Many new investors expect to wholesale vacant homes when they enter the business, but quickly discover that a large percentage of properties today are occupied, including foreclosures and REOs. So how is this a game changer, and what tips can help wholesale houses with tenants better navigate the process more profitably?

While many, especially newer real estate investors, may find selling vacant homes wholesale simpler, there are many advantages to selling tenant-occupied properties in this market.

First-time homebuyers still represent a small percentage of the market in most areas and certainly don’t bring the consistent volume and speed that wholesale home sales offer to eager rental unit investors.

Properties that already have tenants take the guesswork out of end investors and give them the confidence and advantage that comes with an asset that is already generating positive cash flow and returns. This can help generate higher profit margins and move houses faster.

Of course, the wholesale of properties that are occupied can also come with some need for additional due diligence and some challenges. First of all, today this means finding out exactly who is occupying the property and what the deal is.

In many cases today, even when a property has been repossessed and listed as REO owned by a bank for years, previous owners can still be found living there. This is a big problem situation for investors. While it may not seem like a huge concern to those who wholesale or trade real estate contracts, it can mean getting stuck with a deal that no one else wants to touch.

Make sure the property is clear of previous owners and squatters before closing or prepare to stay with them indefinitely.

Even when actual tenants are in your place, it is essential to accurately verify rents, rental status, and deposits. Never just take the seller’s word for it, not even his agent or an occupant. Official letters of legal impediment must be obtained from all verified units and figures.

Please be aware of this at closing to ensure that all funds paid are prorated and the appropriate amounts are transferred to the new owner. As a buyer or broker, remember that cash back at closing due to deposit credit and rent paid in advance is not a profit. Some have bragged about walking away from the closing table with thousands in cash, but actually having to be held for refundable deposits or forwarded to new buyers.

The buying and selling process, especially when there are multiple sales in a short period of time, can be very stressful and upsetting for tenants. Be friendly, be as transparent as possible, and make sure they understand the benefits to prevent them from becoming difficult or blocking potential deals.