Put simply, wholesaling real estate is no-money-down real estate investing. It’s a strategy of finding a below-market or distressed property, getting it under contract from the homeowner, then selling that wholesale property contract for a profit to a buyer before the close date. It’s kind of like being a matchmaker, but for homeowners and real estate investors.
Sounds pretty straightforward, right?
It’s important to distinguish wholesaling properties from a couple of other common terms: flipping and long-term real estate investing. Flipping is buying a property, rehabbing or renovating it, then selling it. By its nature, it involves more time, more money and more risk. Long-term investing is a common strategy in which you hold onto a property, often for years, before selling. The investor will often rent it out to build cash reserves — to cover the mortgage, taxes, etc., while also socking some extra dollars as profit — until they decide to sell it down the road at an appreciated value.
What kinds of real estate can you wholesale?
There’s a ready market waiting to be found, with sellers open and even anxious to unload a home that may be beyond their financial or physical ability — or even their interest level — to take care of.
It could be a diamond in the rough, the fixer-upper with not-so-obvious potential, just waiting for the right buyer to come along who will restore it to its former glory or remodel it into something completely updated.
One of the reasons wholesaling real estate works so well is that available properties are not publicly for sale, meaning they aren’t listed on MLS or any other listing sites. Sometimes, prospective sellers aren’t convinced anyone would want to pay them a decent price to take it off their hands. Or they don’t have the time or money to make improvements to increase their odds of a successful listed sale.
These situations work well for wholesalers who can get a contract on such homes at lower-than-market value. Granted, the homeowners may not get the dollar value they feel it’s worth. But on the flip side, they won’t have to pay for the repairs and upgrades themselves. Wholesalers save them that time, sweat and frustration.
Why is wholesaling real estate so appealing?
With unlimited earning potential and no barriers to entry, it can be a great way to get your feet wet in the world of real estate investing.
- There’s no formal education required to wholesale property. It’s ideal for someone who has neither the time, funding or interest in going back to school. Having said that, anyone getting into wholesale real estate will benefit immensely from seeking out focused courses that delve into the what, where, when, why and how of this niche — especially the how — we can’t emphasize that enough. Those armed with practical knowledge and training will have the most success. Lack of understanding will show, not only in being unable to secure contracts but also when interacting with potential buyers.
- It’s a short-term strategy with relatively quick results. Because the point of wholesaling real estate isn’t to buy a property outright and make upgrades before selling again (a.k.a., flipping), the timeline of your money-making opportunity from the date you get the contract is quite short. The goal is to sell the contract to a final buyer before its close date (could be 60 days, or even mere hours). So you could potentially see payment by that the closing date of the original contract you secured from the seller — and even much sooner.
- There’s little to no upfront money or capital. Why? Because you’re not buying the wholesale property to live in yourself or to rehab it for a not-too-distant future sale. And you pay out nothing from your own pocket — no down payment, no escrow. No money changes hands for you as a wholesaler until the final buyer purchases the contract. That’s when you get the profit for your efforts. This can work for you if you want to break into the real estate market but don’t have the finances or interest to do time- and money-intensive rehabbing or full-on real estate investing.
- Your earning potential is limited only by your ambition and effort. Once you understand the process, you can make wholesaling real estate a rather nice side hustle or a full-time career. Your money is earned per contract. But just how much depends on the due diligence you put into researching property values, potential rehab costs, the neighborhood comps, etc. Buyers won’t buy if you’re too high. And you also don’t want to leave money on the table for yourself. Consider your profit to be like a finder’s fee for all the researching, negotiating, calling and groundwork of hunting down distressed or unwanted properties, as well as the time and effort of locating the investors to buy that home. For buyers, time is money; they want to avoid having to do the legwork themselves.
- It’s a low-risk venture. When you start wholesaling properties you’re not dipping into your own money or having to raise capital. And you’re not assuming ownership of a property that needs any required rehabbing to bring it to code or desired renovation for improved structural or curb appeal for future sale down the road. And there’s no required investment in long-term formal education.
What do you need to start?
You’ll need time — and patience — to make it all happen. And you’ll have to invest a bit of effort in things like finding below-market properties, putting your networking skills to focused use, marketing yourself and those properties to potential buyers, and most important of all, learning about wholesaling real estate.
That’s why we’re here. We help people like you learn the ins and outs of your wholesale property journey. If you’re ready to get started in this potentially lucrative career, take our brief quiz so we can personalize a training kit just for you.