What Is A Real Estate Wholesaler? Definition & FAQsJun 02, 2023
The real estate market can be daunting for the uninitiated beginner. Within the broader industry, there are an infinite number of ways you could get involved and potentially make money.
Just to name a few investment strategies, you could explore the world of generating cash flow with real estate investing, test your skills with value appreciation in fix and flipping, or focus on commissions and fees with brokerage, leasing, and syndicating deals.
These are just a handful of ways you could profit from the industry’s wide reach. However, of all the ways to make money, there is one method above all that trumps the rest in many aspects: Real estate wholesaling.
In this article, we are going to discuss everything you need to know about becoming a real estate wholesaler.
- What Is A Real Estate Wholesaler?
- How To Become A Wholesaler In Real Estate
- What Does A Wholesaler Do In Real Estate?
- What Is A Real Estate Wholesaler Salary?
- Real Estate Wholesalers FAQ
- Final Thoughts On Real Estate Wholesalers
What Is A Real Estate Wholesaler?
A real estate wholesaler is a provider of deals to investors. Wholesalers play a valuable role in the investment world because they connect buyers of investment properties with attractive opportunities in exchange for a fee.
Generally, a real estate wholesaler will source a distressed property from a motivated seller at a below-market price, go under contract with the seller, and then subsequently assign the contract to a different buyer. More often than not, these end-buyers are cash buyers looking to fix and flip these houses for a profit.
After the wholesaler assigns the contract over to another buyer, he or she will collect a payment known as an assignment fee.
While wholesaling real estate might differ from wholesaling in other industries, the very action performed is essentially the same – sourcing cheap inventory or product at a discounted price and assigning the purchase agreement or product to a different buyer for a profit. Whether you are a retail wholesaler, a fragrance wholesaler, an art wholesaler, or anything in between, your goal should be the same throughout – find the right product and find the right buyer.
Though there are similarities, not all wholesaling is created equal. While most wholesalers of other industries work in bulk quantities - sourcing products at cheaper prices by working with large volumes, real estate wholesalers do not need to do that. Whether you decide to pursue one property to assign to a new buyer or ten properties, you are still, by definition, a real estate wholesaler.
That is what makes the industry so attractive for beginners and experts alike. You don’t have to be a full-blown real estate investor to be a successful wholesaler. Wholesaling one deal at a time, as they become available, is still a great option and will be well worth your while.
Now that you know what a real estate wholesaler is, let’s discuss how to become one.
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How To Become A Wholesaler In Real Estate
Becoming a wholesaler in real estate doesn’t have to be tricky. Believe it or not, if you utilize the right tactics, you could legitimately become a wholesaler full-time, earning tens of thousands of dollars and wholesaling dozens of deals a year.
However, wondering how to become a real estate wholesaler isn’t going to get you to the finish line. Like all aspects of business, you’ll need to take the necessary steps and give yourself the requisite time needed to truly master the craft. That’s why, we’ve narrowed your wholesale journey down to the following avenues:
- Trial and Error
There is a wealth of information available online and in books about real estate wholesaling. If you dedicated 30 minutes a day to reading real estate blogs, browsing through YouTube videos, and researching various market data points, you’d gain a tremendous amount of familiarity with the wholesaling industry.
However, there is an even better, more direct form of learning on how to become a real estate wholesaler – joining a course dedicated to the business.
The Pro Wholesaler VIP Program is a curriculum designed by real estate wholesalers for real estate wholesalers. The program is administered by professionals that have successfully closed hundreds of deals across the country.
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.
By joining the community, you’ll jump ahead of the curve in a matter of weeks. You’ll learn invaluable skills such as deal sourcing, finding cash buyers, cold-calling real estate agents, negotiating, and deal analysis. Many previous students have even successfully wholesaled their first property within 45 days of joining the course!
Finding an experienced real estate wholesaler who is willing to mentor you could be an excellent way to learn the real estate business. You’d be shocked by how many professionals, free of charge, would be happy to help you get into the business.
Find a wholesale real estate mentor by attending networking events, commenting on internet forums, and making some cold calls to various realtors and lenders in your area. Once you’ve expanded your contacts, lock in a mentor that would be willing to guide you, step-by-step, through the business process.
The benefits of finding a real estate wholesaling mentor are immense, providing you with hands-on experience, expert guidance, and a chance to develop essential skills. However, it's not the only route to starting your real estate wholesaling education.
At Real Estate Skills, we offer a comprehensive video guide on "How To Wholesale Real Estate Step by Step (IN 21 DAYS OR LESS)!" This step-by-step guide will introduce you to all the tools and strategies necessary to navigate the world of real estate wholesaling efficiently and effectively!
Trial And Error
Another way to become a wholesaler is simply by trial and error. While you could designate hundreds of hours studying, learning, and networking, you won’t truly understand the craft until you’ve given it a shot and purchased your first property.
Making a large investment is scary. You’ll need to devote time, energy, and capital to the process to take your business the distance and learn the ins and outs. Although, sometimes that’s all it takes.
There is nothing wrong with trying, failing, and trying again. The quicker you embrace failure the quicker you’ll reach your goal and become a pro.
What Does A Wholesaler Do In Real Estate?
As a real estate wholesaler, you’ll spend your time sourcing deals, networking with cash buyers, analyzing deals, and managing closings.
For sourcing deals, there are countless strategies that you can pursue including reaching out to homeowners, sending postcards, making phone calls, and networking with real estate brokers and mentors. The wholesaler that can turn over as many opportunities as possible will end up finding the best deals and making the most money. Reach out to real estate attorneys, appraisers, and other house flippers. These individuals will help curate your cash buyers list that will come in handy during your next deal.
Then, after you’ve networked and have created a strong pipeline of potential properties, you’ll spend a lot of time crunching the numbers to determine if you and the seller can come eye-to-eye on a price. For this part of the process, you’ll use nifty formulas like the MAO formula and the 70% rule.
The MAO formula is a formula that helps you determine the Maximum Allowable Offer you should pay for a property to ensure you and your end buyer make a profit. It looks a bit like this:
After Repair Value (ARV) – Fixed Costs – Rehab Costs – Desired Profit or Equity = MAO
The 70% rule is just a variation of the MAO formula. Instead of arbitrarily putting in a desired profit or equity, you’d put 70% of the ARV to ensure you make at least a 30% profit. Here is how it looks:
After Repair Value x 70% - Repairs = Maximum Allowable Offer
Then, once you’ve executed the purchase contract, you’ll spend most of your time finding potential buyers to assume your sale agreement. Local real estate professionals who truly understand the local market are most likely your best class of buyers. These investors usually own a number of rental properties and have a good grasp of the neighborhood’s market value.
Read Also: Wholesaling Real Estate For Beginners
What Is A Real Estate Wholesaler Salary?
Truthfully, there is no clear, defined answer to that question. Generally, wholesalers charge anywhere between $5,000 - $25,000 per real estate transaction. However, your fee will largely depend on the size of the home and the quality of its location.
Consider an 8-bedroom mansion that has a $5,000,000 ARV and is under contract for only $2,000,000. As a wholesaler, since there is so much room to work with, you will undoubtedly be able to charge a much higher wholesale deal fee to your buyer. Contrast that with a much smaller 3-bedroom, 2-bathroom home with a $250,000 ARV and you’ll likely only be able to charge a few thousand dollars for your efforts.
Though it might take some time to gain traction during your first year of wholesaling, in year two or three, it’s not unreasonable to make around $100,000 a year if you can manage to wholesale 1-2 houses a month.
Read Also: Wholesale Real Estate Salary
Real Estate Wholesalers FAQ
Interested to learn more? Here are some questions you might encounter as you begin your wholesaling journey:
What’s The Difference Between A Wholesaler And A Real Estate Agent?
While a wholesaler might seem like a hybrid between an investor and a real estate agent, there are some key differences. Wholesalers act in their own best interest, while real estate agents represent the interests of their clients. Generally, real estate agents have a fiduciary duty to the buyer or seller they are representing. Wholesalers do not have this duty, therefore, are not subject to licensing or much regulation.
Though both an agent and a wholesaler look to connect buyers and sellers, wholesalers are more focused on the numbers and key data points that go into renovations of the home for fixing and flipping properties.
A wholesaler’s goal is to crunch the numbers and sift for properties that can offer an end-buyer profit when they rehab and re-list the house for a higher price. Like an agent, you’ll ultimately be making a connection between two parties. However, as a wholesaler, you’ll be making an upfront fee rather than a commission.
Real estate agents, on the other hand, focus entirely on marketing the property itself. They usually focus on owner-occupied homeowners and spend their efforts creating listings, sending out pictures, and managing the multiple listing service (MLS). Furthermore, because they are commission-based, they are far more focused on the purchase price rather than the end buyer's real estate investment strategies.
How Do I Find Real Estate Wholesalers Near Me?
If you are a real estate investor and are looking to expand your reach and find more opportunities, reaching out to a network of wholesalers is a great idea.
The best way to find real estate wholesalers and wholesale properties is by constantly putting yourself, your name, and your business out there in the open. Attending networking conferences, commenting on public real estate forums, and constantly sifting through social media sites like LinkedIn, Facebook, and Twitter are great ways to dive deeper into the real estate industry.
You should also tap into your peers’ networks. Working with individuals that have a deep understanding of your market and are already established successful real estate operators will surely help you expand your horizons and take your business to the next level.
Do You Need A Real Estate License To Wholesale Properties?
No, you do not need a real estate license to wholesale, but, it’s not a bad idea to get one.
Having a license will give you access to a number of resources that can positively impact your wholesale business. You’ll have access to exclusive agent networks, the MLS, and other professionals within the industry. You’ll also get a deeper understanding of more nuanced components of the industry like liens, earnest money requirements, and real estate contracts.
With just a few hours of coursework and a quick test, you could get a license and make your wholesale business all the better.
Is Wholesaling Real Estate Worth It?
Yes, wholesaling real estate is extremely worth it!
Wholesaling houses is one of the best short-term investment strategies within the real estate industry. Like becoming a broker or realtor, it is a great way to reach financial freedom within real estate in a non-capital-intensive way.
It’s also a great place to start your journey for anyone with access to a phone, an internet connection, and some determination. All you’ll need is time to make some cold calls, and some basic math skills to crunch the numbers, and you’ll be off to the races closing deals and cashing your checks.
Final Thoughts On Real Estate Wholesalers
The wholesaling process doesn’t have to be a tricky one. With the right tools, coursework, and mentorship you’ll be able to expand your knowledge of real estate, help fix and flip investors, buy investment properties, and make handsome wholesale fees along the way.
Real estate is generally thought of as a highly capital-intensive, prohibitive industry designated for the elite business owners of the world. That couldn’t be farther from the truth.
Contrary to popular belief, there are property owners across the country from all walks of life, social classes, and backgrounds. As a wholesaler, you’ll not only be able to learn from these market participants, but you’ll be able to contribute to the industry in a very big way.
Many fix-and-flip investors look to wholesalers for good deal flow. Many contractors rely on wholesalers and their investors to keep them busy with renovations and help them network. By becoming a wholesaler, you’ll be actively contributing to the ginormous wheelhouse of opportunity provided by the ever-growing and ever-changing real estate market.
You can learn more about wholesaling through our free online training today and find out how you can get your foot in the door using only your cell phone and laptop. All you have to do is get started and hit the ground running. Good luck!