Wholesaling Commercial Real Estate

Wholesaling Commercial Real Estate: The (ULTIMATE) Guide

real estate investing strategies wholesale real estate Nov 08, 2022

Wholesaling commercial real estate is a tried and true investment strategy that has changed the investment landscape for prudent investors across the globe. It can spearhead an individual’s ability to access financial freedom, remote work, and broad opportunity that would have otherwise been challenging to attain for a small-scale, beginning investor.

Hundreds - if not thousands - of people are clipping fabulous profits wholesaling residential real estate. The question is, however - how does wholesaling work for commercial real estate? Is it similar to residential real estate? Is it even profitable?

The answer to all of those questions is an emphatic “yes!” This article is going to teach you how to be in the elite club of successful commercial real estate wholesalers.


What Is Wholesaling Commercial Real Estate?

Wholesaling commercial real estate is a form of commercial real estate investing. It is the act of scouring the market for mispriced real estate assets - whether land, distressed properties, multifamily, mixed-use, office, or retail - going under contract with a seller, and simultaneously assigning the contract to another buyer at a premium to your purchase price.

In doing so, the seller guarantees a sale with the wholesaler, the ultimate buyer gets a desired asset at or under market value, and the wholesaler clips a nice profit - the assignment fee - for making the match along the way.

The ultimate beauty of commercial real estate wholesaling is that the asset class offers a wide scope of opportunity - far beyond that of residential. Although residential real estate is a large asset class in and of itself, the commercial real estate spans an even broader range of opportunities. For instance:

  • Do you want to flip an investment property in Chicago? Or, a retail strip in Texas?
  • What about a self-storage facility in Maine? Or, a patch of land in Arkansas?
  • How about an office building in New Jersey? Or, a mobile home park in Kentucky?
  • What about multifamily apartment buildings in California? Or a medical office in Maryland?

The opportunities in commercial real estate are quite literally endless. With a nearly 35 trillion dollar market in America, I can assure you there are plenty of opportunities for wholesaling.

Check out this video describing a real estate assignment contract for a condominium that is being wholesaled. This is just one of many examples of wholesaling.


Why Wholesale Commercial Real Estate?

why wholesale commercial real estate

What makes wholesaling commercial real estate so attractive? A few reasons.

First, commercial real estate offers much larger profit shares for wholesale deals as compared to residential wholesale deals. The typical American home costs a few hundred thousand dollars.

A commercial wholesaler, if successful, can earn wholesale profits and assignment fees in the six-figure and seven-figure range! For a residential home, typical wholesale fees can be in the thousands to tens of thousands of dollars.

In some instances, our Pro Wholesaler VIP students have earned north of six figures per month wholesaling residential real estate. Not bad at all, but not exactly the type of scale you’d find in the commercial space.

Commercial real estate properties across America typically are valued in millions of dollars. And, they generally increase in value by 10-12% year over year.

A successful wholesaler could likely make the equivalent of five to ten residential deals in just one commercial deal. The profits can be massive. Though, the opportunities are fewer in number than residential, since there are hundreds of millions of houses, yet fewer commercial properties.

Second, commercial deals can help wholesalers accumulate capital at a much faster pace than residential. The ultimate goal is to generate the most amount of money as quickly as possible. You can then deploy this capital into different real estate investments or for personal use cases like travel or buying a home for your family.

Commercial real estate wholesaling can be the ultimate ticket to achieving that financial freedom you’ve been hoping for.

Lastly, wholesaling can provide a quick exit for commercial real estate investors. During volatile markets, many motivated sellers are looking to achieve liquidity quickly. Aggressive wholesalers can provide owners with greater reach and access to liquidity much faster than the typical real estate broker can. Aggressive sellers tend to bring about tremendous opportunity and a lot of money for wholesalers.


How To Wholesale Commercial Real Estate (7 Steps)

While there are various ways to complete a wholesale deal, here's a seven-step process to wholesale commercial real estate:

wholesaling commercial real estate 7 steps

Step 1: Search the real estate market for on and off-market properties

Step 2: Contact potential sellers, buyers lists, and real estate agents, and share your interest in their property.

Step 3: Do an internal cap rate and cash flow analysis to determine if the property can withstand a higher price to flip to a different buyer.

Step 4: Contact potential investors and mentors that might be interested in purchasing the property you have selected.

Step 5: Enter into an exclusive partnership with the seller and simultaneously secure another buyer to put the earnest money down on behalf of the transaction.

Step 6: Assist the buyer and seller throughout the due diligence phase. Ensure lenders are contacted and earnest money is placed to guarantee a smooth process throughout.

Step 7: Close on the deal and make your wholesale fee!


How To Find Wholesale Commercial Real Estate For Sale

Once the property is found, the actual wholesaling aspect can end up being pretty simple. It’s the first step - sourcing the property - that can be a challenging hurdle to overcome when you’re first starting out.

Although nothing can quite replace the hustle required to make it in the real estate industry, here are a few suggestions to implement to help get the ball rolling and actually find the right properties to wholesale:

  • Network Aggressively. Having a networking mentality 24/7 will enable you to quickly seize opportunities and connect buyers and sellers in a blink of an eye. Having a large rolodex of contacts - including real estate brokers, property managers, and lenders - will lead you to more real estate deals - both on and off-market.
  • Regularly surf the web. There are a plethora of websites out on the internet. Zillow, Loopnet, Redfin, MLS, brokerage sites, and foreclosure locators are just a handful of examples of good sources of on-market properties.

Read Also: Top 23 Real Estate Wholesaling Software To Scale Your Business

If you make it a habit to spend a couple of hours a day looking through these websites, you’ll see tons of deal flow and very little will get by you. You’ll surely be the first to make an offer on an attractive deal.

  • Cold Call. Many common folks underestimate the power of a cold call, cold email, or postcard marketing ploy. Although it might be tedious at times, if you can reach out to a prospective seller, and smooth talk on the phone, you’d be surprised how many listings you can generate.

Draft a wholesale cold calling script to make sure you always hit your essential talking points. Oftentimes property owners are indifferent about selling their units. Sometimes all it takes is a friendly conversation and a little push to get the ball rolling in your favor. 

These strategies - coupled with plenty of hard work and dedication - will unequivocally pave the way for ultimate success.

However, with success comes challenges. It is essential to weigh both pros and cons of any business venture.


Commercial Real Estate Wholesaling: Pros and Cons

pros and cons of wholesaling commercial real estate

Pros of Wholesaling Commerical Real Estate

  • Larger check size. As mentioned earlier, commercial buildings can go for millions of dollars. If you can manage to flip one or two commercial real estate contracts a year, you’d likely make more money than you would have generated on ten residential wholesaling deals combined.
  • Greater national exposure. The national commercial real estate market not only has trillions of dollars backing it, but it also has millions of companies in the active market. There is an innumerable amount of opportunity for the aspiring investor. Scraping just an infinitesimal percentage of the market could be massive.

Cons of Wholesaling Commerical Real Estate

  • Increased competition. With increased opportunity comes increased competition. Millions of dollars are available for the taking in commercial real estate wholesaling. You’ll have to stay sharp because there will be quite a few investors looking at the same handful of opportunities.
  • More red tape. With larger property sizes, loan sizes, and bigger players involved in the mix, there will also be more red tape. Commercial real estate is not without its fair share of regulations, rules, and wholesaling laws. Be sure to know your jurisdiction and state laws before diving into an opportunity.


Mistakes To Avoid When Wholesaling Commercial Property

For the wholesaling beginners - and experts - of the bunch, be aware of the typical mistakes wholesalers encounter throughout the process. Be sure to avoid the following at all costs:

  • Take your sweet time. Wholesaling is all about efficiency. If you secure a property, do not let it sit.

I repeat. Do Not Let It Sit.

Wholesaling is about speed and efficiency. Once you have a property in your grasp, you better find another buyer quickly before your wholesale contract expires.

  • Not securing a rock-solid contract. Wholesalers do a lot of the heavy lifting of sourcing buyers and sellers. Be sure you have a bulletproof contract to ensure no one uses your services and then cuts you out of the deal at the closing table. You’ll want answers to questions like: Do you need an LLC to wholesale? Or, what are your rights and protective guarantees? All of these would be listed in a contract.
  • Spending too much time on a dead lead. As an active wholesaler, you’ll be sourcing hundreds - if not thousands - of potential deals every single month. Don’t make the mistake of spending all your efforts on a broken deal that won’t materialize. Your time is precious, spending it on the deals that will likely materialize into a sale. Don’t waste your efforts on a dead end. Prioritize effectively.


Why Sellers Would Agree To Wholesale Commercial Real Estate

Wholesaling is not only beneficial to the wholesaler, it is actually quite an attractive exit strategy for a seller. Sellers are often looking for a quick exit. They might be having trouble finding a buyer.

Using a wholesaler could help them quickly turn their property over and find more willing buyers - even if it means forfeiting some profit to compensate the wholesaler.


Wholesaling Commercial Real Estate Contract

So, you’ve found the property, you’ve put in an offer, and you’ve locked in another buyer - now what? It’s time to put together a formal wholesaling contract.

A wholesaling commercial real estate contract is a purchase agreement that facilitates the transfer of the purchase agreement to the end buyer. It is a drafted document that ensures all parties understand what it is they are buying and for how much.

It is highly advisable to consult with a lawyer to draft a wholesaling contract. Although the details are not particularly complex and wholesaling can be done without a formal contract, in the event something goes awry, you’ll want your interests protected at all costs. They would also be able to answer any questions you might have about taxes on wholesaling you’ll likely incur after a successful closing.

Download our Wholesaling Contract Template PDF!


Final Thoughts On Commercial Real Estate Wholesaling

Wholesaling commercial real estate can be a tremendously lucrative form of real estate investing. The simple act of connecting willing sellers to eager buyers can be your ticket to financial freedom and autonomy.

The opportunities within the commercial real estate world are truly endless - potentially superior to residential wholesaling if you know how to win. All you have to do is work a proven wholesaling process and seize the opportunity.

Anyone can become a successful wholesaler, but the question is - will you?

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