Maryland may be one of the smaller states in the nation geographically, but there is still plenty of room for success in real estate wholesaling.
Maryland’s surface area of just 12,407 square miles makes it the 8th smallest state in the country in terms of land mass. But with about 645 people per square mile, Maryland is also one of the most densely populated. In fact, only four other states are more densely populated: New Jersey, Rhode Island, Massachusetts, and Connecticut.
According to the U.S. Census, there were over 2.2 million households in Maryland in 2020, with over 2.5 million housing units. Located near Washington, D.C., this mid-Atlantic state boasts over 6 million residents. Known for its ample coastline and abundant waterways along the Chesapeake Bay and Atlantic Ocean, the state’s largest city is Baltimore, Md., a seaport where over 585,000 residents made their homes at the time of the 2020 Census.
Densely populated areas tend to have higher housing costs. With a median home value of over $325,000, the State of Maryland ranks in the top 10 most expensive states in the nation. While that may be a disadvantage for the general population, it could spell higher profits for real estate wholesalers.
Ready to launch your wholesale real estate business in Maryland? After reading this step-by-step guide on how to wholesale real estate in Maryland, you will learn about the legalities and benefits of this lucrative business model.
Wholesaling real estate is a unique investment strategy because the wholesaler doesn’t take title to the property in most cases and instead, retains the right to assign the purchase contract to a third-party buyer. The objective is to sell the rights to the purchase contract at a higher price than the original contract price. The difference, often referred to as the assignment fee, is the profit the wholesaler realizes on the transaction. It’s a strategy that can be applied not just to single-family homes, but to all types of real estate, from bare land to multi-family structures to commercial properties.
While the process may vary at times, wholesale real estate begins with establishing a network of investors and then locating a motivated property owner who is looking for a quick sale of their home. Many times, these homeowners are facing serious financial problems, such as the threat of foreclosure. But sometimes, they simply want to sell quickly due to family-related problems, medical issues, or other life changes.
Regardless of what motivates a seller, the wholesaler represents a solution. A fast sale avoids the need for repairs or staging, something the homeowner likely wants to avoid due to costs. It also helps the homeowner address whatever financial issue they were facing. Because you are offering a solution to a problem, you can expect to purchase the house for well below market value—a key to success at wholesaling real estate.
Once you’ve identified a motivated homeowner and distressed property, it’s time to make an offer. When writing the contract, be sure the contract language gives you the right to assign it to another buyer. Once you’re under contract, you can then find an investor who agrees to purchase the home at a higher price. These buyers may be looking for investment property for a number of reasons, from flipping properties to buying rental homes to simply scaling up their investment portfolio.
Now that you have a basic understanding of wholesaling real estate, read on for some of the details of the wholesaling process.
Read Also: Wholesaling Rental Properties: The (ULTIMATE) Guide
One of the ways to quickly build your real estate wholesaling business in Maryland is to develop a step-by-step process that you can follow deal after deal.
With that goal in mind, here are nine steps to consider when launching your real estate wholesaling business. Be sure to check out our in-depth video showing you how to wholesale real estate step by step here:
With that in mind, here's our simple step by step process for wholesaling real estate in Maryland:
It’s said that experience is the best teacher. Until you have your own experience under your belt, why not tap into someone else’s expertise?
If you’re a real estate wholesaling beginner, relying on the mentoring of an experienced wholesaler will not only help you accelerate your success but also help you avoid potentially expensive mistakes.
A real estate wholesale mentor can provide you with guidance and support that will help you build your own successful real estate wholesaling business.
Real estate wholesaling involves the use of legal contracts. Before you launch your Maryland real estate wholesaling business, you should familiarize yourself with any of the federal, state, and local real estate laws that could apply to your business. Failure to do so could result in legal trouble, including heavy fines, court action, and lawsuits.
There are three methods for real estate wholesaling that are legal in Maryland: assignment of contract, double close, and buy and sell.
Assignment of contract is what most think of when they think of real estate wholesaling. Under this scenario, the wholesaler goes under contract to purchase a home but then sells their rights and obligations under the contract to another buyer for a profit.
With a double close, rather than the assignment taking place and the end buyer closing with the homeowner, there are instead two simultaneous closings. The first is between the wholesaler and the homeowner, while the second is with the end buyer.
Wholesalers may also opt to go through with the purchase of the home, taking possession, then selling it to a new buyer afterward.
While this was a brief summary of the main types of wholesaling you can practice in Maryland, read on to learn more.
An important component of a successful wholesaling business is the ability to understand the residential real estate market, including local property values, inventory, and market trends. As a new wholesaler, it’s important to have a realistic understanding of what buyers are paying for properties in the neighborhoods you target.
The good news is that the Maryland REALTORS have real estate market reports available every month as well as a year’s end report. Each monthly Data at a Glance report provides data on homes sold, homes pending, average and median sale prices, inventory, days on the market, and new listings.
Another option for familiarizing yourself with the market is the local Multiple Listing Service (MLS). The MLS is a system developed by real estate companies that are used for listing properties so other agents can access the information and bring buyers, with the commission split between the listing agent and the buyer’s agent.
Whether you gain access directly or through a real estate agent, the local MLS will provide you with pricing information on all the active and closed listings in your targeted market.
You can also access MLS data through Redfin, Zillow, or HomeFinder.
Before finding distressed properties, you will want to build a list of potential cash buyers who are willing to work with wholesalers so you can assign rights to contracts once an offer is accepted. Here are some proven ways to build your list of preferred buyers:
You can also check out this video on how to find cash buyers!
Read Also: Wholesaling Auction Properties: The (Ultimate) Guide
Once you’ve built your list of potential end buyers, it’s time to start researching potential homeowners who may be willing to sell their properties below market value. They may be facing family or financial struggles, such as divorce, death of a family member, foreclosure or condemnation. These motivated sellers are likely to be more interested in solving their problem with a quick cash sale than getting top dollar for their home.
When reaching out to these potential sellers, position yourself as the solution to their financial or personal distress. Here are some sources for finding motivated seller leads and off-market properties:
Read Also: 25 Questions To Ask Motivated Sellers
Once you’ve identified a distressed property and motivated homeowner, you’ll want to run the numbers before extending an offer to purchase. Here are the calculations to focus on:
The After-Repair Value (ARV) will help you estimate the home’s value after it’s purchased and has undergone renovation. You can calculate the ARV by adding the property’s current value to the value resulting from the renovation:
ARV = Property’s Current Value + Value of Renovation
To determine the ARV, you must study recently sold, renovated properties that are similar to the subject property (see: real estate comps). This calculation will help you begin to formulate an appropriate offer, but you aren’t there yet.
Before you write the offer, consider paying a contractor to go through the entire property and present a detailed list of repairs with cost estimates. Of course, if you have the experience and knowledge, you can do this step yourself and estimate the rehab costs.
For guidance on estimating costs, check out our review of the Rehab Valuator. This software can be useful in helping you analyze potential deals, no matter if your goal is wholesaling, or if you plan to flip or rehab and hold it as a rental property. You can also use it to market the deal to potential buyers.
Once you have the repair cost estimates, calculate the Maximum Allowable Offer also known as the MAO Formula. This figure will help determine the offer price for the potential wholesale property. The MAO is important because it can prevent you from offering too much. If you go under contract at a price too high for the property, you could either end up with no profit or, even worse, fail to find an investor for the deal.
You can calculate the MAO Formula based on the numbers you’ve determined so far and the profit you hope to realize:
After Repair Value (ARV) – Fixed Costs – Rehab Costs – Desired Profit or Equity = MAO
Subtract the fixed costs necessary to purchase and hold the home from the ARV. Then, take away the rehab costs and subtract whatever profit you hope to make. Remember to subtract your wholesale fee from the resulting price. The final number is the MAO or maximum amount to offer on the property.
Now that you’ve done the proper calculations to determine your MAO and made the decision to go forward, you can write an offer. Be sure the homeowner understands that the wholesale real estate contract is a legally binding document between you as the wholesaler and the seller.
If you’re unsure about what needs to be in the contract, you can check out our article on wholesale real estate contracts to learn the important terms and conditions that go into a standard offer-to-purchase contract for wholesaling as well as assignment agreements.
Once you are under contract, you will want to find a cash buyer to assign all rights and obligations of the contract. It will then be the end buyer who closes on the property, and you will no longer be obligated to close.
This agreement should also spell out all terms and conditions of the new contract. Go to our article on assignment of contract.
Download Free Wholesale Real Estate Contracts Here (PDF)
This is the moment you’ve worked for: it’s time to close the deal and collect your assignment fee. The property can be closed in one of three processes: assignment of contract, double closing, and buying and selling.
Assigning your rights under the contract to another investor means you can collect an assignment fee from them. With the other two types of closings, you will have to wait to collect your fee at the property closing rather than collecting it beforehand. One of these other processes involves a double close, meaning the closings between the seller and end buyer happen at the same time.
The third method is to close on the contract, follow through on the purchase, and then sell the actual property—rather than the rights to the contract—to another investor. When they need to close, wholesalers often turn to hard money lenders.
At times, you’re likely to come across a homeowner who doesn’t agree to assigning the contract to a third party but is willing to accept the offer from you as the buyer. In these situations, you can still complete the deal by doing a double closing.
With a double closing, the homeowner signs the offer to purchase from the wholesaler, the transaction closes and the seller is paid. Then, the end buyer signs a second set of closing documents to buy the home from the wholesaler. The wholesaler is then paid.
Keep in mind that not only do you take possession of the property with a double close, but there may be two sets of closing costs, depending on the contract terms.
Wholetailing is also another wholesaling method which is a combination of a fix and flip and a standard wholesale deal. In wholetailing, you’ll take ownership of the property, do some cleanup and light renovations, and then re-list the property shortly thereafter on the market.
Wholetailing is often a desirable exit strategy because you can access a larger pool of buyers when you re-list the property on the MLS. These buyers may have enough time to use financing and are generally less sensitive to pricing as compared to quick cash buyers.
As with many states, wholesaling real estate can be done legally in Maryland. The key is to avoid any activity that requires a real estate license.
Real estate brokerage activities are defined in §17–101 (l 1-6). They include such services as selling, buying, exchanging or leasing any real estate to another person; collecting rent; assisting in locating or obtaining real estate for purchase or lease; and other real estate activities. For precise language on what is considered a brokerage service, see §17–101 (l 1-6).
Maryland statutes also spell out situations where licensing requirements do not apply. Both §17–102, which includes exceptions such as court orders and public officers, as well as §17–301(b), which includes exceptions for attorneys, builders, and a financial institution, among others.
In addition, there are other instances when an individual is not required to hold a real estate license in Maryland, as explained in §17–302 (a). These include selling six or fewer unimproved lots per calendar as owner and subdividing or selling property that has been unimproved and owned for at least 10 years.
For details about the legalities of wholesaling real estate in Maryland, see our article, Is Wholesaling Real Estate Legal in Maryland?
Wholesaling is self-employment. There’s no set hourly wage or salary involved. Instead, the amount of money that can be made depends on how many deals are closed, resulting in assignment fees, net profits made from double closings, or any other profits made through real estate deals.
That being said, it’s also true there is the potential to earn a significant income. It all comes down to how many deals you can do in a year and the average amount you earn from each one.
Both the median sales price and price per square foot saw increases year-over-year in 2022 to date, translating into increased average fees from wholesaling. It would not be out of the question to earn at least $12,000 per deal. Under this scenario, it would take:
The most successful real estate wholesalers are those who establish a process and then follow it for every deal. With this deliberate approach, there’s really no set ceiling to how much can be earned.
It isn’t necessary to have a real estate license in order to operate a real estate wholesaling business in Maryland. You aren’t marketing and selling property, you’re assigning the rights and obligations to contracts you have signed.
There are some advantages to having a real estate license, however. It offers easy access to the local MLS and enables you to earn commissions rather than negotiate fees. Keep in mind that if you are licensed, this should be disclosed to the homeowner when making an offer. Full disclosure helps steer clear of legal problems down the road.
Of course, building a good relationship with a licensed real estate agent will also get you access to the MLS. In addition, these professionals often have a great deal of local market information to share and many will be able to open the door to local investors.
While there is potential to earn a significant income, wholesaling real estate in Maryland isn’t easy. But there are resources that can provide you with information on the legalities involved. There are plenty of informative articles available to read, plus you can enroll in courses that will help you build your process. Check out our free training to see how we help students all over the country find and flip deals efficiently and profitably.
If you’re ready to go all in with real estate wholesaling, you’ll want to sign up for our Pro Wholesaler VIP Program. The program will help you build a solid foundation and grow your business by showing how to:
The Pro Wholesaler VIP Program is designed for the modern entrepreneur to learn the basics and how to help new real estate wholesalers avoid the pitfalls typically found by beginners. It is 100% online and is used for local and virtual real estate wholesaling.
Real estate wholesaling in Maryland has the allure of significant earnings on every deal. You won’t need to get your real estate license before getting a start. As a self-employed business owner, the sky’s the limit when it comes to your earning potential. It all depends on how many deals you close and what your average profits are from each deal.
Before launching your business, however, it’s important you have a clear understanding of local and state laws related to real estate. It will help you avoid legal issues and sidestep practices like marketing properties you don’t own.
The most successful real estate wholesalers are those that follow a set process. Our nine steps outlined in this article will get you started. You also might want to join networks or social media groups of more experienced wholesalers and take advantage of opportunities like our expertly curated training to hone your skills and build success and growth for your business.
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