How To Wholesale Real Estate In California: Step-By-Step (2024)

Wholesaling real estate is a fantastic investment strategy that can be profitable in every state, and California is no exception. With its diverse and dynamic real estate market, the Golden State offers ample opportunities for savvy investors to thrive. If you're new to the world of real estate and wondering what wholesaling real estate is, you've come to the right place. This guide will tell you everything you need to know about wholesaling real estate in California, starting with the following:

• What Is Wholesaling Real Estate?
• How To Wholesale Real Estate In California (9 Steps)
• Is Wholesaling Legal In California?
• How Much Do Real Estate Wholesalers Make In California?
• Do You Need A License To Wholesale In California?
• Can A Realtor Wholesale Property In California?
• Is Wholesaling In California Easy?
• Final Thoughts On Wholesaling In California

When you are ready to take the information you've learned in this wholesaling guide and apply it to all the opportunities in today's California real estate market, enroll in Real Estate Skills' free training program. Our expert-led training will provide you with the skills, knowledge, and confidence you need to succeed in the competitive world of real estate wholesaling.

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*Before we begin our guide on wholesaling real estate in California, we invite you to view our video on How To Wholesale Real Estate Step by Step (IN 21 DAYS OR LESS)!

Host and CEO of Real Estate Skills, Alex Martinez, provides a comprehensive, step-by-step guide for beginners to start wholesaling real estate!

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Wholesaling, at its core, is a method where you find a property, get it under contract, and then sell that contract to another buyer for a profit. It’s an entry point for many aspiring investors because it requires less capital and carries lower risk compared to other real estate strategies. The wholesaling business in California can be especially lucrative due to the high demand for properties and the competitive market.

In this comprehensive guide, we'll walk you through how to wholesale real estate in California, breaking down the process into easy-to-understand steps. We'll cover the essentials, including finding properties, negotiating deals, legal considerations, and marketing your real estate wholesale contracts. By the end of this guide, you'll be equipped with the knowledge and confidence to start your wholesaling journey in California.

What Is Wholesaling Real Estate?

Wholesaling real estate is a strategy where an investor secures the rights to purchase a property and then sells those rights to another buyer for a profit. The most common method is the assignment of contract. This involves the investor (wholesaler) entering into a purchase agreement with the property owner and then, through the principle of equitable conversion, transferring (or assigning) this contract to an end buyer for an assignment fee.

For example, imagine you find a property worth $200,000 and negotiate a purchase agreement with the seller for $180,000. Instead of buying the property yourself, you assign this contract to another investor for a fee, perhaps $10,000. The new buyer pays the seller $180,000, and you receive the $10,000 assignment fee.

In cases where a contract assignment isn’t feasible, investors can attempt a double closing. This method involves the wholesaler actually buying the property and then immediately reselling it to another buyer. While effective, this approach is less popular because it incurs additional closing costs and logistical challenges.

Understanding how to wholesale real estate in California, especially through the assignment of contract method, is crucial for maximizing efficiency and profits in the competitive market for wholesale properties. This method remains preferred due to its simplicity and lower costs compared to double closing.

Why Wholesale Real Estate In California?

Despite California's typical home value of $786,180, according to Zillow, there are plenty of opportunities for investors of every experience level to capitalize on. The state currently has 21,525 properties in foreclosure, 1,190 bank-owned properties, and 3,706 headed for auction, according to RealtyTrac. Investors can secure properties below market value by focusing on these foreclosures and bank-owned properties and potentially earning significant profits through assignment fees. The high volume of distressed properties and substantial home values make California an ideal market for wholesaling real estate and allow investors to thrive in this competitive landscape.

Wholesaling Real Estate Pros & Cons

Wholesaling houses can be a thrilling avenue to pursue, especially for those eager to dip their toes in the property market without the heavy financial burden that often accompanies traditional investing. However, like any endeavor, it presents a unique set of challenges alongside its advantages; let's take a look at each of the pros and cons of wholesaling below:

Pros Of Wholesaling In Real Estate

• Educational Opportunity: Wholesaling is a masterclass in real estate investment exit strategies. It's low risk and demands less experience and time than other real estate transactions. You gain valuable insights without the financial burden on your shoulders.
• Minimal Financial Requirement: The beauty of wholesaling is the low financial barrier to entry. You can secure a deal with a homeowner without any initial investment. There's no need to pour funds into house repairs or renovations, which keeps your wallet comfortably intact.
• Profit Potential: Your profit in wholesaling comes from what we call an assignment fee when you pass the contract to the end buyer. This fee usually ranges from 5-10% of the property's sale price. Plus, with a double closing, you have the chance to buy and immediately resell a property, creating profit potential without a substantial holding period.
• Reduced Risk: Since wholesalers don’t hold onto properties long-term, they avoid risks associated with market fluctuations, maintenance costs, and property management issues.
• Flexibility: Wholesaling provides flexibility in terms of time and commitment, allowing investors to work on deals part-time or full-time based on their personal schedules and goals.
• Scalability: The wholesaling model is scalable. Successful wholesalers can expand their business by finding more deals, building larger networks, and eventually transitioning into other real estate strategies like rehabbing or renting.

Cons Of Wholesaling In Real Estate

• Time Sensitivity: Speed is non-negotiable in wholesaling. Your contract will have an expiration date, and you must secure a buyer before this looming deadline. It's a fast-paced environment that requires quick action.
• Strategic Property Selection: Choosing the right property is more art than science. If you pick a property that's out in the sticks, chances are you'll struggle to attract investors. Location is more than just a buzzword; it's the heartbeat of a good wholesale deal.
• Buyer Matchmaking: The endgame in wholesaling is to find a buyer, but not just any buyer. Your target market consists of investors with specific tastes and investment appetites. Pinpointing the ideal buyer requires savvy market insight and a bit of finesse.
• Competition: The real estate market, especially in lucrative areas, is highly competitive. New investors often compete against experienced wholesalers who have established relationships and market knowledge.

Read Also: How To Find Off-Market Properties In California: The 4 Best Sources

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*For in-depth training on wholesaling real estate in California, Real Estate Skills offers extensive courses to get you ready to make your first investment! Attend our FREE training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!

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How To Wholesale Real Estate In California (9 Steps)

Here's our simple step-by-step process for wholesaling real estate in California:

1. Partner With A Wholesale Mentor
2. Learn California Real Estate Wholesaling Laws And Contracts
3. Understand The California Real Estate Market
4. Build A Cash Buyers List
5. Find Motivated Sellers And Distressed Properties
6. Put Distressed Properties Under Contract
7. Assign Contracts To Cash Buyers
8. Close Deals And Collect Assignment Fee
9. Double Close When Necessary

Partner With A Wholesale Mentor

The first step in the wholesaling process is to partner with an experienced real estate mentor. Like any new career, having guidance from an expert can accelerate your learning curve and help you avoid costly mistakes. To find a mentor, consider networking at real estate investment groups, attending industry seminars, and joining online forums. Look for someone with a proven track record in wholesaling real estate and a willingness to share their knowledge.

Working with a mentor is a great first step because they offer personalized advice, real-world insights, and strategic guidance tailored to your goals. They can provide practical tips on how to wholesale real estate in California, helping you navigate the market's unique challenges. Most importantly, a great mentor can give you the confidence to start your first wholesale deal in California, offering support and encouragement that no book or TV show can provide.

Working with a mentor is a proven strategy for success. Even greats like Warren Buffet attribute much of their achievements to having a mentor. By gaining personalized guidance and expert insights, you can navigate the complexities of wholesaling real estate with confidence and avoid costly mistakes.

Read Also: Wholesale Real Estate Mentor: The ULTIMATE Beginner's Guide

Learn California Real Estate Wholesaling Laws And Contracts

Before you begin working in a profession involving legal contracts, you need to be familiar with federal, state, and local laws. This knowledge will help keep you out of legal trouble. For example, new landlords must know the federal and state anti-discrimination housing laws or face heavy fines and lawsuits for violating them.

Wholesaling is legal in California as long as real estate investors abide by the state's real estate laws, contract laws, and the rules governing licensed agents. In the context of how to wholesale real estate in California, it's important to understand that unlicensed wholesalers are not acting as real estate agents. Instead, they function as intermediaries by acquiring the rights to purchase a property and then assigning these rights to an end buyer for a fee.

This practice is legal due to the doctrine of equitable conversion and the use of assignment contracts. The doctrine of equitable conversion allows the wholesaler to hold an equitable interest in the property through a purchase contract. By assigning this contract to another buyer, the wholesaler transfers their interest in the property without acting as a real estate agent.

For example, when wholesaling real estate, an investor finds a property, gets it under contract, and then assigns that contract to a buyer who completes the purchase. The wholesaler earns an assignment fee for facilitating the transaction. As long as wholesalers adhere to relevant laws and regulations, this strategy remains a legal and effective way to invest in the California real estate market. Understanding these legalities is crucial for anyone interested in how to wholesale real estate in California.

Read Also: California Real Estate Contract: Requirements, Template & FAQs

Understand The California Real Estate Market

No matter what you sell you must understand the buying and selling market. For new wholesalers, this requires knowing what buyers are willing to pay for certain types of real properties in a given location and time.

Fortunately, the California Association of Realtors (CAR) publishes regular real estate market data reports every week. Their monthly Latest Market Data shows what the market is doing along with what their Realtors are saying, and what they think will happen regarding sales, prices, and listings.

Local Multiple Listing Services (MLS) lists all active homes for sale listings and recent closed sales prices along with photos and detailed information about each property. The best way to access up-to-date local MLS data is to work with or become a real estate agent in California.

The MLS system was created by real estate companies so they can list properties for sale for other agents to access to help find buyers for the listing agents.

The commission is split between the listing and the buyer’s agent. If you don’t want to work with a local real estate agent you can access MLS data through private websites like Redfin, Zillow, or HomeFinder.

CAR also publishes a comprehensive list of Real Estate Terms. From A to W, all of the essential realty terms are explained to you.

Build A Cash Buyers List

A cash buyer is an end buyer who can purchase properties without needing to secure financing through a mortgage. These buyers have the liquid assets available to complete the transaction quickly. Cash buyers are crucial to real estate wholesalers because they expedite the closing process, ensuring that deals can be finalized swiftly and with fewer complications.

When learning how to wholesale real estate in California, identifying and building relationships with cash buyers is essential. These buyers provide a reliable market for the wholesale properties you secure, allowing you to assign contracts confidently and profit from assignment fees. In wholesaling real estate, having a network of cash buyers enhances your ability to close deals efficiently, making your wholesale business more successful and less reliant on financing contingencies.

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 *Want to learn the proven strategies for finding cash buyers? View our video below where Alex Martinez covers How To Find Cash Buyers For Wholesaling! [FREE]

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Simply put, wholesalers need cash buyers. We’ll give you some tips for building a buyers’ list:

• Attend Real Estate Auctions: You will find all-cash investors bidding on properties. A great way to network with bidders is to hand out your business cards and brochures. Get their names and contact information.
• Local Real Estate Investors Networking Events: Find local associations, clubs, or investors' networking events. Wholesalers meet other investors and network with them. Some events will allow you to speak to the group to introduce yourself and explain what you are up to.
• Create A Website Looking For Cash Buyers: Many buyers look for wholesalers but don’t know how to find them. A localized SEO-optimized website can pop up in Google’s Top 3 or as the Featured Snippet for bigger exposure.
• Join LinkedIn Real Estate Groups: The best B2B social media channel is LinkedIn. They have hundreds of real estate groups you can join for free. Many are localized for specific states, counties, and cities.
• Network With Local Agents: The more experienced ones often have cash buyers. Some can lead you to distressed sellers. Work with the agent for a Win-Win deal where the agent gets a commission, and you make a profit. Access their MLS data.
• Research Public Records: All property sales become public records. Most counties allow fast online access. Pull a list of purchases over the past year and look for 3 things:
  1. Persons who make multiple purchases are usually investors.
  2. Purchased properties with no liens mean an all-cash buyer.
  3. Properties bought and sold within one year (or less) are indications of a house being flipped.

Create a list of these buyers and research their business or home contact information online. Or, you can hire a private investigator or use a skip tracer to find them.

Read Also: How To Find Cash Buyers For Wholesaling Real Estate

Find Motivated Sellers And Distressed Properties

The next step in wholesaling real estate in California is finding motivated sellers and distressed properties. Motivated sellers are typically individuals facing financial difficulties, foreclosure, or needing to sell quickly. Distressed properties are often undervalued due to their condition or the owner's situation.

Working with motivated sellers and distressed properties is crucial because it allows wholesalers to secure properties at below-market prices, creating opportunities for profitable deals. These sellers are more likely to accept lower offers, enabling wholesalers to negotiate better terms and maximize their assignment fees when transferring contracts to end buyers.

Here are a few ways to find motivated sellers and distressed properties:

• Saving the owner from facing a government auction for failing to pay property taxes or an IRS tax lien is a Godsend for them. You can clear their debts, which helps raise their credit score to make them qualify for loans.
• Many real estate auctions are put on by lenders who prefer getting the entire loan paid instead of what they can get at an auction. Pay off the loan and the extra fees and you make the lender and the property owner happy.
• Obituaries are sad to read but useful for wholesalers because the heirs may not want to live in the deceased’s home. A quick sale brings faster closure with money for the heirs. Probate lawyers are also a good source.
• Property owners facing bankruptcy will lose their property when the court orders an auction. You can contact the property owner’s lawyer to make an offer to buy the real property. Contacting bankruptcy lawyers for future leads also helps.
• Network with city and county property inspectors who constantly look for code violators. Real properties are not up to code or in need of repairs due to safety or health code violations. Property owners with multiple violations usually want to sell quickly.
• Properties with multiple liens indicate an owner in debt. Poor credit scores make it impossible to qualify for loans. They are usually motivated by a fast sale.
• For Sale By Owner (FSBO) homes are also worth visiting. They may have many problems like a need for extensive repairs or high debt. Find fore-sate-by-owner websites like FSBO.com.
• Look at MLS expired listings as they couldn’t find a buyer. Reasons for not selling include over-priced listing, poor showings (needing repairs), or unfinished projects.
• Finally, the Pro Wholesaler VIP Program by Real Estate Skills helps investors to acquire, flip, and wholesale properties directly from the MLS.

Learn How To Start Wholesaling Without Any Marketing Costs: Apply To Become A Pro Wholesaler VIP™

Put Distressed Properties Under Contract

The next step is to put the property under contract, to give you the sole right to buy the home. However, before you decide to make an offer, you need to calculate your estimated profits. This requires you to calculate the following estimates:

• After-Repair Value (ARV)
• Estimating Repair Costs
• MAO Formula

After-Repair Value (ARV)

After-Repair Value (ARV) helps property investors estimate what a property is worth after purchasing and renovating. The formula to calculate ARV is as follows:

ARV = Property’s Current Value + Value of Renovation

Knowing how much a home is worth after renovations helps you to decide the price you offer the seller. For example, a home worth $200,000 with an estimation of $50,000 for renovations comes up with an ARV of $250,000.

Yet, there is more information you need to decide whether to make an offer to the seller and at what price.

Read Also: Free ARV Calculator: After Repair Value Estimator

Estimating Repair Costs

First, you need to pay a good contractor to inspect the home from top to bottom. The inspection report should show what needs repairing with an estimated cost.

If you are in a hurry to quickly estimate repair and renovation costs, read our useful guide explaining how to estimate rehab costs.

MAO Formula

The Maximum Allowable Offer (MAO) Formula is an equation that determines the price you should offer for a specific real property.

The importance of running your MAO Formula before making an offer boils down to the importance of having profit in your real estate deal. Are you fine with zero or negative profit? Probably not.

Therefore, in order to ensure a profit on any wholesale deal or flip, you must run these numbers.

The MAO Formula is:

After Repair Value (ARV) – Fixed Costs – Rehab Costs – Desired Profit or Equity = MAO

Simply take the ARV minus the fixed costs to buy and hold the home minus the renovation costs minus your equity or desired profit equals the MAO.

If this confuses you, our article explains every step in detail.

Read Also: MAO Formula In Real Estate: What Is A Maximum Allowable Offer?

Preparing The Purchase Contract

A wholesale real estate contract is a legal document creating a binding agreement between you as the wholesaler and the homeowner.

Unless you are an experienced real estate attorney, don’t rely on cheap online real property contracts. They are too basic and may not be legal in your state.

Check out our informative article explaining wholesale real estate contracts. We cover many of the important terms and conditions in a standard wholesale contract to buy properties and sell the contract to a buyer.

Read Also: Flipping Real Estate Contracts: A 6-Step Guide For Investors

Assign Contracts To Cash Buyers

The next step in wholesaling real estate in California is assigning the contract to a cash buyer. Once you've secured a property under contract with a motivated seller, the next move is to transfer your rights to purchase the property to a cash buyer in exchange for an assignment fee. Understanding how to wholesale real estate in California involves finding cash buyers through networking, real estate investment groups, or marketing the deal online.

After identifying a cash buyer interested in the property, you’ll execute an assignment contract. This legal document transfers your interest in the original purchase agreement to the buyer and specifies the assignment fee you’ll receive. For example, if you have a property under contract for $150,000 and agree to an assignment fee of $10,000 with the cash buyer, the buyer will pay you the $10,000 fee. The buyer then takes over the original purchase contract and proceeds with the transaction, paying the seller the agreed-upon $150,000.

This method is advantageous because it allows you to complete the deal without needing to fund the purchase yourself. Wholesaling real estate through assignment contracts is a quick and efficient way to profit from real estate transactions in California, leveraging the principle of equitable conversion.

Close Deal And Collect Assignment Fee

The next step in wholesaling real estate in California is closing the deal, where everything becomes official. When assigning a contract, closing the deal involves transferring your rights under the purchase agreement to the cash buyer. You'll meet at a title company or real estate attorney's office, where the buyer pays the assignment fee, and the title company facilitates the transfer of the property from the original seller to the cash buyer. The buyer pays the seller the agreed-upon price, and you receive your assignment fee as stipulated in the contract.

If you're double closing, the process involves two separate transactions. First, you close the deal with the seller, taking temporary ownership of the property. Immediately after, you sell the property to the cash buyer at a higher price. This requires two sets of closing costs and can be more complex but is sometimes necessary if the seller or buyer prefers not to see the assignment fee.

Regardless of the method, both approaches in wholesaling real estate result in you collecting the stipulated assignment fee. Understanding how to wholesale real estate in California, whether through contract assignment or double closing, ensures you can successfully navigate the final steps and secure your profits.

Double Close When Necessary

In real estate wholesaling, investors sometimes need to conduct a double close when they can't assign a contract directly to a buyer. This situation arises when a home seller insists on not having the contract assigned, often due to concerns about transparency or preference for dealing directly with the end buyer. Additionally, wholesalers might need to use a double close if the end buyer's funding source requires them to be on the title, or if the profit margin is so large that it might cause the seller or buyer to back out if disclosed.

A double close, also known as a simultaneous closing, involves the wholesaler purchasing the property from the seller and then immediately selling it to the end buyer, typically on the same day. This process requires two separate transactions: one between the wholesaler and the seller, and another between the wholesaler and the end buyer. While effective, this method is considered a secondary option due to the additional closing costs, fees, and logistical complexities involved.

Understanding how to wholesale real estate in California includes knowing when to use a double close. Despite its higher costs and complexity, a double close ensures the wholesaler can still profit from the deal while respecting the seller’s preferences and meeting the buyer's requirements, making it a vital strategy in wholesaling real estate.

How To Wholesale Real Estate Step-By-Step Recap

You’ve just taken in a lot of information about how to wholesale real estate in California, and it might seem overwhelming. Don’t be intimidated! The process becomes much easier when broken down into simple steps. To help you navigate wholesaling real estate more effectively, we’ve created this infographic to sum up everything you’ve learned so far. This visual guide will walk you through each step, making the entire process clear and manageable. Dive in and see how straightforward it can be to start your real estate wholesaling journey in California.

Is Wholesaling Legal In California?

Yes, wholesaling real estate is legal in California. Unlicensed wholesalers aren't acting as agents; they are acquiring the rights to purchase a property and transferring these rights to an end buyer. This is legal due to the doctrine of equitable conversion, which allows wholesalers to hold an equitable interest in the property and assign it for a fee.

For more about California wholesaling laws, see our article, which answers the important question: Is wholesaling real estate legal in California?

It explains why wholesaling is legal in California and cites specific California laws like their Business and Professions Code, which oversees the state’s real estate laws such as:

• Section 10016 defines a real estate agent as a natural person licensed to work under a real estate broker to receive compensation for helping property owners sell or lease their properties and helping their buyers and renters.
• Section 10130 states that it’s unlawful for unlicensed persons to engage in the business, capacity, or advertising as a real estate broker or a licensed agent.
• Section 10139 sets the penalties for violating the above sections with fines up to $20,000 or with a crime in the county jail for a term of up to six months or both.

when all is said and done, the wholesale real estate contract used for assigning rights makes this exit strategy legal and viable in California.

How Much Do Real Estate Wholesalers Make In California?

How much a real estate wholesaler makes can range greatly.

A benefit California real estate wholesalers have is the potential to earn a significant income. Real estate prices in California are soaring, and therefore wholesalers can demand large wholesale fees. Wholesalers can make as much money as they want depending on how many deals they can do and the size of their fees.

According to Rocket Mortgage, a wholesale fee "usually costs 5% – 10% of the total property price."

Let's say, for example, you put the house under contract for $120,000 and use your network to find a potential investor to buy it for $150,000. The investor takes on this contract to make substantial renovations and resell the property for much more. Afterward, you can legally make $30,000 in profit without even purchasing the property yourself. 

Ready To Learn How To Wholesale Real Estate? SIgn Up For Our FREE Training, Today!

Do You Need A License To Wholesale In California?

No, California does not require wholesalers to become licensed. That’s because wholesalers do not sell real estate. They only sell a purchase contract to a buyer who enforces the contract, so the property seller transfers the title to the new buyer.

If you are licensed to sell real properties in California (as a broker or an agent), you are required to disclose that to your sellers when you make an offer and enter into a contract. The Section 10139 penalties will apply to a broker or agent who fails to disclose.

Also, licensed agents and brokers may get sued by the sellers for failing to disclose their license status. This could lead to civil penalties and large damage awards too.

Real estate prices in cities such as San Francisco and Los Angeles are some of the highest in the country. Therefore, as a licensed salesperson, the commission you earn per real estate transaction is likely MUCH higher than in most other states.

Read Also: How To Become A Real Estate Agent: The Ultimate Guide

Can A Realtor Wholesale Property In California?

Yes, as long as the proper disclosure is made to the sellers. There are numerous advantages to wholesaling as a licensed real estate broker or a sales agent.

Licensed brokers and agents have access to all of the Realtor contracts available through the California Association of Realtors, including proper disclosures and forms. Since they are licensed, there is less worry about potential marketing property restrictions that unlicensed wholesalers may face. Agents can also earn real estate sales commissions when they buy and sell properties for themselves and for others.

Wholesaling, as an acquired skill set, allows Realtors to help homeowners in more ways than the typical real estate agent or broker is capable of. This is mostly because real estate licensure training does not include any practical aspects of real estate investing. Very few agents can offer to purchase real estate directly from the sellers that they aim to serve, therefore, wholesaling agents are able to create a competitive advantage for their businesses.

Is Wholesaling In California Easy?

No, it's not easy because wholesalers need to understand the state and local contracts and real estate laws.

However, reading our informative articles here and taking courses will teach you everything you need to know about the wholesaling profession.

In addition, undergoing mentoring with an experienced wholesaler who can teach you the practical side of wholesaling beyond taking courses and reading articles. Coaches are available to teach you the finer points of the wholesaling profession.

After reading our articles and viewing our instructive videos, we strongly suggest signing up for our Pro Wholesaler VIP Program!

Final Thoughts On Wholesaling In California

Wholesaling real estate in California presents a unique opportunity for investors looking to enter the real estate market with minimal risk and significant profit potential. As we've discussed, understanding how to wholesale real estate in California involves navigating the legal landscape, identifying great deals, and building a network of reliable buyers and sellers. By following the steps outlined above, you can take advantage of this quick and profitable real estate exit strategy.

Ready to translate the skills you've learned in this article into real-world success? Enroll in Real Estate Skills' free training program today! Our expert training will equip you with the knowledge and confidence to capitalize on the vast opportunities in the California real estate market. Don’t miss out—sign up now and take the first step towards your real estate investing success!

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*Disclosure: Real Estate Skills is not a law firm, and the information contained here does not constitute legal advice. You should consult with an attorney before making any legal conclusions. The information presented here is educational in nature. All investments involve risks, and the past performance of an investment, industry, sector, and/or market does not guarantee future returns or results. Investors are responsible for any investment decision they make. Such decisions should be based on an evaluation of their financial situation, investment objectives, risk tolerance, and liquidity needs.