A wedge deal in real estate is purchasing a property that is worth less than the potential market value. In real estate investing, a wedge refers to a strategy where the buyer scouts for properties that have the potential to be worth around the market value with minor cosmetic work.
The strategy includes making low-cost renovations. A property that needs high-expense renovations isn’t a good match for this strategy.
Is A Wedge Deal A Good Real Estate Investing Strategy?
A wedge deal is a good real estate investing strategy if you do it right. Since renovations are crucial to making the strategy work, it’s only a good deal if you can renovate the home and still make a profit. If you put too much money into the renovations, you will end up paying more than what you’ll be getting in return.
There are many ways to make money through real estate. A wedge is one way to turn a quick profit. But considering that real estate is a local market, plenty of factors will determine if you can make a profit out of a wedge.
For any real estate investor who wants to wedge a house, the key concept is to avoid properties with extensive repair needs.
How To Make A Wedge Deal Work For You?
Any experienced real estate investing guy will tell you that wedge deals are difficult to come by. A house doesn’t just miraculously fall on your lap. To make the strategy work for you, you must do your research.
That’s why eager real estate investors that look for house deals spend more time identifying a potential property. While real estate wedge deal experts have all kinds of means of identifying a wedge deal, here are a few things to consider that will help you do it much more efficiently.
- Find Eager Sellers
Not every seller is desperate to sell their property for any amount. Some sellers face personal issues that play a crucial role in getting the property below the market value. Sellers going through a divorce, facing debt, and displacement are what you need to be on the lookout for.
These sellers are more motivated to sell due to the circumstances they find themselves in.
- Find Properties In Terrible Condition
Another way to make the strategy pay off is to look specifically for properties in need of renovations. In real estate investing, looks are everything. A buyer will never commit to a property that looks terrible. Regardless of the price, modern homes sell for much more and much faster. A deteriorating property or a property in poor condition will sell for much cheaper.
But that doesn’t mean the property can’t be worked on and brought back to life. But even so, there are renovations you have to avoid. A property that needs a new roof isn’t a good wedge deal. But you can work if the property needs replacing kitchen cabinets or repainting.
So even if you are looking at properties in terrible condition, not every property will work for a wedge deal.
Where To Find Good Properties To Wedge?
So that begs the question, where do you look for eager sellers or properties in terrible condition? Well, there are a few ways to go about it.
Since real estate is local, you need to narrow your search and scout for sellers or properties in a targeted market.
But what does this mean? Put yourself in their position. If you are moving to another city and need to sell your house fast, where would you list it? The big real estate websites are a natural place to start. Websites such as Zillow, FSBO.com, Foreclosure.com, and Realtor.com should be some of your starting places.
While many will tell you that MLS (multiple listing services) is the worst place to look for, the opposite is true. You can find good deals through MLS. Some eager sellers are more than willing to list their property below the market value if they find themselves in those circumstances.
But probably the best way to look for real estate wedge deals is to contact for sale by owner houses. FSBO houses aren’t as visible as houses sold by agents.
Thus, they get significantly less exposure. Most FSBO sellers want to save the 2-3.5% agent commission, so they might be more willing to sell under the market value.
There are plenty of other ways to find real estate wedge deals. All you need to do is look hard enough.
To summarize, a wedge deal in real estate can be a good investment strategy if you do it right. To ensure you’re getting a good deal, look for house deals that require low-cost renovations and sell well under the market price.