How To Wholesale Real Estate In Colorado: Step By Step (2023)Dec 06, 2022
Have you ever pondered different ways to get involved in the Colorado real estate market but you don’t know where - or how - to begin?
Do you walk around looking at malls, retail strips, offices, single-family homes, and multi-family apartments and wonder how you can get involved in investments like rental property?
Do you watch shows on flipping houses and think about how to generate side income and build wealth utilizing real estate as the springboard to ultimate financial freedom?
It’s time to learn about wholesale real estate, which is one of the best ways to get involved with the real estate investment world.
Wholesaling real estate can be your ticket to sustainable real estate income for many years to come.
The median home price for the Colorado residential housing market has climbed sustainably from $400,000 to $600,000 in just five short years. And, according to the Colorado census, Colorado has been one of the fastest growing states in the last ten years.
Wholesale properties can open doors for you and give you the opportunity to tap into some of those remarkable profit opportunities.
Keep reading and we’ll teach you how to wholesale real estate in Colorado like a professional.
- What Is Wholesaling Real Estate?
- How To Wholesale Real Estate In Colorado (9 Steps)
- Is Wholesaling Real Estate Legal In Colorado?
- How Much Do Real Estate Wholesalers Make In Colorado?
- Do You Need A License to Wholesale Real Estate In Colorado?
- Is Wholesaling In Colorado Easy?
- Final Thoughts On Wholesaling In Colorado
What Is Wholesaling Real Estate?
Wholesale real estate, simply stated, is a method of going under contract on a distressed property and simultaneously assigning the contract over to a different buyer in exchange for a fee.
Essentially, a wholesaler first finds a motivated homeowner willing to sell their off-market property. Then, they put an offer in for the property and flip the contract to an eager investor or potential homeowner. Then, they upcharge the third-party buyer for making the connection.
The beauty of wholesaling is that it can be a win-win-win scenario for all parties involved.
The seller is happy to close quickly with a buyer (you, the wholesaler). The end buyer is happy to find a property that fits their acquisition criteria, while you, the wholesaler, is happy for putting in the work to make the connection in exchange for some money.
The question is, do these opportunities exist everywhere?
Can a resident of Aspen, Colorado partake in these real estate deals like someone in Boulder or Fort Collins?
Are there any limitations and restrictions if you are in the southern cities of the state versus the northern areas?
What about the larger cities like Denver and Colorado Springs? What are the laws surrounding wholesaling in Colorado?
All these questions - and many more - will be answered throughout the article.
Having a step-by-step guide is essential in navigating the Colorado market. Here are nine steps we recommend you take in order to launch a successful wholesale business in the Centennial State.
How To Wholesale Real Estate In Colorado (9 Steps)
Here's our simple step by step process for wholesaling real estate in Colorado:
- Partner With A Wholesale Mentor
- Learn Colorado Real Estate Wholesaling Laws & Contracts
- Understand The Colorado Real Estate Market & Lingo
- Build A Cash Buyers List
- Find Motivated Sellers & Distressed Properties
- Put Distressed Properties Under Contract
- Assign The Contract To Cash Buyer
- Close Deal And Collect Assignment Fee
- Double Close Or Wholetail When Necessary
Step 1: Partner With A Wholesale Mentor
Wholesale mentors are one of the most important aspects of the wholesaling process.
Why? Because there are hundreds of mistakes that can happen in any given wholesaling transaction and a mentor can be your guiding light to help navigate you away from these challenges and straight into a massive success.
The seller might come back and negotiate different terms. The buyer might back out at the last minute. The title company might give you a hard time regarding the timing of closing and earnest money deposit. Or, your assignment contract could leave you with unfortunate liabilities.
These are just a few examples of what could possibly go wrong during a typical wholesale deal.
A good mentor, though, can prepare you accordingly and set you up with the right tools to navigate the trials and tribulations associated with the many moving variables within the real estate industry and the Colorado market specifically.
Additionally, mentors can help curate your buyer’s list, source distressed properties, find a bank or hard money financing, and assist in the closing process.
Connect with a solid mentor - you won’t regret it!
Step 2: Learn Colorado Real Estate Wholesaling Laws & Contracts
States operate in different jurisdictions and regions, all with different sets of laws. Philadelphia legislation, for example, broadly requires individuals who are a party to purchase, sell, or exchange of real estate to hold a valid license. But, what about Colorado?
In order to understand the laws and contracts needed for a Colorado wholesale or fix and flip transaction, you’ll have to take a look at the Colorado Department of Regulatory Agencies Division of Real Estate for more details.
The Division of Real Estate protects consumers through the licensing, regulation, and enforcement of licensed real estate professionals all while maintaining a fair and equitable market for all parties involved in a transaction.
Without the Colorado Department of Regulatory Agencies, citizens would operate real estate agencies and realty companies without protection. Businesses would lack fair competition amongst all major constituents.
As a wholesaler, you should be familiar with the 2020 Colorado Revised Statutes, Title 38 - Property - Real and Personal laws. Although generally not many changes from year to year, brushing up on the annual revisions - if any - will ensure you are always operating within the confines of the Colorado law.
Step 3: Understand The Colorado Real Estate Market & Lingo
In order to become a powerhouse in the Colorado market, you’ll want to understand the local language and market lingo as best you can.
When you approach agents, distressed sellers, mentors, local investor forums, and podcast communities, you’ll want to know the lay of the land.
Which towns do college students like to hang out in?
Which markets are more prone to attract higher net worth individuals?
Which streets are undergoing a positive shift in popularity?
These questions - amongst others - are questions you should be familiar with as you do your research in preparation for determining the right price to purchase and sell properties in Colorado.
Step 4: Build A Cash Buyers List
By definition, wholesalers have to act extremely quickly to be successful. You’ll need to quickly find a property, go under contract, and almost immediately find the right buyer to assume your contract.
How is this done? By building a cash buyer list.
Cash buyers are real estate investors. But, unlike other investors, cash buyers don’t have to jump through typical financing hoops to execute a transaction. They don’t need to have a hard money lender or bank relationship to win a deal. They are quick to respond and can typically close in just a few days with cash on hand.
Building a list of these types of buyers can make the speed and execution of a transaction run a lot smoother.
Research buyers in the Colorado area and foster these relationships by posting on Facebook groups, speaking to mentors, and talking with realtors ahead of time.
You can also check out this quick video below that talks about how to find cash buyers online for free!
Step 5: Find Motivated Sellers & Distressed Properties
Once you’ve fostered strong business relationships and have identified a swath of cash buyers that are committed to buying your contracts, you are ready to locate distressed properties.
Finding distressed properties is essential in finding the right price point and profiting off an investment property. Buying a property at market value with limited room for upside will never result in a substantial profit for the wholesaler or flipper.
Distressed properties and motivated sellers are where you’ll want to spend most of your time because those are the individuals and properties that will sell below market value.
Motivated sellers are individuals who for whatever reason need to sell their assets.
Examples would include an heir to an estate that would prefer the cash over the property, an elderly lady that is moving into a nursing home and doesn’t need the large space anymore, or someone that got a new job and needs to relocate very quickly and would prefer a quick, off-the-market cash offer to a formal on-the-market one.
Motivated sellers are usually willing to forgo profits in exchange for a quick close.
Find these situations and you’ll be in great shape to make a buck wholesaling the properties.
Step 6: Put Distressed Properties Under Contract
You’ve done your market research, you’ve connected with plenty of cash buyers that are ready to pounce at the right opportunity, and you’ve identified some motivated sellers and distressed properties - it’s time to go under contract.
So, what does that mean?
It means you are ready to crunch the numbers and present the seller with an offer that is just enough to pique their interest, but also still in the realm of profit for you, the wholesaler.
What you’ll need to do is calculate the ARV - or the After Repair Value.
Then, you’ll estimate the repair costs a buyer would need in order to bring the property up in value. By doing this you bake in what you expect a buyer would need to calculate into their purchase price to ensure they can make a profit on the back end.
After that you’ll use the Maximum Allowable Offer formula - or the MAO formula - to determine what you can offer on the property.
Then, you’ll add your wholesale fee to the tail end of the equation. It should look something like this:
MAO = After Repair Value (ARV) – Renovation Costs – Desired Profit – Wholesale Fee
The MAO formula is designed to ensure you, the wholesaler, and the ultimate buyer is all able to profit from the transaction.
A buyer is not going to want to buy the property off of you if they ultimately won’t be able to repair it and sell it for a profit. And you, the wholesaler, shouldn’t make an offer on the property that doesn’t let you incorporate some form of wholesale fee - even if it is just $5,000 - $10,000.
So, how are all these formula inputs found? By surveying the surrounding market.
What are other houses currently selling for?
What are general contractors charging for typical repairs and maintenance fees?
What is the cost of materials at the local Colorado Home Depot or Lowe’s?
These questions can be determined by talking to real estate agents, mentors, and other professionals in the neighborhood. Most would be happy to help you out in your quest for knowledge.
Once you have a good idea of the MAO you’ll be ready to go under contract.
Step 7: Assign The Contract To Cash Buyer
After you’ve gone under contract, it’s for the assignment of contract over to a cash buyer.
There are hundreds of templates online you could use as an assignment contract, but we recommend talking to your mentor and a real estate lawyer for legal advice before you pick any one of them.
When you wholesale a property, you are dealing with real assets. And, with real assets comes real liabilities.
If you are going to build a business off of wholesaling, you’ll want a rock-solid assignment contract to ensure your interests are protected at all costs.
When using any wholesale real estate contract as a starting point, be sure to always check with your local government to ensure all the Colorado restrictions and recommendations are being met.
Step 8: Close Deal And Collect Assignment Fee
After you go under contract, it’s time to close on the deal.
You’ve identified the cash buyer and drafted the assignment contract, now it’s time to collect your money for your hard work and move on to the next opportunity!
Be sure to stay connected to all parties involved and ensure the title company, lawyers, and recording agents don’t need any additional information in order to close.
If they do, be sure to give it to them. But if not - which is usually the case - the closing should go by pretty quickly.
If all goes well, your closing should work out smoothly and you will walk away with your assignment fee as a happy person.
Step 9: Double Close Or Wholetail When Necessary
If you’d like to get a bit creative, you can do what’s called a double close or a wholetailing transaction.
Double closing is a type of real estate investment strategy where two real estate transactions take place around the same time. However, unlike traditional wholesaling, this strategy differs in how the transaction transpires. Here’s how it works:
The wholesaler starts by finding a motivated seller and going under contract to purchase a distressed house. Then, he or she immediately contracts to sell the property to the ultimate buyer - without actually owning the property yet.
How is this done? By structuring the deal in a way that the cash proceeds from the sale of the property to the end buyer can directly fund your purchase of the property from the original seller.
Ideally, the end buyer - the person that typically buys the property last - actually pays you before you own the property. You then, in turn, send that money over to the seller minus your wholesale fee.
Double closings are legal in Colorado. If done correctly, you shouldn’t run into many legal issues.
It is important to note though, that this strategy is not without its challenges. In order to work it out, you’ll have to get the title company to cooperate. They will need to be able to hold the money in escrow and facilitate the transaction to ensure the buyer’s money can fund the purchase of your seller.
Alternatively, if your title company refuses to complete the funding this way, you can use a hard money lender, private money lender, or transactional funding to close on the deal. Then, you can immediately resell it to your end buyer at a higher price.
Finally, if you’d like maximum flexibility, consider "wholetailing" the property instead.
Wholetailing is the act of actually purchasing the property first and then selling it to a different fix-and-flip investor or another buyer later on the open market. By doing this you’ll get more access to buyers with financing and potentially secure more profits by seasoning the property for a few extra weeks or months.
All of these strategies are totally doable in Colorado.
Read Also: Wholesaling Real Estate For Beginners
Is Wholesaling Real Estate Legal In Colorado?
Remember, wholesaling is not the buying and selling of an actual asset such as a residential home, multifamily property, or office building. It is the act of assigning a purchase contract over to a third-party buyer.
Since the wholesaler is not actually marketing the property and scheduling showings, he or she does not fall under the category of a broker or realtor. However, since there are a lot of common interests, it might not be a bad idea to head over to the Colorado Department of Regulatory Agencies Division of Real Estate and look into getting an official real estate license.
As a Colorado wholesaler, these laws will very much apply to your day-to-day business operations.
For example, you’ll need to disclose your assignment fee to the parties involved in the transaction.
These laws and many more should be reviewed constantly to ensure nothing is changing materially from year to year. Be sure to understand the ins and outs of what you can and cannot do. Speak to a lawyer and a mentor and make sure all of your interests are protected at all times.
How Much Do Real Estate Wholesalers Make In Colorado?
As with income earned from flipping houses, there is no set number for a wholesaler’s salary. But, rest assured, the profits are quite compelling and enough to encourage anyone to want to enter the industry.
Wholesale profits depend entirely on the type of property you work with and the discount it enjoys compared to surrounding properties.
If you are wholesaling a massive foreclosure in a very wealthy area in Colorado Springs, you’ll likely make a pretty penny. But, if you decide to wholesale a small three-bedroom residential home without much torque to it and without much rehab potential, you likely won’t make too much money.
You should expect to make on average $10,000 - $15,000 per transaction. But, if you spend your time as a full-time wholesaler flipping one to two contracts a month, you could literally make upwards of $200,000+ annually.
Do You Need A License to Wholesale Real Estate In Colorado?
No license is necessary to wholesale real estate in Colorado.
It might be a good idea though because as a licensed real estate broker or agent, you’ll be able to access larger networks, more cash buyers, and greater property opportunities.
With just a few months of studying you can pass a test and shortly thereafter set yourself up for success not only as a wholesaler but also as a broker.
Is Wholesaling In Colorado Easy?
Although anyone can learn to be successful in wholesaling, the barriers to entering are not without their fair share of challenges.
In order to be great, you’ll need to have a strong cash buyer list, be able to navigate the Colorado legal world and act swiftly for each transaction. However, with the right wholesaling tools, grit, and attitude you will surely become a wholesale legend in no time.
If you are looking for expert mentorship, a community of active wholesalers nationwide, and step-by-step detailed training to improve your chances, the Pro Wholesaler VIP Program can be a powerful tool to set you up for success.
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.
Final Thoughts On Wholesaling In Colorado
Colorado is a fantastic state for real estate investing and wholesaling.
In response to remote work capabilities and people fleeing big cities due to the pandemic, the population of Colorado has grown extraordinarily quickly over the years. With more people looking for jobs and more people looking for schools, there is a much greater demand for housing.
As a real estate wholesaler, you can tap into the growing market and make a tremendous amount of wealth searching for distressed properties and flipping them to cash buyers looking to renovate homes for incoming families.
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.
With the right tools and determination, you can become a Colorado wholesale rockstar in the blink of an eye.
Here's to your success!