include:
Contrary to popular belief, you don't have to be a licensed real estate agent to join a national or local board of realtors. Membership is open to anyone involved in the business of real estate. The Alaska MLS also has a list of the common real estate phrases and definitions if you need help mastering the lingo.
Once you've done your homework, it's time to build a cash buyer's list. Cash buyers and house flippers with access to hard money loans make the best buyers because they will be the most willing to buy distressed properties and have the funds available to close quickly. So connect with anyone actively flipping houses to build your buyer's list.
The best way to ensure you find a buyer as quickly as possible is to build a cash buyer's list before you look for deals. That way, you can simply call up any potential candidates when you have a property under contract. The larger and more detailed your list, the easier it will be to find a willing candidate.
You can find cash buyers by attending one of the real estate organizations listed in the previous section. You can also use social media or leverage your own network. Posting bandit signs or ads on Craigslist is another method that works for many people. You can find cash buyers in many ways, so developing a strategy that makes sense to you is essential.
When you do speak to cash buyers, make sure to get the following information:
You can keep this information handy in a simple spreadsheet, or you may choose to invest in CRM software to keep things more organized. However you decide to compile your data, you must have easy access to this information when you have a property under contract.
Also, check out this video on how to find cash buyers!
Once you've built a solid cash buyer list, it's time to start looking for motivated sellers and distressed properties. To make money as a wholesaler, you'll need to get a property under contract at a significant discount. But most homeowners in a position to sell their property at the market rate likely won't be willing to sell at a price that will be attractive to investors.
So, instead, you'll look for motivated sellers who will be willing to accept a discounted offer to close quickly. In most cases, the properties will be distressed, which means the owner is behind on the mortgage and will soon go into foreclosure. They may also be behind on the taxes or don't have the money to renovate the property to market standards.
There are many ways you can find motivated sellers in Alaska. Common strategies include:
You can find motivated sellers in various ways, so you'll have to develop a lead generation strategy that works for you.
Once you've found a motivated seller willing to hear you out, you'll want to make them an offer and agree to that offer in writing. But if you want to be sure that investors will be interested in your deal, it's important to crunch the numbers and familiarize yourself with a few crucial metrics.
After repair value refers to the estimated price the property will fetch on the open market when renovated to meet current standards. Investors use ARV to determine the profit potential of a deal, so you should try to estimate this figure for yourself to determine a reasonable offer.
To estimate ARV pull the sales data from a few comparable properties in the area. Then determine a rough price per square foot by dividing the sales price by the square footage of each home. Then take the average and multiply it by the square footage of the home you're looking to wholesale to determine a rough ARV.
The calculation would look something like this:
Average Price Per Square Foot = [Property 1 (sales price / square footage) + Property 2 (sales price / square footage) + Property 3 (sales price / square footage)] / 3
ARV = Wholesale Property Square Footage x Average Price Per Square Foot
Once you determine the ARV, you can use that metric to calculate your MAO or the highest offer you can make and still turn a profit. The MAO formula looks like this:
MAO = ARV - fixed costs - rehab costs - desire profit or equity
Fixed costs refer to the costs of holding the property, including taxes, insurance, utilities, financing, etc. Rehab costs refer to the costs of renovating the property to market standards (use a rehab calculator or hire a contractor to help you determine or estimate rehab costs).
Finally, leave a margin for the end buyer to make a profit on the deal. Do your best to estimate all the related costs to arrive at your MAO.
Most investors use the 70% rule to determine a real estate deal's viability. So ARV x 0.70 can help you estimate your MAO quickly. But the more research you do and the more precise your calculations are, the greater your chances of success.
Read Also: Real Estate Comps: The (ULTIMATE) Guide
Once the seller agrees to a price equal to or lower than your MAO, you'll have them sign a purchase contract that commits them to accept that price. You'll then start calling up your buyer's list to find an investor who may be interested in the property.
When you find an interested buyer, you'll assign the contract to them, allowing the new buyer to assume all the future ownership rights.
You can do this either by including a clause in the purchase contract that allows you to reassign the contract to a new buyer or use an assignment of contract to achieve the same results.
Once both parties have agreed to the terms, you'll close on the sale and collect your fee. The buyer typically pays all the closing costs because they're the party who is purchasing the property. So you have to worry about executing the contracts properly.
Alaska is not an attorney close state, which means a lawyer is not required to officiate the closing. You may consult a real estate attorney to help you structure the contracts. But ultimately, it's up to you and the other parties involved whether you want representation at the closing.
Once the contracts are signed, and the sale is closed, you will collect your assignment fee and be able to move on to your next deal.
In most cases, the easiest way to close a deal is to wholesale the property - which means you assign ownership rights directly from the seller to the buyer without ever actually taking ownership. But there is also a strategy called double closing that may make sense in specific scenarios.
A double closing involves closing with the seller, then turning around and closing again with the buyer immediately afterward. In a double closing, you will briefly retain ownership of the property and be included on the chain of title.
A double closing is often more complicated than using a standard wholesale contract. But some lenders have issues with underwriting a purchase made using a wholesale contract - so a double closing may be necessary in some cases.
Yes, wholesaling is perfectly legal in Alaska. However, you must remain neutral and avoid engaging in any behavior that may require licensure.
The most apparent behavior that requires licensure is representing the interest of the buyer or seller in exchange for a commission on the sale. So be sure to steer clear of giving either party any advice or performing additional services that would fall under the responsibilities of a real estate agent.
Review Alaska's local laws and accepted business practices to understand what is and isn't permitted. As long as you conduct yourself with honesty and transparency when dealing with buyers and sellers, you shouldn't face any legal problems.
The beauty of wholesaling is that there's no cap on how much money you can make. Even beginners can earn anywhere from $5,000 to $10,000 per deal, with more experienced investors earning checks in the multiple five-figures.
Your fee will equal the difference between the final purchase price and the offer accepted by the seller. So if you got the homeowner to agree to sell you the property for $150,000 and you turn around and sell it to an investor for $165,000, you'd collect a $15,000 assignment fee.
So, the amount of money you earn will largely depend on how well you can crunch the numbers and negotiate with the buyer and seller. As a result, wholesaling is a great way to achieve financial freedom by earning hefty fees without the hurdles that keep most people from getting involved in real estate investing.
No, a license is not required to be a wholesaler. You don't need a license to buy or sell a property, so it isn't required as long as you stick to acting as a middleman and don't overstep your boundaries.
However, as a wholesaler, you may be tempted to engage in activities that do require licensure. So it's crucial to know what activities require a license, so you don't inadvertently break the law.
Review the Statutes and Regulations published by the Alaska Real Estate Commission to understand what actions require licensure. Important sections include:
Sec. 08.88.161. License required: States which activities require a license.
Sec. 08.88.167. Civil penalty for unlicensed or unauthorized practice: Outlines the penalties you will face for performing brokerage services without a license.
Sec. 08.88.391. Conflict of interest: States what activities would be deemed a conflict of interest for real estate agents (in case you are licensed and considering wholesaling as a side business).
Yes and no. Like any real estate investing strategy, it takes time and patience to become a successful wholesaler. It certainly isn't a get-rich-quick scheme, and it may take several months or even years to close your first deal.
But it becomes much easier once you create a reliable system for finding leads and making offers. You will certainly be required to do extensive research and put time and effort into learning the business. But, once you master the basics, wholesaling is one of the simplest ways to earn large checks in a short period.
A newer wholesaler may consider finding an experienced mentor and enrolling in the world-class Pro Wholesaler VIP Program. With a step-by-step process and expert guidance, new wholesalers have a chance to clear up any misconceptions about the real estate wholesaling business as they start wholesaling real estate in Alaska.
The Pro Wholesaler VIP Program is designed for the modern entrepreneur to learn the basics and the easy potholes to spot and avoid. It is 100% online and is used for local and virtual real estate wholesaling.
Alaska is a state full of natural beauty with plenty of open lands and available housing, making it an excellent market for wholesalers. If you're looking for a reliable way to bring in additional cash flow that doesn't require excellent credit or a full-time commitment, you should consider wholesaling. But, you will need to master the basics if you want to be successful. So use this handy guide to help build your wholesaling business in the Last Frontier.
Check out our brand new free training on how we help investors all across the country wholesale and flip houses from the MLS using only a laptop and a cell phone.
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