What Is Wholesale Real Estate? (5 Reasons Why You Should Learn How To Do It)

"The real estate industry has helped create more millionaires than any other industry in America."

I'm not sure who said this exactly (do you??), but it tends to ring true!

However, I'm sure we can agree that real estate is one of the few industries which has various avenues to make money and build long-term, generational wealth.

Whether you're getting your license and becoming an agent, holding rental property and building equity, or finding fix and flip properties, there's a way for everyone to make money.

One of my favorite (and not so talked about) avenues to make money in this industry is called "wholesale real estate."

In this article, we get into detail all about wholesale real estate and if you're not wholesaling yet, we'll cover 5 main reasons why you should start today!

 

What Is Wholesale Real Estate?

Wholesale real estate is when you find a great investment opportunity (for example, a house), get the property under contract, and then sell the rights of that contract for a 'wholesale fee.'

This differs from fixing and "flipping" real estate because you are never actually buying the property when wholesaling the right way. You are just assigning (a.k.a. transferring) the contract rights from you, or your company, to the end buyer and being paid a 'wholesale fee' for this transfer.

The end buyer of a wholesale real estate deal is typically an investor (also known as a cash buyer) who wants to renovate and resell the house you have under contract in order to make their desired return on investment.

While it is simple to wholesale real estate, it is not necessarily always easy if you don't know what you're doing!

We'll show you the right way today so you can hit the ground running!

Let's get into the nuts and bolts of how wholesale real estate works!

How Does Wholesale Real Estate Work?

Wholesale Real Estate is done by following this process:

1. The Real Estate Wholesaler finds a distressed property from a motivated seller that they can get under market value.
2. The Real Estate Wholesaler submits an offer on that specific property.
3. The Real Estate Wholesaler negotiates back and forth until they agree upon a price with the seller, therefore ‘locking up property under contract’ (This gives the wholesaler the legal rights to the contract for buying the property).
4. The Real Estate Wholesaler then finds an investor (a.k.a. cash buyer) that would love to purchase the contract rights for this great deal.
5. The Real Estate Wholesaler then assigns the contract over to the investor for a wholesale fee. In other words, the investor is technically paying them a fee to buy them out of the deal.
6. The investor closes on the property and the wholesaler receives their wholesale fee.

(I go over the entire wholesaling process here in my detailed free wholesale real estate training.)

Now, let's get into what types of real estate you can wholesale!

 

What Types Of Real Estate Can I Wholesale?

• Houses
• Condos
• Townhomes
• Mobile Homes
• Land
• Apartment Buildings
• Storage Facilities

Really, you can wholesale any type of residential or commercial piece of real estate!

However, if you want to get into wholesale real estate, we recommend starting out by wholesaling houses first.

Wholesaling a house is the simplest way to begin because there are more companies flipping houses than any other type of real estate. 

For example, there are many more companies flipping houses rather than flipping storage facilities.

What this means is: finding a buyer to wholesale a house to is much easier, which means a higher likelihood of success and profits!

 

Is It Legal To Wholesale Real Estate?

Yes, it is legal to wholesale real estate.

To some, the concept of wholesaling may seem simple, so some tend to question the legality of it. However, the process is entirely legal when done the right way.

Silberman Law Firm says:

"It seems that wholesalers that make full disclosure that they are only selling an assignment contract related to a property at every stage of their marketing process and contracting phase will stay safely within the guidelines to avoid licensure requirements. However, wholesalers that attempt to market the underlying real property by offering the property for sale will likely run afoul of the law."

So what does this mean in layman's terms?

This means that if you know you are the wholesaler in a real estate transaction and disclose that you're only selling the rights of the contract, then you'll stay safely within the guidelines.

 

Can You Wholesale Without A Real Estate License?

Yes. Wholesale real estate is actually often done without a license.

Just like any other home buyer, you do not need a license to submit offers on properties that you can wholesale!

So, what's a real estate license for, then?

Well, a real estate license allows you to represent buyers and sellers through real estate transactions, therefore earning a commission.

When you wholesale a deal, you receive a wholesale fee for selling the equitable interest in a real estate contract (a.k.a. the contract rights).

Important: Understand that you are not selling the property as a wholesaler; you are selling the rights to the contract.

A wholesaler sells contracts, and a licensed real estate agent sells the actual property. Since you are selling contract, you do not have to be licensed because you are not selling a piece of real estate!

 

Can Real Estate Agents Wholesale, Too?

Yes, of course, real estate agents can wholesale property!

If you are licensed, just be sure to always disclose to all parties that you're a real estate agent!

Disclosing that you're a licensed real estate agent in any real estate transaction is part of the law in some states. However, even if this is not a written law in your ordinance, it is still necessary to disclose you are a Realtor according to the NAR Code of Ethics.

 

Can You Wholesale Real Estate In Different States?

Yes. Several wholesaling companies wholesale real estate across multiple different states.

The process of getting a property under contract does not always require you to physically see or visit the property. 

However, if you want to wholesale, we recommend you start in your local real estate market because it will be much easier to find wholesale deals, negotiate at the property, and build your real estate network.

Many new wholesalers prefer the extra security of being able to drive to the property if need be!

 

Why Learn How To Wholesale Real Estate?

Below are 5 solid reasons WHY you should learn how to wholesale real estate. Within each reason is a video to give you the best explanation possible! 

Reason #1 - You Can Wholesale Real Estate With Little To No Money and Bad Credit

Yep, you can wholesale real estate with little to no money. Wait, what do I mean?

Well, when you wholesale real estate, you are getting a property under contract (usually a house), and then you are selling the rights of that contract to another investor (usually an investor that wants to fix and flip a house).

Here’s an important thing to realize:

IT DOES NOT COST $1 TO GET A PROPERTY UNDER CONTRACT TO WHOLESALE!

This is extremely important to understand because you can literally get a property under contract this week and then wholesale it next week and make $10,000.

Sound too good too be true?

Well, time to stop being skeptical and time to get out of your own way because wholesaling real estate is legit!

In this video below, I cover how I did my first wholesale real estate deal. I completed this wholesale deal while having no money and bad credit (I was in tens of thousands of student loan debt when I started investing in real estate, but not anymore)!

Alright, so we covered this base. Reason #1 being you can wholesale real estate with little to no money because it doesn’t cost $1 to get a property under contract. 

On to the next reason!

 

Reason #2 - You Can Wholesale Real Estate With Little To No Experience

Wait, this still sounds good to be true, right?

Well, this isn’t rocket science. What we’re doing is getting a property under contract at one price and selling that contract at a higher price.

See, as a wholesaler you make the difference between what you get the property under contract at and what you wholesale it at.

For example, if you get a property under contract at $190,000 and wholesale the contract at $200,000, then you can make a $10,000 profit.

This doesn’t require tons of experience...

I did my first deal 8+ years ago and made a $22,000 profit (see video above). I did this all within 45 days of learning wholesale real estate investing!

Trust me, from 45 days of learning something and actually doing it does not require tons of experience.

Here's a video interview with my student, Brandon. Brandon had zero real estate experience when he started to learn wholesale real estate investing. He was able to wholesale his first house and make $12,000.

Stick to the game plan, be consistent, and you’ll make it happen EVEN IF you have no real estate experience, whatsoever!

 

Reason #3 - Wholesaling Houses Can Be Done With Little To NO Risk (when done the right way)*

One of my favorite reasons why you should wholesale real estate is that you can do it with little to no risk (when done the right way)*.

I put a “*” there because most people wholesale real estate the WRONG way.

Why? Because they have no idea what they’re doing and do not have a system to follow.

It's extremely important to PROTECT yourself on each & every contract by including a “back out clause.”

In real estate, this back out clause is called a "contingency.”

A contingency in real estate means that something has to happen in order for the contract and buying process to move forward. Such as, an approved loan or an approved home inspection.

My favorite type of contingency is an “inspection contingency.” When worded correctly, an inspection contingency clearly states that you can back out of a contract if it does not pass your personal inspection.

Therefore, if a property never passes your personal inspection, then you can back out of the contract!

Capeesh?

By always staying within your contingency time frames, you can virtually wholesale with little to no risk.

In order to invest in real estate with no risk, check out this video going over the inspection contingency. Every real estate investor should know and master what's in this video!

Most amateur wholesalers do not know how to wholesale real estate with no risk.

This is how you do it: by including a contingency in the contract that allows you to back out of the deal - it's your escape clause!

 

Reason #4 - You Can Learn How To Wholesale Real Estate Extremely Fast

Like I mentioned, I did my first deal within 45 days of learning how to wholesale real estate.

Believe it or not, I've actually trained multiple students & clients to wholesale their first houses within 21 days!

Now, whether it takes you 7 days, 21 days, 45 days, or 90 days to do your first wholesale real estate deal - it doesn’t matter.

We’re all on our own journey!

The important thing to see here is that: you can wholesale real estate in an extremely quick time frame compared to other types of investments!

So, not only can you learn wholesaling quickly, but once you get a property under contract you can then sell the property fast, as well.....like well within 24 hours!

In fact, as soon as you get a property under contract, then you can literally wholesale it to another investor the next minute!

Of course, the more time you invest into learning how to wholesale real estate, the better & faster you will become at closing profitable deals.

In this video, my student, Tyler, explains how he completed his first wholesale real estate deal in 3 weeks! Now that's fast!

 

Reason #5 - Learning How To Wholesale Real Estate Is The Perfect First Step To Flipping Houses

So, why else is wholesaling real estate awesome? Well, have you ever wanted to fix and flip a house?

Then, learning how to wholesale real estate is the perfect stepping stone to flipping a house.

Why?

Because everything you need to learn in order to wholesale a house, you also need to learn in order to fix and flip a house.

If you want to fix and flip houses:

• you need to find great real estate investment deals,
• you need to learn how to analyze real estate comps,
• you need to learn how to negotiate,
• you need to learn how to work with title companies and escrow,
• you need to learn about earnest money,
• you need to learn real estate contracts,
• you need to learn how to close real estate deals,
• and more...

Once you become a Pro Wholesaler, you'll establish a strong foundation, develop all of the real estate skills listed above (and more), and wholesale deals like champ. 

The best part is that all of these skill sets you learn from wholesaling only make you a better fix & flipper!

Here's a quick video I made with 3 tips on how to start wholesaling real estate today. Hope you enjoy it! 

Were my Youtube videos helpful? If so, you can subscribe to my channel right here to get notified when my next videos on wholesale real estate investing come out!

 

How Much Do Real Estate Wholesalers Make?

There's no set salary for real estate wholesalers. From our experience, we see that the average wholesale real estate profit per deal is about $10,000.

If you do one wholesale deal a month for a year, then you can expect about $120,000 in one year.

It is not unreasonable to start doing one wholesale real estate deal a month and then graduate to doing 2 deals a month, then 3 deals, and so on and so forth.

From wholesaling and flipping real estate, myself and other colleagues have been able to record over $100,000 months.

This can be accomplished by yourself, but it is wise to scale & grow a successful wholesaling business by building a wholesale real estate team. This way you can eventually build an automated wholesale business that does not require you to do all of the day-to-day work. Instead you can work on the business instead of in the business.

Keep in mind that becoming a successful wholesale real estate investor is not rocket science, but does require hard work, determination, and the constant ability to always be learning.

 

Is Wholesale Real Estate Worth It?

For the reasons listed above, wholesale real estate provides a great opportunity for anyone who is looking to get their foot in the door within the industry. You can wholesale real estate without almost any initial investment (except time), without being licensed, and without previous real estate experience.

It is a great way to build a strong foundation before pursuing other avenues of revenue within real estate while at the same time bringing home thousands, if not hundreds of thousands of dollars in profits.

Stan Gendlin, Founder of Gendlin Homes, LLC & IV Fund Global, LLC, has completed hundreds of wholesale real estate deals and other investments over the years. Here's what he has to say about wholesaling:

It's always something we keep in our tool belt, and we'll probably always wholesale, because it's just the best and easiest way to make money in real estate.

For these reasons and many more, real estate wholesaling is definitely worth the time, commitment, and effort.

 

Real Estate Wholesaling vs Flipping:

You may be asking yourself, "Should I start by real estate wholesaling or flipping?"

I personally recommend you start by taking the wholesale real estate route versus getting into flipping right from the start.

Why?

Well, let's get into the Pros & Cons of each to thoroughly explain why!

Wholesale Real Estate Pros:

• Little to No Risk
  • When you wholesale real estate, you are only assigning contracts and not buying property. You can include contingencies in your contract, which can allow you to back out and have virtually no risk. 
• No Money
  • You can find and wholesale real estate deals without using any money. You just need an entrepreneurial drive!
• Quick Profits
  • You can learn how to wholesale real estate quickly in a few weeks time like many others have. Once you get a deal under contract, you can usually wholesale the deal and get paid within a one day to two weeks time.

Wholesale Real Estate Cons:

• Smaller Profits (Typically) Than Flipping Houses
  • The average wholesale fee is about $10,000 when wholesaling a house. When you fix & flip a house, real estate investors typically look to earn much more than $10,000 for the work being put in.
• Rely On Buyers
  • As a real estate wholesaler, you rely on cash buyers to purchase your contract and close the deal. If you do not have relationships with multiple potential buyers, then you can have a rough time wholesaling.

Flipping Real Estate Pros:

• Larger Profits
  • When fixing & flipping real estate, your goal is always to make as much money as possible. Through out the years, I've seen $30,000 to $40,000 be the average fix and flip profit. This is more than the average wholesale fee of $10,000, but flipping houses comes with much more risk (we'll get into this below)!
• In Control
  • When you fix and flip a house, you own the piece of property. You're the in control and the one 'calling the shots.' You do not have to rely on a cash buyer to buy your deal like a wholesaler has to.
• Creativity
  • When you flip real estate, you're able to scratch your creative itch. You get to renovate a home to your exact specifications. I got to admit, renovating a house to look spectacular is a fun process. You're able turn a run down house into the gem of a neighborhood! 

Flipping Real Estate Cons:

• Takes More Time
  • Flipping real estate takes a lot more time than wholesaling. You have to find the property, raise the capital to buy the property, close on the property, renovate and fix it up, then put the house back on the market and sell it! I've had flip projects take over a year!
• Requires Capital
  • Running a flipping business requires capital in order to buy and renovate real estate. You have to spend time and resources in order to raise money for real estate, or you have to already have the money. 
• Much More Risk
  • When you fix & flip a house, you have to actually buy the property. This, inherently, brings on a lot of risk! Repair budgets often go over budget and delays usually tend to happen.
  • The best real estate investors use Other People's Money (OPM) in order to buy much more real estate than they'd be able to with their own funds. This allows investors to take on many more projects, but also brings on much more risk. When you borrow money to flip houses, you'll have to pay back the money with interest. The interest you have to pay back for borrowing the capital increases each day you own the piece of real estate (it can add up quickly)! 

 

Final Thoughts On Wholesale Real Estate Investing

When you wholesale real estate you can learn the investing business the right way with no risk, no money, & with little to no experience. 

The worst that can happen when fixing & flipping real estate is that you can go over budget, have the project take longer than expected, and literally lose hundreds of thousands of dollars.

I'd rather you make mistakes wholesaling (while still protecting yourself with contingencies) because the worst that can happen when you wholesale is that you just lose out on a deal without losing any money!

I wrote an article on a real life example of a beginner who wanted to get into real estate investing by flipping a house first instead of doing a wholesale deal. He was about to buy a house to flip, but asked if I would cross-check his estimations first to be on the safe side.

This beginner real estate investor thought he had a great fix & flip project that he'd make $180,000+ of profit on...

After I ran the numbers on the deal and did my estimations, it actually looked like he would lose $158,000+ if he did the project!

Thankfully, he backed out of the deal and did not go through with the project. I was happy to help out this beginner not lose his shirt and be in debt for years from just one bad real estate flip!

This is exactly why I recommend wholesaling first rather than flipping when you're just starting out!

Wholesale real estate can change your life for the better just like it changed mine!

Cheers & Happy Investing!