What Is Real Estate Wholesaling?
Real Estate Wholesaling leverages homeowners — who are usually unable to sell their distressed homes — with real estate investors. These investors are interested in investment properties they can buy for less, renovate, and sell or convert into income rental properties. As a real estate wholesaler, you’ll be the one who connects both parties involved. Therefore, you’ll need to search for these types of properties and create a network of investors.
Generally, you’ll negotiate a price for the property with the homeowner, contract with the seller to secure a buyer, and make a profit on the difference between the agreed upon price and its markup — in other words, the latter is your commission! You get paid after the property sells, contingent on a sell-by date. To learn more, read our guide on starting a wholesaling real estate business.
Recommended: Foreclosure.com is a great way to find local, low-cost (foreclosed, bankruptcies, tax liens, etc.) properties online with a database that updates twice daily, so you can quickly secure your next investment or real estate deal.
Below are the top 5 reasons to enter the wholesaling real estate business.
1. Low Startup Costs
Starting a real estate wholesaling business requires little initial investment. Unlike house flippers that buy the house outright, you operate as a liaison between homeowners and real estate investors — bringing them a fantastic deal on a property.
Unlike other real estate investment strategies that require capital, you do not need any money to wholesale a property. You act as a middle-man between the seller and real estate investor — not as a buyer. However, to mitigate liability during this process, be sure to include the following in your offer contract:
- Disclosure of your intention to transfer or assign the property to another investor
Additionally, real estate wholesalers typically don’t have employees or an office lease, which saves you money right from the start. However, to find potential properties, you will at least need a mode of transportation, a phone, and some funds to dedicate to marketing.
Real estate wholesalers typically don’t have employees or an office lease, which saves you money right from the start. However, to find potential properties, you will at least need a mode of transportation, a phone, and some funds to dedicate to marketing.
2. Operate the Business From Your Home
You can wholesale real estate from the comfort of your living room, which means your wholesaling business can operate on your schedule and without the hassle of leasing an office space. Wholesaling can be parlayed into a full-time job or a lucrative side business — which means you can wholesale real estate even with a full-time job.
While you can be based out of your home, the biggest task of a real estate wholesaler is finding properties to buy wholesale, which means you might need to go out and be proactive in your search.
Ideally, you will look for potential properties once a week using at least one of the following methods:
- Driving for dollars
- Cold calling
- Skip tracing
You will also be responsible for evaluating the home’s after repair value (ARV) and assigning offer contracts to your buyer. This business is all about communication and reliability — it is up to you to move these deals forward efficiently.
Here’s how you can get your real estate wholesaling business off the ground:
- Formalize your business by creating an LLC to protect your personal assets in case you get sued
- Set up a business phone line to easily automate calls without sharing your personal number
- Get a subscription to foreclosure.com to find great deals on the most up-to-date, local, and low-cost (distressed, tax liens, etc.) investment properties.
3. Wholesaling Is Lucrative
On average, real estate wholesalers can expect to make between $5,000-$10,000 in commission per property. Once you have a property, a contract, and an interested buyer, this process can move quickly and you can start your business.
To maintain steady profits, you can keep multiple properties in your pipeline at various stages of the buying process. The amount of properties you can wholesale at one time depends on a few factors:
- Your knowledge level
- How much capital you have to invest in your business
- The amount of time you can dedicate to wholesaling
If you have the time and know-how to succeed in this business, real estate wholesaling can be a simple, quick, and lucrative business. Whether you plan to do it full time or as a profitable side business, real estate wholesaling can be a good fit for a variety of lifestyles.
4. Provide a Service to Your Community
Real estate wholesaling can benefit a community in several ways. Your services provide an avenue for homeowners to make money off a burdensome property, neighbors to see improvements in this community, and investors with the opportunity to generate profit.
By offering a fair price for distressed or unwanted homes, you save the homeowner time and effort while putting money in their pocket. This is especially impactful when the seller is a family member of the owner or a person who couldn’t continue to take care of the property. Either way, if the property has become a burden to the seller, your services provide them with a solution as well as fair compensation.
Additionally, if the property has a large amount of deferred maintenance, neighbors will most likely appreciate the potential for improvement. Your services expedite this process by passing ownership to a party that will repair and give it new life.
Not only are you providing investors with another avenue to make money, but you are also saving them the hassle of sourcing the properties themselves. Since a large portion of your time will be dedicated to finding the right properties to wholesale, your services allow real estate investors to save time and resources by bringing them properties directly.
5. It’s a Low-Risk Way to Start Investing in Real Estate
Other real estate investments can be highly rewarding and also higher risk — especially if you are still learning. Wholesaling provides an avenue for anyone interested in investing in real estate to familiarize themselves with the process without taking on higher risk investments.
After you build a strong foundation of knowledge through your wholesaling experience, you can use the profit you’ve gained through commission to invest in bigger real estate purchases with confidence.
For example, you could use your property-hunting skills to find a great deal that you can flip easily without paying wholesaler commission to increase your profits tremendously or upgrade distressed properties to use as a rental for monthly income.
Recommended: For everything you need to know about buying and flipping real estate, read our full guide on how to start a house flipping business.
If you are looking to get involved in real estate investment, wholesaling is a terrific way to start. This business requires little initial investment and low risk but delivers fast, providing you with the skill and financing to expand your investments and provide a service to your community. If you’re ready to get started, read our guide on how to start a real estate wholesaling business.
Frequently Asked Questions
How much does the average real estate wholesaler make?
As a real estate wholesaler, you can expect to make between $5,000-$10,000 per house. The number of houses you wholesale will depend on the time you are able to dedicate and the number of houses or investors in your pipeline.
Is wholesaling real estate easy?
Wholesaling real estate isn’t easy, but it's simple. The process of wholesaling real estate can be simple as long as you have a steady stream of properties and investors as well as a solid foundation of knowledge. Most importantly, wholesaling requires dedication and effort.
Do you need to be an LLC to wholesale real estate?
Technically, you can wholesale houses without an LLC. However, it is strongly recommended that you do form an LLC prior to wholesaling real estate.