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The Beginner’s Guide to Wholesaling Houses | Real Estate Skills

It’s possible to make good money in the real estate industry through wholesaling houses. Some real estate gurus teach wholesaling as a way get wealthy without capital. Generally, real estate wholesaling can be a great business. However, it’s not easy and it requires investment of time and effort.

 

What is Wholesaling Houses?

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 of the original contract with the homeowner.

 

How Does Wholesaling Houses Work?

Real estate wholesaling provides a system that enables real estate investors to tremendously grow cash holdings overtime, 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:

  1. Locate a house or property whose price is below the market value.
  2. Make the seller an offer.
  3. Get a purchase and sale agreement or contract with a signed assignment clause with the seller.
  4. Assign this contract to a buyer at closing for a profit.
  5. Seal the wholesale deal.

That’s basically how wholesaling properties works. However, it’s not as easy as it might seem.

 

Is Wholesaling Houses Legal?

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.

 

Do I Need a License to Wholesale Houses?

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 grey 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 quit helpful over the years.

 

What Does A Wholesale Real Estate Investment Company Do?

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.

 

What Types of Property Can I Wholesale?

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.

These include:

  • Single Family Houses - Since most people know the dynamic of single family houses; they form a great and straightforward niche for wholesaling. Some of the properties in this category include fourplexes, triplexes, and duplexes.
  • Condos and Townhomes - Condos and townhomes are individual title units. This makes it easier to wholesale and flip them. In fact, their wholesaling mechanics are similar to those of single family houses.
  • Mobile Homes - Some people overlook mobile homes when investing in real estate. However, these can be profitable just like other properties. You can wholesale both new and used mobile homes as well as mobile home parks. The affordability factor creates a great resale market for mobile homes despite their limited financing.
  • Apartment Buildings - New real estate investors can be discouraged from investing in apartment building due to their size, units’ number, and dollar amounts. However, their mechanics are similar to those of single family houses. Sellers, buyers, and financing can be different depending on price and size but this doesn’t have to make wholesaling apartment buildings complicate. Funds and savvy investors wholesale apartment buildings by getting the right connections and prices.
  • Commercial Real Estate - Commercial real estate includes office buildings, warehouses, retail malls, and mixed-use buildings. These are contracted at low prices and flipped to other investors. The new investors can operate them to generate cash flow, renovate and then reposition them, get new tenants, and flip them. Commercial real estate wholesaling is largely about connections and prices.
  • Property Rights - Properties can be split up into different rights. This helps in turning assets into different ways of profiting. For instance, an investor can lease a land then sell off mineral and oil rights. They can also auction air rights. Timber and access rights can also have value.
  • Land and Lots - Vacant land and lots can be wholesaled too. These include individual parking lots, infill lots, teardown buildings, as well as large acreage lands. These properties are easy to wholesale, reposition, and market.

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 a creative and an open mind, there are many opportunities you can explore.

 

How Much Money Can You Make Wholesaling Real Estate?

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.

 

Wholesaling vs. Flipping Homes (Rehabbing Houses)  

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 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.

 

How to Start Wholesaling Real Estate?

There are many online resources where you can learn how to start wholesaling real estate.

Here are simple guidelines to help you:

  • Know your local market - Real estate investing requires an investor to be in touch with the local market. Therefore, take time to learn about your local real estate market. For instance, know about the local market demand because this goes a long way when it comes to real estate wholesaling.
  • Create a marketing presence - Boost your exposure in your target area. This will enable you to access more wholesale deals and people that might be interested in buying properties. Knowing the persons to wholesale to and finding good deals on properties are both important. In fact, you should have lined up buyers before you find property deals.
  • Find deals - There are many marketing funnels that you can use to find great deals. They include direct mail marketing, online listing portals, multiple listing services, and social media.
  • Evaluate Deals - Evaluate deals carefully to ensure effective marketing of properties to end buyers. It’s crucial to know how to convince people that your deals are worth buying.
  • Decide on your wholesale strategy - Decide whether to initiate an assignment contract or a double close strategy. You will most likely assign contract. However, knowing how to double close when necessary is also important.
  • Market Assets - Once you’ve decided on the best wholesale strategy for you, market the properties you get to the end buyers.

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.

 

Is Real Estate Wholesaling Worth It?

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.

 

Pros and Cons of Wholesaling Houses

Just like any other form of real estate investment, wholesaling has its pros and cons.

Pros

  • No cash investment required - Real estate wholesaling does not require cash investment, down payments, credit score review, and monthly mortgage payments. That means you avoid saving and financing to get cash investment. These are the major hurdles for people that want to venture into real estate investment.
  • Quick money - If you get below-market-value investment properties, you get good return on your investment quickly. In fact, you can make good money within days or months because no renovation is involved.
  • A great starting point - Real estate wholesaling is a great place to start investing in real estate because it does not require a great credit score or cash investment. You can even do it with little experience because it’s easy to learn and it involves little risk.
  • No property maintenance and management involved - With wholesaling, you don’t have to endure the hassles of property repairs and managements. These are passed on to the buyer.

Cons

Real estate wholesaling has disadvantages too. Here are some of them:  

  • No regular income generated - To get paid while wholesaling houses, you need to keep generating deals consistently. When a houses is wholesaled, it no longer generates income for you as an investor. 
  • It’s not effortless - Yes, it may be a quicker and easier way of making money for a real estate investor. However, it requires a comparative analysis of the market and finding houses for sale below the market value. Getting buyers also requires networking and effort.

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.

 

Where Can I Find Houses to Wholesale?  

Distressed houses are the best to wholesale. That’s because they are easy to buy under the market value. Essentially, a distressed property is in disrepair or a 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 use to put it under a contract.

What appeals most people to 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 are investment properties, and mailing flyers.

 

What Are Wholesaling Exit Strategies Once I Have a House Under Contract?

A wholesale deal entails having a wholesaler or real estate investor acts 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 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.

 

How to Find Cash Buyers for Wholesale Real Estate Deals?

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 buyers in a list. This necessitates finding them. 

Some of the ways to find cash buyers for wholesale real estate deals include:

  • Find Cash Buyers now in one minute or less using my Google Ninja Trick!
  • Advertising properties on websites like Zillow and Craigslist.
  • Distributing flyers with information on the property in the neighborhood.
  • E-mailing property information to the investors you come across in networking events.

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.

 

About The Wholesale Real Estate Contract for Houses...

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 get 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.

 

Can I Wholesale a House with a Realtor?

Yes. A wholesaler can use a real estate agent to wholesale a 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, 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:

  • Liability protection because the realtor acts as the bullet proof vest of the wholesaler.
  • You save money because you hire a realtor and pay them based on performance instead of hiring a virtual assistants’ team to find and evaluate deals.
  • Realtors do the work of finding and evaluating deals, sending offers, cranking out marketing, and negotiating. This gives wholesalers free time and priceless peace of mind.

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!

 

Is Wholesaling Real Estate Ethical?

A real estate wholesaler gets a house under contract at a low price so that they can wholesale it and make 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 wholesale 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 about a wholesale deal. What’s more, real estate wholesalers help motivated sellers get out of unpleasant situations in most cases.

 

Can I Start Wholesaling with No Money?

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 assignments contingencies are included and escrow funds held.

 

Is Wholesaling Real Estate Dead?

Wholesaling real estate is absolutely not dead. Only that most people venture into real estate wholesaling with their focus on 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.

 

What is Virtual Wholesaling?

In real estate, virtual wholesaling is simply wholesale real estate that is done via electronic means. It involves purchase and sale of properties through online references, computers, smart phones, 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.

 

What is Reverse Wholesaling?  

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.

 

Why Should I Wholesale Real Estate to Begin Investing?

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 waters. Nevertheless, take time to learn about wholesaling real estate and practice what you learn.

 

How Do You Become a Wholesaler in Real Estate?

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 contract and legal issues. To avoid these, follow these steps:

Step 1) Find Distressed Houses to Wholesale

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.

Step 2) Make an Offer

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 profit.

Step 3) Find an Appraiser, Contractor, and a Title Company

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.

Step 4) Assess the Renovation Needs of the Property

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.

Step 5) Find a Buyer

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.

Step 6) Negotiate with the Buyer

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.

Step 7) Close on the Property

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.

 

Is Wholesale Real Estate Investing for Beginners?

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 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.

 

What Are the Best Books On Wholesaling Real Estate?

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.

  1. The Book on Investing In Real Estate with No (and Low) Money Down by Brandon Turner
  2. Building Wealth One House at a Time by John Schaub
  3. The E-Myth Real Estate Investor by Michael Gerber
  4. The Real Estate Wholesale Bible by Than Merrill
  5. The Art of Wholesaling Properties: How to Buy and Sell Real Estate by Aram Shah and Alex Virelles

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

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.

Pro Wholesaler 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.

 

The Bottom Line...

Wholesaling real estate is a great way 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, locate distressed properties, negotiate and seal deals!

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