Wholesaling is unique from other real estate investing, such as flipping houses or purchasing a rental property, in that a wholesaler doesn’t actually take possession of the property in most cases so managing cash flow becomes much easier. Instead, the wholesaler goes under contract, then assigns the rights and obligations of the executed contract to another investor, the end buyer, who ultimately closes on the property and pays the purchase price.
Wholesaling real estate is known as one of the best short-term investment strategies around and a good way for beginners to get a start in real estate investing.
If you’re wondering what it takes to become a successful real estate wholesaler in Ohio, whether you live in Columbus, Cleveland, Akron, or another city in the Buckeye State, read on to learn more.
In this ultimate guide, we’ll show you exactly how to wholesale real estate in Ohio with our proven step-by-step wholesaling process. Let’s dive in.
Wholesaling real estate has some similarities to traditional real estate investment, at least at the start. The wholesaler assesses the property to determine an offer price. If the wholesaler’s offer is accepted, the wholesaler and homeowner enter into a sales contract for the property.
But unlike traditional real estate transactions, the wholesaler does not close on the contract and take possession of the property. The contract’s terms provide the wholesaler with the ability to sell their rights and obligations under the contract and keep any profit they can create for themselves.
Therefore, the wholesaler doesn’t pay the purchase price. Instead, they assign their rights and obligations under the contract to a third party who is the ultimate cash buyer of the property, closes on the contract, pays for the purchase, and takes possession.
Homeowners who agree to wholesale their home and allow someone to receive profits on the sale are usually dealing with either a financial or family hardship. They either want or need to sell the property quickly and want to avoid the burden of updates or repairs.
Many wholesale properties are homes that are about to go into foreclosure. The homeowner contracts with a wholesaler as a way to solve the financial problem they face.
If you want to launch your wholesale real estate business in Ohio, it’s helpful to have a series of steps in mind as you set your sights on your first deal so you can move through the process properly—at least until you have enough experience that the steps come naturally. Here are nine steps to consider as you get started in wholesaling in Ohio.
Even when you have done all your homework, experience is still the best teacher. Until you have built up your own knowledge through experience, it can be helpful to engage some assistance from a seasoned wholesaler who is willing to show you the ropes as your mentor.
You’ll find that even if you have experience in other types of real estate investing, such as house flipping, enlisting the guidance of someone who has been wholesaling for a while can put you on the fast track to growing your own successful wholesaling business. Think of it as an investment in the future of your business. You’ll also find it easier to focus on the business of identifying motivated sellers and building relationships with other investors.
It makes sense that prior to launching your wholesaling business in Ohio, you will want to acquaint yourself with any state real estate license laws, contract laws, and in particular, laws pertaining specifically to wholesaling real estate. One of the biggest threats to the success of your business is overstepping boundaries set by state laws.
The good news is Ohio law as it pertains to real estate wholesaling is uncomplicated. In fact, there is no Ohio law that was specifically written to address wholesaling. However, that doesn’t mean you can operate your business however you please.
Real estate wholesalers planning to operate legally in the state of Ohio must not conduct any activities that require them to hold a real estate broker’s license. In other words, they must be careful not to market the actual property rather than assign their rights and obligations to the contract.
To assure you don’t overstep the boundaries, you should familiarize yourself with the definition of a real estate broker according to Ohio law, which can be found in Ohio Laws & Administrative Rules Section 4735.01. The definition is then augmented in Section 4735.02, to explain the duties that a real estate broker or salesperson can legally perform, including marketing a home for sale.
Unless you are a licensed real estate salesperson or broker, as defined by Ohio law, you cannot legally act in the capacity of a real estate professional, with only a few exceptions.
Real Estate Tip - Unless you are a licensed real estate professional or own a home, you cannot advertise a property for sale in the state of Ohio.
If you are new to real estate or at least new to Ohio, you’ll need to do some research to familiarize yourself with the Ohio real estate market and any real estate lingo new to you. Get to know a local real estate agent. Not only might they help you expand your investor network, but they can help you get familiar with local real estate market trends and lingo.
Spend some time with an agent willing to help you get familiar with the market. Read whatever you can about the real estate industry in your area. Understand not just the current market status, but historic trends as well.
Check out Ohio Realtors and your specific region's Realtor association to get more familiar with the predominant real estate licensee organizations in your market. Relationships with agents and brokers are essential to your long-term success in this business.
You won’t be successful in real estate wholesaling until you’ve established a network of investors to turn to once you have a property under contract. There is just a short window of time to get the contract assigned to an end buyer, so you don’t want to start from scratch in reaching out to investors.
Instead, build your network before you get any properties under contract. Learn the preferences of each cash buyer, including sought-after locations and market values. When you’ve identified a property, reach out to an investor to gauge interest.
You can also check out this quick video below that talks about how to find cash buyers online for free!
Once you understand Ohio real estate law and have built a network of cash buyers, you can start looking for on- and off-the-market distressed properties and motivated sellers. Consider what you learned in researching the preferences of your cash buyer network as you evaluate properties and connect with motivated property owners.
You should be sure the seller understands wholesaling as a real estate investment strategy. You’re likely to run into fewer objections if you reassure the seller that they are guaranteed the contract purchase price and will be able to close on their property on time, per the contract.
Once you’ve pinpointed a potential property, it’s time to evaluate its suitability for wholesaling. Begin by calculating the home’s after-repair value (ARV). This figure will play a role in determining the maximum amount you can expect a cash buyer to pay for the property.
The maximum allowable offer (MAO) is a calculation that will tell you what you can expect a real estate investor to agree to pay for an investment property. The MAO is determined by starting with the ARV, then subtracting the expected fixed costs and cost of rehab. Next, deduct a profit for the investor and the assignment fee you hope to be paid. Once you know the maximum allowable offer (MAO), you know what the final buyer will likely pay, which will help you determine what to offer.
Offering too much will make it more difficult to find a cash buyer willing to accept the contract assignment and still leave you with a profit.
One final note: be sure the contract terms allow you to wholesale the property without the consent of the seller. If this is not the case, do not enter into the contract without changing the terms so that you are allowed to do so. Otherwise, you will need to obtain the seller’s approval to assign the contract prior to closing.
After you have an accepted contract, you then reach out to one of your cash buyers whose preferences are most closely aligned with the subject property. Ideally, you will have already spoken with a potential end buyer to gauge their interest in the property before going under contract.
When you sign the assignment of contract with the cash buyer, be sure you include your wholesale fee in the terms. You’ll also want to have an accurate description of what the buyer is receiving by way of purchase rights, as well as spell out obligations, like closing costs.
You will also want to spell out any liabilities if for some reason, you are not able to secure the property. This is particularly important if you are asking an investor to enter into the agreement with you prior to going under contract with the property. In addition, you’ll want the assignment contract to include terms that greatly limit the buyer’s ability to walk away from the deal as long as you deliver what you say you will.
Once you’ve assigned the contract to a cash buyer, who will ultimately complete the purchase of the property, it’s time to close the deal and collect your assignment fee.
Depending on how you structure your Ohio wholesale deal, your fee will either be paid from the title company or come directly from your cash buyer.
In a typical wholesale real estate contract, you never actually take ownership of the property. Instead, the offer to purchase includes terms that give you the ability to sell your rights to close on the real estate deal. This is sometimes referred to as equitable conversion. The final transaction takes place between the end buyer and seller directly.
However, there may be instances where you will need to double close on a property. This real estate investment strategy occurs when both of the real estate transactions during a wholesale deal occur simultaneously. As with other wholesaling, the transaction involves three parties: the seller, the wholesaler, and the end buyer of the home.
One of the reasons for doing a double close is to conceal just how much you are making on the real estate deal. It can also help you eliminate the potential obstacles that can arise between the seller and the cash buyer since the transactions are handled separately. Both the seller and end buyer will be dealing with you and not each other.
With a double close, you begin by purchasing a property from the homeowner at a discounted price. As a cash buyer, you may be able to minimize the amount of earnest money deposit required by the contract and avoid a down payment.
Once you are under contract, you immediately enter into a separate agreement to sell the property to the end buyer. The goal is for the closings to happen very close together. Ideally, the title company would receive the end buyer’s funds, then close out the original purchase transaction using a portion of those funds so that the second transaction can immediately take place. Any proceeds would be your profit.
If the title company is unwilling to do so, you will need to use personal funds, get a short-term personal loan, transactional funding, or secure a hard money loan to complete the purchase. If you think you may find yourself in this type of situation, you may want to build a relationship with a hard money lender.
The other option is wholetailing, which occurs when a wholesaler closes on the property, then lists it on the local Multiple Listing Service (MLS) to sell to an investor on the "retail" market or open market. Wholesalers often command higher prices due to having more exposure and having a longer time to find a high-paying, potentially mortgaged buyer.
Read Also: Wholesaling Real Estate For Beginners
Yes, wholesaling real estate is legal in Ohio. There are no state laws specific to wholesaling real estate. However, there are state laws that prohibit someone from selling a residential property unless they are the homeowner or a licensed real estate professional.
Therefore, a wholesaler in Ohio may not act as though they are a licensed real estate broker if they are unlicensed. Wholesalers must only market the sale of their rights and obligations under the offer to purchase and not the sale of the property itself. This important distinction will keep you from running afoul of the law.
As a wholesaler, you should ensure nothing in the contract for sale of the distressed property explicitly prohibits you from assigning the contract. Instead, before making an offer to purchase, ensure the purchase agreement used enables the assignment of the contract’s rights and obligations to another party, the end buyer, without requiring the consent of the seller.
If you are wondering how much you stand to make by being a wholesaler in Ohio, think of being a wholesaler as similar to being a flipper—there’s really no limit to how much you can make. The most successful wholesalers tend to be those who have fine-tuned their process and have systems in place to consistently identify distressed properties and motivated sellers.
The average wholesaling assignment fee is about $10,000 per transaction. It does not take many transactions a year to accumulate a decent income from wholesaling. Even a novice wholesaler should be able to make $50,000 their first year. Experienced wholesalers are able to make $240,000 to $600,000 annually on the sale of just 5 to 10 homes. The key to success is developing a system that works for you and then following it.
To shortcut your path to achieving the highest income with real estate wholesaling, make sure you are educated and receive extensive wholesale real estate training.
You can create your own offer-to-purchase contract to be used in your wholesaling operations. To get started, look at examples and contract templates online. Unless you are already a real estate professional licensed in Ohio and a member of the National Association of Realtors, you will find the purchase forms used by Ohio Realtors inaccessible. The Columbus REALTOR website does, however, provide contact information for several vendors that provide forms.
You may be able to access forms used by some of the local Realtor Boards through third parties, such as this example of an Ohio Contract to Purchase from the Cincinnati Board of Realtors.
This example would need editing but does include language indicating the contract is binding not only on buyer and seller, but any “assigns.” This is the type of language you will want to include when creating your wholesaling purchase contract.
Here is another example of an Ohio Real Estate Purchase Agreement made available by the Ohio Public Works Commission. This is the first page of the purchase agreement:
As previously discussed, you will also need an assignment contract. Here is one example of an assignment of contract you can customize for your use:
It’s also important to include your fee as well as the date it will be received. In addition to providing all terms, the assignment contract will need to be signed by the assignor and assignee.
In creating contracts, it is good practice to seek legal advice from an attorney familiar with real estate law in Ohio.
You do not need to be a licensed real estate professional to utilize wholesaling as a real estate investment strategy in Ohio. It is important, however, that you do not act as a licensed real estate professional at any time during your wholesaling activities or misrepresent yourself as a licensed broker or salesperson.
This includes, but is not limited to, representing yourself as selling the home on the seller’s behalf, or in marketing or advertising the property in any way, rather than your rights and obligations under the contract only.
For information on getting your real estate license in Ohio, check out the Department of Real Estate & Professional Licensing.
You can wholesale property in Ohio as a Realtor. You may even find several advantages to being licensed. For example, you won’t need to be as concerned about your marketing plans since you are licensed.
You should also find it easier to put sellers at ease. As a Realtor, you can explain to them that you will be following the standards put forth by the National Association of Realtors (NAR). This may give you an edge over competitors who are not licensed.
Your status as a licensee should be disclosed in all your contracts. As a licensed real estate professional, you will earn a real estate commission, either in addition to or in place of, a wholesale fee.
That old adage, “If it were easy, everyone would be doing it,” certainly holds true for wholesaling real estate. But that doesn’t mean you should not consider wholesaling as a real estate strategy.
With some preparation, patience and perseverance, you can build your real estate wholesaling business over time. Consider enlisting the help of a coach or mentor, and taking advantage of property training like Real Estate Skills offers in the Pro Wholesaler VIP Program.
Because it doesn’t require a lot of capital to get started, real estate wholesaling is an appealing investment strategy and offers the opportunity to make a comfortable living. Before getting a start in wholesaling in Ohio, it’s important you become familiar with local real estate markets as well as state laws pertaining to real estate.
You should also consider investing in the help of a mentor to help guide you through your first few transactions in exchange for a percentage of your profits. Establishing a process that brings you success and sticking with it are critical to your future in real estate wholesaling.
Join our mailing list to receive the latest news and updates from our team.
Don't worry, your information will not be shared.