"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!
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!
Wholesale Real Estate is done by following this process:
(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!
Wholesaling real estate involves finding off-market properties, getting them under contract at a discounted price, and then selling that contract to another investor at a higher price. If done correctly, you can pocket the difference between the price you got the seller to agree to pay and the price paid by the investor.
Doing so allows you to earn sizable checks without ever having to purchase the home or risk your own money. Wholesaling works well for beginners, but you have to develop a solid strategy if you want to be successful. That includes building a strong buyers list and creating a reliable pipeline of leads to keep your business running smoothly.
The trick to wholesaling is getting the buyer to finance the actual purchase and all the associated costs, so you don't have to spend anything upfront beyond your business expenses and marketing. In most cases, the properties you target will be distressed, meaning the homeowner is in foreclosure. So they will usually be looking to make a deal quickly and won't require an earnest money deposit upfront to secure the property. You can find distressed properties in various ways, such as through direct mail, public records, property auctions, driving for dollars, and more.
Once you have a property under contract, you will find a buyer looking for an investment property. Buyers looking for a primary residence probably won't be interested in a distressed property because it may need significant work. But, investors are often on the lookout for distressed properties to flip. Most investors are willing to pay about 70% or less of a property's after-repair value (ARV), which is the amount it would sell for good once it's been rehabbed.
So, the trick is to have the seller sign a wholesale real estate contract that allows you to transfer the ownership to the investor. The investors will likely be paying cash or using a hard money loan to finance the purchase, meaning they will be responsible for paying all the closing costs and fees associated with owning the home, such as the taxes, insurance, utilities, repair costs, etc. All you have to do is set up the deal and ensure the pieces fall into place so you can collect your fee.
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!
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.
No. 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 contracts, you do not have to be licensed because you are not selling a piece of real estate!
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.
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!
Read Also: 18 Best States 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!
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 to 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!
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 strategies!
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!
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!
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!
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!
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.
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:
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 a 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!
A real estate wholesaler is a middleman between an investor and a seller. They help flippers locate deals in exchange for a fee but aren't involved in rehabbing or sales (unless they want to be). Wholesaling works well for beginners because it offers a low-risk way to learn the basic skills needed to identify profitable deals without the added risks of purchasing the property. Plus, you can make four to five-figure checks on a short-term deal that can close in as little as 30 days.
One of the most challenging aspects of flipping houses is finding profitable deals and negotiating with the seller to get a reasonable price. Many flippers don't mind paying a fee to a wholesaler to handle this aspect of the transaction on their behalf. So, to get good at wholesaling, you'll need to build a solid buyer's list and learn how to get properties under contract.
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.
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.
Check out our brand-new free training and start scaling your wholesale real estate business today!
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.
Well, let's get into the Pros & Cons of each to thoroughly explain why!
One of the most critical aspects of real estate wholesaling is signing contracts. If you want to be compensated for your hard work, you have to be sure that you sign a contract with both the seller and the buyer that legally entitles you to a fee. Otherwise, the buyer could go behind your back and cut you out of the deal entirely. You can use several contracts in a wholesale deal, but most go with an assignment of the contract or a double closing.
First, you will have the seller sign a purchase contract that affirms they are willing to sell you the home at the agreed-upon price. This step is essential because it confirms your relationship with the seller and stipulates that you are entitled to compensation. The simplest way to transfer the contract is to include a clause in the purchase agreement that allows you to assign the ownership responsibilities to a new buyer. This means you won't close on the property but will assign your interest to the new buyer instead.
The other option is to do a double closing. A double closing is precisely what it sounds like and involves closing on the property twice, once with the seller and once with the new buyer. This is a bit more complicated because you will briefly assume ownership of the property and have your name on the chain of title. A double closing can be beneficial because some lenders have issues underwriting a loan using an assignment contract.
Which wholesale real estate contracts you use will all depend on your unique strategy. But the key is to have the seller sign a contract agreeing to the negotiated price before you start contacting any buyers, so you have everything you need to get paid clearly in writing.
Download Free Wholesale Real Estate Contracts Here (PDF)
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!
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