It’s possible to make good money in the real estate industry through wholesaling houses. Some real estate gurus teach wholesaling as a way to get wealthy without capital. Generally, real estate wholesaling can be a great business. However, it’s not easy and it requires an investment of time and effort.
With the right systems and processes in place, even a beginner can learn how to wholesale houses profitably. So, let’s dive in.
Wholesaling is selling merchandise or goods to retailers as well as industrial, institutional, commercial, and professional business users. It can also involve selling merchandise or goods to other wholesalers and subordinated services. Essentially, wholesaling entails selling goods to buyers that are not standard consumers.
Wholesaling houses happens when one party enters a contract with a person selling a home to market their property to potential buyers then assigns the contract to another entity. The profit made by the wholesaler is the difference between the price contracted with the original seller and the amount the buyer pays. When wholesaling a house, the wholesaler aims at selling the house before closing the original contract with the homeowner.
Real estate wholesaling provides a system that enables real estate investors to tremendously grow cash holdings over time, generate gains, and build wealth. They do so by getting the resale rights over properties. Wholesaling houses works by allowing the wholesaler to put a property under a contract and then assigning that contract to an interested party or an investor.
Here is a breakdown of how it works:
That’s basically how wholesaling properties work. However, it’s not as easy as it might seem.
In general, wholesaling properties is legal. That’s because it entails locating a distressed property and making an offer for it. The offer is contingent on selling the property to another investor. After purchasing the property, the wholesale real estate deal is complete.
But, there are several components of wholesaling houses that you should know. Each state has its own rules and regulations. Therefore, it’s advisable to seek advice from experienced real estate wholesalers before venturing into this business. Talk to experienced real estate investors and a real estate attorney because there are grey areas that you should know.
The assignment aspect of wholesaling in particular is surrounded by controversy. This is the part where the wholesaler gets a contract for a property before selling it to a buyer to get an assignment fee.
Some people think that this is illegal since it is brokering real estate license-free. However, wholesaling real estate is legal as long as it’s done right. But just like with any other exit strategy, investors must follow the law.
Essentially, the wholesaler should have a bilateral contract with the seller. This contract should state that the wholesaler is getting equitable interest. The wholesaler should also prove that they intend to buy by providing a funds letter as their proof. After acquiring the property under contract, the wholesaler can now find a buyer.
In most cases, you don’t need a license to wholesale houses. But, each state regulates real estate brokerage on its own terms. Therefore, there are definitions of the activities that require licenses in each state. Licensing codes have a lot of ambiguity, vagueness, and gray areas in some states. These can complicate the issue.
What’s more, if your real estate business practices and techniques vary beyond the real estate wholesaling scope, it might not be clear how your state authorities will view it. Nevertheless, there are several benefits of acquiring a real estate license when interested in the wholesaling business.
For instance, this license gives an investor access to multiple listing services which is a great property leads source. It can also open you up to networking opportunities. These can be quite helpful over the years.
A wholesale real estate investment company finds great deals on distressed properties, put the properties under contracts, and then assigns or sells the right to those contracts to end buyers. The end buyers are usually investors in real estate.
In simple terms, a wholesale real estate company executes contracts with property sellers, markets contracts to properties to potential buyers, and then assigns those contracts to buyers. The profit made by the wholesale real estate firm is known as the assignment fee.
This is the difference between the price contracted with the original seller and the amount that the end property buyer pays. Profit potential in the real estate wholesale industry is massive when it comes to servicing the real estate investors’ needs. That’s because investors are always in the search for high-equity properties.
Most real estate investors have tight schedules managing their fix and flip projects as well as rental properties. Thus, they may not have time to find the properties to invest in. This increases wholesale properties and real estate wholesaler services demand.
Different real estate investors implement different investment strategies. The goal is to use the simplest methods to make more money in their real estate investing. Essentially, there are different tactics and levels of flipping houses through wholesaling. Once you venture into the real estate wholesaling industry, you can wholesale different types of properties.
Basically, there are different types of properties that you can wholesale. As long as you know the right thing to do, have the right network, are creative and have an open mind, there are many opportunities you can explore.
Nobody gets into real estate wholesaling for fun. Real estate wholesalers work hard because they know they can make good money from wholesaling and flipping houses. But, defining a wholesale fee that each wholesaler makes is not easy. However, elite wholesalers know how to find good deals and make good money from their work.
Generally, most wholesalers focus on making at least $10,000 per deal. Some can make much more than $10,000 per deal! The great thing about real estate wholesaling is that you can make a good amount of money with little work and effort. In fact, you can do 2 or 3 wholesale house deals each month while working at it part-time. Essentially, you don’t have to be a full-time wholesaler to make good money.
The most important thing is to find a deal that will make you money. Look for a house that's below the market value and purchase it with cash. Some wholesalers do not rehab the properties they buy. Instead, they leave the work to the real estate investors they flip their deals to. This enables them to earn more from real estate wholesaling.
Read Also: Wholesale Real Estate Salary | The (ULTIMATE) Guide
Wholesaling is a concept where an investor or real estate wholesaler finds a deeply discounted property, puts it under a contract, and assigns the rights to the contract to an end investor or takes advantage of double closing to get a closing fee. Typically, wholesaling a house does not require renovation.
Flipping on the other hand is a concept where a real estate investor buys a property at a discounted price, adds value to it through strategic repairs, and then resells it at a profit.
When a property is sold to a seasoned investor, less people are involved in a wholesale deal. You also don’t have to worry about contractor management, contractor paperwork, time management, appraisals, budgets, inspections, and market risks among other factors, as you would with flipping.
Nevertheless, wholesaling can mean giving up a lion’s share when it comes to profits. That’s because if you buy the property at a discounted price and renovate it, you can get much higher profit than when you sell it without repairs. However, wholesaling is quicker especially when a property is sold to an experienced investor. What’s more, wholesaling is the best option when you don’t have enough money to buy the house, pay for insurance, utilities, attorney fees, closing costs, and taxes.
There are many online resources where you can learn how to start wholesaling real estate.
Here are simple guidelines to help you:
To succeed in wholesaling real estate, know that it is a marketing funnel. And like other businesses, you need an effective strategy. Stick to the strategy while varying up the methods of acquiring wholesale leads. That way, you will most likely realize that you are a better real estate wholesaler than you’ve ever imagined.
When done right, real estate wholesaling is worth the resources invested in it. In fact, it’s a great way to venture into real estate investing. Wholesaling is diverse and this makes it a lucrative addition to a real estate business.
Wholesale deals are about finding motivated sellers ready to sell their rights and negotiate on their properties. You then find buyers that want to buy those properties at markups of your choosing. Upon closing the deals, you sell to investors at higher prices.
Original property sellers are happy because wholesalers get them out of bad situations. Wholesalers are also happy because they get properties and sell them risk-free and at a profit. End investors are happy because they get properties without marketing. They also make more money after rehabilitating them.
Basically, if you venture into real estate wholesaling and manage to make between $5,000 and $10,000, with every deal, you will agree that real estate wholesaling is worth it. That’s because you invest a relatively low amount and reap big.
Just like any other form of real estate investment, wholesaling has its pros and cons.
Real estate wholesaling has disadvantages too. Here are some of them:
Wholesaling is a great way to invest in real estate. However, it has pros and cons that should be considered when making the decision to venture into it or not.
Distressed houses are the best to wholesale. That’s because they are easy to buy under the market value. Essentially, a distressed off-market property is in disrepair or property whose owner wants to sell quickly. Finding such properties enables wholesalers to sell a house under contract at a price higher than what they used to put it under a contract.
What appeals to most people in real estate wholesaling is the low capital required. Therefore, those new to this form of investing look for inexpensive or free ways of locating distressed properties. However, seasoned investors have other means of locating distressed properties.
Some of the major places to find houses to wholesale include:
Some wholesalers use other methods to find properties to wholesale including placing bandit signs, working with a real estate agent whose specialty is investment properties, and mailing flyers.
Read Also: Top 23 Real Estate Wholesaling Software To Scale Your Business
As a wholesaler, you'll have to develop a unique strategy for finding leads and getting properties under contract. But here are the basic steps you should follow.
The first step is to find motivated seller leads who may be willing to sell quickly and at a discount. There are various ways you can locate property owners looking to move quickly.
You can drive around your neighborhood looking for run-down houses and then check public records to find the property owner's information. Or you can post bandit signs or ads on Craigslist.
You'll want to target sellers who want to close quickly either because they're experiencing financial difficulties or going through a life event that requires them to move quickly.
Next, you'll make them an offer. When negotiating, you'll want them to agree to the lowest price possible so you can sell it to an investor and still earn a decent fee.
Most flippers use the 70% rule when looking for a deal, meaning they will pay up to 70% of the home's after-repair value. So, if the property is worth $250,000 in good condition, try to get the seller to agree to a price below $175,000, so you can pocket the difference. It's also wise to build an extensive buyers list before making an offer so you already know what investors may be willing to pay.
Once they accept your offer, it's time to get the property under contract to lock in your fee. There are several ways you can get the property under contract. Which you choose will depend on your overall strategy.
You could have them sign a regular real estate purchase agreement with a clause that allows you to assign the contract to another buyer. Or you could use a wholesale assignment contract and avoid closing on the property at all. Most sellers won't require an earnest money deposit if they're looking to close quickly, but you may decide to request one from the end buyer to commit them to the deal.
You may want to consult an attorney or other real estate professional during the home buying process to double-check that the contract is legit and legally binding.
A wholesale deal entails having a wholesaler or real estate investor acting as a middleman between a property buyer and a property seller. The wholesaler finds a cheap property and sells it quickly to make a profit. A real estate wholesaler puts a house under contract and sells the contract or assigns it to a buyer to make a profit.
Thus, finding a person to assign or sell the contract to and make a profit is the exit strategy in wholesaling. The strategy saves the investor time and it’s a low-risk approach. Many property investors look for real estate wholesalers because they locate profitable properties faster.
Finding a cash buyer should be done quickly because the contract for the property has a settlement date that should be adhered to. But, when starting out, a real estate wholesaler might not have a buyers list. This necessitates finding them.
Some of the ways to find cash buyers for wholesale real estate deals include:
When contacted by buyers, save their contact information and names even if they do not buy the property. Come up with a spreadsheet with the contact information of potential buyers and use it in the future to share details of the properties you will want to wholesale.
Check out this quick video that talks about how you can find cash buyers for free!
Download The Google Ninja Trick Resource For Finding Cash Buyers Here
A wholesale real estate contract stipulates how the property will be purchased from its owner and assigned to an investor before the property is actually bought. The reason for assigning a wholesale real estate contract for houses is to minimize upfront costs for wholesalers when purchasing properties.
A wholesaler uses their contract in order to include clauses and language that benefits them. For instance, a wholesaler can include a clause that gives them an out in the event that they do not sell the house. The clause states that, if the wholesaler hasn’t found a partner or a buyer as worded by the contract, they are not obliged to buy the property. This clause eliminates the need or risk of raising money to buy the property if they do not find a buyer.
Another clause entails property assigning. This clause says that the investor can wholesale the house to any business or anyone without informing the seller. This means the wholesaler is allowed to sell the property contract without putting out funds to buy the house first.
Generally, it’s advisable that you read and understand the contract before you sign it. If you have questions or if there are clauses you don’t understand, consult your lawyer.
Download Free Wholesale Real Estate Contracts Here (PDF)
Yes. A wholesaler can use a real estate agent to wholesale an MLS property. Acquiring and selling deals via a realtor or MLS can work when a real estate wholesaler finds a good match.
Essentially, you should start by finding the right real estate agent that needs business, is open to the idea of working together, appreciating commissions, and being loyal. Once you have found an ideal partner agent, flipping houses will realize that negotiating prices for flipping houses in exchange for higher business volume and making even one percent per deal will be easier.
Wholesaling a house with a realtor has the following benefits:
The most important thing is to find the right realtor to work with. You can attend our free online workshop on how we've been wholesaling houses for years from the MLS!
A real estate wholesaler gets a house under contract at a low price so that they can wholesale it and make a profit because the owner doesn’t know the accurate value of the property. The ethical question is whether the wholesaler operates ethically when they convince the seller to sell their property at a very cheap price.
The wholesaler knows that the seller is misinformed or unaware of the actual value of their property in the market and that’s why they agree to sell it at a lower price.
However, these investors argue that as long as sellers are happy with the amount offered, there is no ethical issue with a wholesale deal. What’s more, real estate wholesalers help motivated sellers get out of unpleasant situations in most cases.
Yes, wholesaling houses is a legit investment strategy that allows anyone to earn sizable checks without purchasing property themselves. But you have to be careful to avoid getting into legal trouble.
Wholesaling is legal everywhere in the country, but your local state or county may have specific laws relating to the practice of wholesaling that you should review before getting started.
Also, be honest and upfront when approaching buyers and sellers, so you aren't accused of being deceptive. Wholesaling is a legit strategy, although you'll have to be patient and disciplined if you want to make money doing it.
Yes. Real estate wholesaling entails contracting sellers to buy discounted properties and re-marketing them at higher prices, assigning contracts to new buyers before closing and never taking title. A wholesale makes a spread from the price contracted originally and the amount a new buyer pays or a fixed fee.
For a fix and flip property, a wholesaler sells the opportunity to buy a property without taking title. The wholesaler gets an assignment fee just for being an intermediary. Nevertheless, it’s important to have your contracts reviewed by an experienced real estate lawyer to ensure that assignment contingencies are included and escrow funds held.
Wholesaling real estate is absolutely not dead. Only most people venture into real estate wholesaling with their focus on the wrong properties. Currently, there are many investors looking for properties to invest in. There are also no clear inventories for them to choose from.
Therefore, investors in need of properties flock to the deals of reputable real estate wholesalers because they don’t have many options to choose from. What’s more, when you establish yourself as a reputable wholesaler, investors will pay top dollar since they will be drooling to get profitable deals to flip. So, focus on the right properties and establish yourself as a reputable real estate wholesaler.
In real estate, virtual wholesaling is simply wholesale real estate that is done via electronic means. It involves the purchase and sale of properties through online references, computers, smartphones, and fax machines. What makes virtual wholesaling advantageous is the fact that investors can spread efforts across different markets. This maximizes their return on time & their investments.
When it comes to real estate wholesaling, finding a cash buyer that has the right means to purchase the property is the most difficult part. Reverse wholesaling is the concept of getting this hard step out of the way before you start the search for a good property. That means you find a buyer before you find a property.
Investors that start by finding cash buyers do not feel pressured by the contract terms. Essentially, they do not face deadlines for closing in on deals. That way, they avoid paying out of their pockets or being responsible for buying houses they get under contract.
The best strategy or path for you to follow when you start investing should depend on your talents, personal goals, and resources. But, regardless of your long-term plan, there are good reasons to wholesale real estate when starting to invest.
For instance, wholesaling houses has faster paydays and lower risks. This is also a profitable entry strategy when scaled and automated correctly. Though it may not be 100% right for newbies or a magic solution, it’s a great way to test the waters. Nevertheless, take time to learn about wholesaling real estate and practice what you learn.
To become a wholesaler in real estate, you must know how to wholesale the right way. Some of the downfalls that you can face when venturing into real estate wholesaling include complex contracts and legal issues. To avoid these, follow these steps:
These are properties in disrepair or properties that people want to sell quickly. Use keywords or search terms like distressed property, sold as is, fixer upper, estate sale, and must sell.
After identifying distressed properties, make sellers an offer. Convince sellers to sell you the properties and sign a wholesaler contract. This is very important because it enables you to secure the houses to wholesale in order to make a profit.
You need an appraiser, a contractor, and a title company in your team. These are professionals that will add professionalism in your team and help you through the wholesale transaction. They will also save you money and time down the road.
Assessing a property enables you to know the renovations it needs and the involved costs. That way, you ensure that the costs fit within your plan so that you can profit from the deal.
You need to find a buyer quickly because the contract has a settlement date to adhere to. There are different ways of finding buyers including online advertising, flyers, and email marketing.
Negotiate the price with the interested buyer. Negotiation is important because it determines the amount you make from the deal. The profit you make is the difference between the amount you spend on the purchase of a property and what you wholesale it for.
Settlement or closing takes place at the office of a title company and it takes about one hour and a half. Closing brings all parties together. The deed is transferred to a new owner thereby completing the wholesale deal.
Familiarize yourself with these steps to become a successful wholesaler in real estate.
Whether wholesale real estate investing is ideal for you as a beginner or not will largely depend on what you are interested in. For instance, wholesale real estate investing is ideal for you if you want to venture into real estate but you don’t have the financial means. It’s also good for you if you have an eye for properties that are considered distressed and great negotiation skills. When done correctly, wholesaling real estate takes time to master but the rewards are significant.
Essentially, you should conduct some research and locate experienced real estate wholesalers to advise you. Also, invest time in locating motivated sellers and distressed properties. You should also familiarize yourself with wholesaling contracts.
If you’re looking for a step-by-step process to help you start and grow your wholesaling business without spending a dollar in marketing, check out our brand-new free training and start scaling your real estate business today!
Reading top-rated books on wholesaling real estate is a great way to ensure your continual growth. These books will expand your real estate wholesaling knowledge, change how you perceive wholesaling real estate, and help you focus on a particular niche. There are many books on wholesaling real estate but here are some of the best ones.
Whether you are venturing into wholesaling real estate or you’ve already completed the first deals, these books will boost your industry knowledge, confidence, and profits.
The best wholesale real estate course for wholesaling houses teaches the learner how to get started and excel in real estate wholesaling. It simplifies wholesaling real estate by showing the learner what real estate wholesaling is, how it works, as well as how to get started and excel.
The Pro Wholesaler VIP Program is the best wholesale real estate course. It focuses on helping learners start hyper-profitable wholesaling businesses faster. This course provides a fun, fast, and convenient way to learn the best ways to grow a real estate wholesaling venture.
Wholesaling is a short-term real estate investment strategy to earn decent money, quickly & efficiently. Even more, you avoid the risk & high cost of buying the property you want to wholesale.
All you need to do is get a property under contract, find a cash buyer, and sell the property at a profit! Nevertheless, you need time to learn about wholesaling real estate, locating distressed properties, negotiating and sealing deals!
Join our mailing list to receive the latest news and updates from our team.
Don't worry, your information will not be shared.
Just enter in your name & email below for Real Estate Investing Golden Nuggets!