How To Wholesale Real Estate In New York: Step-By-Step (2024)Jan 26, 2024
Wholesaling real estate is a fantastic way to dive into the New York market and claim a piece of the wealth-generating pie. Keep reading to learn how to wholesale real estate in New York.
- What Is Wholesaling Real Estate?
- How To Wholesale Real Estate In New York (9 Steps)
- Is Wholesaling Real Estate Legal In New York?
- How Much Do Real Estate Wholesalers Make In New York?
- Do You Need A License To Wholesale Real Estate In New York?
- Is Wholesaling In New York Easy?
- Final Thoughts On Wholesaling In New York
New York is a state of wealth, prosperity, and opportunity.
The wealthiest real estate magnates, investors, and philanthropists all live in the great state of New York. With a population of just over 20,000,000 people, New York ranks amongst the top five states by population density in the United States - right behind Texas, California, and Florida.
So, where are New York’s great opportunities? In the real estate market.
As of July 2023, the median household value in the United States is $281,900. The median household value for New York, on the other hand, is $384,100.
New York City, Albany, Westchester, Brooklyn, and all the other cities in between are extremely resilient. The surrounding real estate market has grown in value at a much faster clip than the rest of America and now, the average monthly rent in New York is $3,343 for a studio rental to $6,869 for a 4-bedroom rental. The median price of available listings is $4,050 ($6 per square foot).
If you’d like to break free from your nine-to-five job and access the remarkably resilient and ever-growing New York real estate market, it’s time to consider wholesaling real estate. Let's dive in!
*Before we begin our guide on wholesaling real estate in NY, 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!
What Is Wholesaling Real Estate?
Wholesaling real estate in New York typically unfolds in this manner: a contract is established between the wholesaler and the property owner for selling the property. The twist here is that the wholesaler doesn’t actually finalize the purchase and take over the property.
Instead, they opt to transfer their rights from the sale agreement to another buyer. This buyer, unlike the wholesaler, will assume ownership of the property.
In this scenario, the wholesaler doesn’t purchase the property outright. They engage in a provisional agreement with the property owner. This agreement is somewhat different from standard real estate contracts, as it allows the wholesaler to sell the property to an end buyer on behalf of the owner, making a profit for themselves in the process.
It might be puzzling as to why a property owner would consent to another party profiting from their property’s sale. The reasons vary greatly. Factors such as financial difficulties, divorce, death, or other circumstances can lead an owner to rapidly dispose of a property. Sometimes, they might not want to undertake the efforts needed to prepare a property for the market.
Often, the properties that are wholesaled in New York are in distress, like those nearing foreclosure. In these cases, homeowners may prefer to work with a wholesaler to quickly resolve their property-related issues.
Why Wholesale Real Estate In New York?
New York's real estate market is dynamic and diverse, offering a range of opportunities for wholesalers. The state's robust economy, combined with its varied real estate landscape—from bustling city apartments to suburban homes—makes it an ideal location for wholesaling.
However, the competitiveness and complexity of New York's market require a solid understanding of local trends and regulations.
With motivation, training, and guidance, beginners can earn a substantial amount wholesaling real estate in New York City. Apart from market conditions, your success will depend on how well you understand the wholesale real estate laws in New York City.
How To Wholesale Real Estate In New York (9 Steps)
In the following nine steps, we’ll show you how to wholesale properties in The Empire State. Here's our proven step-by-step process to effectively start wholesaling real estate in New York:
- Partner With A Wholesale Mentor
- Learn New York Real Estate Wholesaling Laws & Contracts
- Understand The New York Real Estate Market & Lingo
- Build A Cash Buyers List
- Find Motivated Sellers & Distressed Properties
- Put Distressed Properties Under Contract
- Assign The Contract To A Cash Buyer
- Close Deal And Collect Assignment Fee
- Double Close Or Wholetail When Necessary
Step 1: Partner With A Wholesale Mentor
Your first deal can be challenging. So, your first step in your wholesaling due diligence journey should be getting in touch with a wholesale mentor. Mentors have already successfully navigated the New York market. They know the necessary laws, lenders, hurdles, and challenges you’ll likely face.
If you work with a mentor, they’ll help you avoid classic mistakes and challenges you’ll likely face on your real estate investing journey. Not only will they be able to save you money, but they will also be able to save you precious time.
If are eager to get started today, sign up for our FREE training course on wholesaling real estate!
Building A Real Estate Network In New York
Networking is pivotal in real estate wholesaling. Building relationships with real estate agents, other wholesalers, potential buyers, and investors can provide valuable opportunities and insights. In New York's diverse market, having a broad network can open doors to various types of properties and deals.
Check local blogs, podcasts, and networking events. Reach out to peers as well. These are all great ways to connect to a mentor. A good network and a seasoned mentor can put you in the right direction and set you up for success!
Step 2: Learn New York Real Estate Wholesaling Laws & Contracts
There is no specific language geared towards wholesaling delineated within NY law. However, understanding the laws surrounding licensing requirements could be a great place to start your wholesaling legal journey.
According to Article 12-A of New York's Real Property Law, anyone who (in exchange for a fee) negotiates a sale of real estate in a New York real estate market, collects rents, or negotiates a commercial loan – must be licensed in New York as a real estate broker.
Additionally, anyone who advertises a property on behalf of someone else (in exchange for a fee) will also, under the auspices of the law, require a license.
So, although the State does not explicitly mention wholesaling laws, you know that as long as you aren’t operating as a broker, you are free to wholesale across the state.
As a wholesaler, you’ll also want to get familiar with a standard New York State Purchase Agreement. These agreements are what you are inevitably going to sell or assign to a different buyer. You should be familiar with each line item to ensure you completely understand what it is you are assigning.
FREE DOWNLOAD: Wholesale Real Estate Contracts (PDFs)
Step 3: Understand The New York Real Estate Market & Lingo
When diving into a new market and performing your due diligence, you’ll want to get familiar with the state’s lingo and market. What that means is you’ll want to know the popular cities, markets, schooling districts, restaurants, and companies that operate throughout the state.
Most people know about Manhattan - it’s the biggest and most populous borough in New York City. But, did you know the population in Brooklyn has grown dramatically over the years? Did you know upstate has a thriving community that could be a great feeding ground for new real estate investors?
Did you know the schooling districts in Chappaqua, Armonk, and New Rochelle are amongst the best in the country?
Walking the streets of these neighborhoods, speaking to local New Yorkers, and learning from your mentor should be the primary form of research you embark on. However, to take your search one step further, we recommend also glossing through the various Realtor association websites. These sites can be a great source of information as you build your investment cases.
Here is a list of a few different counties you might want to explore:
- New York State Association of Realtors (NYSAR)
- Hudson Gateway Association of Realtors (HGAR)
- Manhattan Association of Realtors (MANAR)
- Hamptons and North Fork Association of Realtors (HANFAR)
Successful wholesalers in New York are always up-to-date with market trends. This includes understanding which areas are hot for investments, what types of properties are in demand, and the overall economic indicators affecting the real estate market.
Tools like MLS (Multiple Listing Service), public records, and real estate websites can provide valuable data for this research.
Step 4: Build A Cash Buyers List
A cash buyer list is a list of ready-to-go investors and home buyers who have the requisite liquidity necessary to purchase your property and buy in your wholesale deals in a flash. Cash buyers are wealthy, professional investors who enjoy flipping houses and can close on your transaction extremely quickly.
In wholesaling, speed and efficiency are the name of the game. Connecting with a list of cash buyers ahead of time will put you in a great place when the right deal comes around.
Step 5: Find Motivated Sellers & Distressed Properties
Motivated sellers are homeowners who are in a cash crunch and need to sell their properties very quickly. They are eager to get the cash and sometimes will even forgo larger profits in exchange for a quick, seamless closing.
Distressed properties are also a great place to look for real estate deals. A distressed property is a property that is usually in bad condition. Perhaps the previous owner had a bad tenant that wrecked the place or maybe the house got destroyed in a fire or a flood. Many homeowners would rather sell their distressed properties at a discount to fair market value rather than spend time renovating and improving their condition.
Finding these wholesale properties can offer the most profit upside for you and your end buyer. You can find these deals on off-market transactions or through the Multiple Listing Service (MLS). Reach out to local brokers and let them know your investment criteria. Once these deals come around, be sure to act quickly before someone else steps in.
Step 6: Put Distressed Properties Under Contract
Once you’ve found the right property, it’s time to put it under contract. But, how do you know what price is a good price to offer the seller?
This is where the Maximum Allowable Offer or MAO formula comes in handy. Here is what the formula looks like:
Maximum Allowable Offer (MAO) = After Repair Value - Rehab Costs - Desired Profit - Wholesale Fee
The MAO is the maximum purchase price a wholesaler should pay for a property. Abiding by this tried-and-true formula will ensure not only do you make a profit but your end-buyer/fix or flip investor will make a profit as well.
At the end of the day, as a wholesaler, you are trying to find a deeply discounted property to sell to an investor who also believes the property is trading at a discount. By abiding by this equation, you’ll ensure just that.
What Are The Inputs Of The MAO Formula?
- ARV: The first input is calculating the after repair value or ARV. The ARV is the value of a property after you renovate it and bring it up to fair market value. You can calculate this value by researching the neighboring markets and determining what similar properties have sold for in the surrounding area.
- For instance, if you are renovating a three-bedroom home in the Hamptons or Queens, you’ll want to walk the surrounding streets, talk to local realty companies, and determine what the house would sell for once the necessary repairs are made.
- Estimated Rehab Cost: Next, you’ll have to estimate the rehab costs necessary to fix up your distressed property. Is the property going to need new appliances, a paint job, and updated landscaping? Answering these questions will help give you an idea of the time and cost of the renovation project.
- Desired Profit: Then, you’ll need to determine the flipper’s desired profit and your desired profit. These numbers are at your sole discretion to guess. If you are investing in a property with a $2,000,000 ARV, you might want to bake in a large desired profit for you and the flipper due to the large size of the transaction.
- Wholesale Fee: A conservative rule of thumb is to assume a cash buyer would want to make about 30% gross profit on any transaction. This is calculated using a formula called the 70% Rule. For you, the wholesaler, we recommend at least a 15% - 20% profit.
Once you calculate the MAO, put an offer for the property at, or below, your calculated number. This will ensure you’ll generate interest for your purchase contract from one of the cash buyers on your list.
Step 7: Assign The Contract To Cash Buyer
Next, once you are under contract with the seller, you’ll need to assign the contract over to a cash buyer.
For this part, we recommend seeking legal advice from a real estate attorney. You’ll want to make sure your assignment contract is rock-solid with all your interests taken care of. The last thing you want is to go under contract illegally face the wrath of the New York legal system and lose money along the way.
You can download our free wholesale real estate contracts to use as a template for your New York deals.
Step 8: Close Deal and Collect Assignment Fee
You have the purchase contract signed and ready to go, and you have the assignment contract negotiated, signed, and sent to the cash buyer. Now, it’s time to close the deal and collect your assignment fee.
For this stage, all you need to do is be on standby. Be in contact with all parties involved and ensure the legal team, title insurance, and any real estate agent involved have all the necessary information they need.
Step 9: Double Close Or "Wholetail" When Necessary
As a wholesale investor, you’ll need to be flexible in the way in which you transact on deals. Two methods you might want to familiarize yourself with are double closing and wholetailing when necessary.
What Is A Double Closing?
A double closing is a transaction where you forgo an assignment contract entirely in favor of two purchase agreements. Instead of going under contract with the homeowner and assigning the contract to a different buyer, you’ll actually go under contract with the seller and then simultaneously go under contract with your buyer.
Then, the title company will close on both transactions at the same time - essentially giving your end-buyer the property that you were in contract to purchase from your seller.
In a perfect world, your end buyer will actually fund your purchase of the property from your seller.
However, double closings are not without their hurdles. Since you are going under contract with a cash buyer before actually owning the underlying property, you might encounter some challenges from your title insurance company.
Although there are some workarounds, you might have to be a bit creative by using hard money loans or transactional funding. Double closings are also a bit more expensive because you may be paying closing costs on two separate transactions, in addition to borrowing costs.
What Is "Wholetailing?"
Another such wholesale method is what’s called "wholetailing".
Wholetailing is a hybrid between a full fix and flip and a traditional wholesale deal. In wholetailing, you’ll take ownership of the property, do some high return on investment (ROI) renovations, and then re-list the property shortly thereafter on the market.
It is a great exit strategy because you can increase the value of the house and access a larger consortium of potential buyers when you re-list the property back on the MLS at a higher price.
Is Wholesaling Real Estate Legal In New York?
Yes, it is legal to wholesale real estate in New York. However, there are a handful of hurdles and laws to be aware of before you begin wholesaling throughout Buffalo, Syracuse, Hempstead, and other major cities in the Empire State.
Unless otherwise stated in the purchase agreement, the equitable interest in a contract is assignable to a third party - even without the expressed consent of the contract's other party. As long as the assignment does not materially change the responsibilities of the seller, there is no issue at all for a wholesaler to operate their wholesale business as usual. (See UCC § 2-210 (2) – Assignment of Rights)
However, real estate wholesalers must avoid marketing the property - publicly or privately - as if they were the actual owners. Remember, wholesalers are assigning contracts to end-buyers, not acting as real estate brokers. NY law prohibits individuals or businesses from acting on behalf of a seller or buyer, marketing or advertising properties in exchange for a commission without legally obtaining a real estate license.
As a wholesaler, to stay within the confines of New York law, you will have to either obtain a real estate brokerage license or stick to marketing the equitable interest in the purchase agreement and not the actual property itself.
How Much Do Real Estate Wholesalers Make In New York?
The average wholesale deal brings in about $5,000 to $25,000 per property while top earners can get up to $80,000 per deal The amount you can make wholesaling real estate can fluctuate greatly depending on the state in which the deal is conducted, the size of the transaction, and the discount the property is to its ultimate ARV.
In New York, given the size of the real estate market and higher household average price point, we envision the typical wholesaler will bring in about $20,000 per transaction. If you manage to wholesale one deal every other month, that equates to a $240,000 annual salary. Not bad at all!
Do You Need A License To Wholesale Real Estate In New York?
No, as mentioned earlier, you do not need a license to operate a traditional wholesaling business in New York. However, many real estate professionals recommend beginners start off getting their license.
Getting a license can give you access to numerous resources not available to other wholesalers. Most significantly, realtors get MLS access. Almost all properties sold throughout the country get listed on the MLS. Although foreclosures and distressed properties are a great source for wholesaling, standard properties on the MLS are also a fantastic fertile ground for good, attractive real estate deals.
Getting a real estate license in New York will also give you access to do deals in states like Connecticut, Colorado, Georgia, and many more due to a rule is known as Real Estate Reciprocity.
In New York, you can obtain three different types of licenses: a real estate broker, an associate real estate broker, and a real estate salesman. For more details, check out the New York State Real Property Law Section
Is Wholesaling In New York Easy?
No, but with the right wholesaling tools, it can be.
Wholesaling is hard work. It requires time, effort, and determination to find the right deals and best buyers and to learn the market. The process can be challenging, but with a coach, mentor, and the proper training you can transform from a new investor into an expert.
Check out the Real Estate Skills Pro Wholesaler VIP Program. It is a world-class immersive experience that can give you the necessary guidance you need to become successful wholesaling properties.
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 New York
If you are looking to get involved, create generational wealth, and take your financial freedom to the next level. wholesaling real estate in New York can be your ticket to success.
With the right mentor, research, grit, and determination you can become a successful wholesaling professional in New York. Search social media for properties, walk around neighboring towns for available houses, and attend networking events to find the right deals. Familiarize yourself with state laws surrounding rental properties, flipping houses, and real estate sales.
Be sure to seek legal advice and ask your mentor for help when writing your real estate contracts and generating your investment strategy.
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.
Once you’ve done the research and with the proper training and guidance, it’s time to hit the ground running. Good luck!