The Beginner’s Guide to Real Estate Wholesaling

Table of Contents:

What is wholesale real estate?

Wholesale refers to a short-term business strategy used by investors looking to make big profits. The term wholesaling in real estate should not be confused with wholesaling in retail. In retail wholesale usually requires the sale of a large number of goods to other retailers, in contrast, real estate wholesaling does not involve multiple properties offered at a lower price. Instead, wholesale real estate refers to a strategy in which the investors contract a home that needs repairs or is in distress to a potential seller before closing on the property with the original homeowner. This means that from the start the investor will have found a contract possible buyer interested in the property.

This will mean that the home in question will be contracted to a new interested party before the closing with the original homeowner. To be successful in this process the wholesaler needs to find a potential buyer willing to pay more than the original sellers asking price. That difference between the sellers asking price and the price that the wholesaler is selling the property for will be the profit that the wholesaler makes from this exchange.

This is a great option for those looking to get into the real estate industry who lacks the funds to begin purchasing homes. There is no special license required to become a wholesaler, all you will need to do is grow your network and start finding the right people to make deals with.

What is the first step in wholesaling real estate?

If you want to start taking steps to begin your career as a real estate wholesaler then you will want to create a plan. In reality, wholesaling real estate begins with you finding good deals. This should be the first and possibly the most important step that you can take to begin your wholesaling endeavor.

There are many different ways of finding proper deals, but it can take some time to get better at this part of the job. You will want to familiarize yourself as much as possible with the industry. This will include figuring out how to find good deals in your area, making connections with agents and brokers, knowing how to search for online marketing campaigns, direct mailing potential home sellers, and even driving around to see if there are any properties for sale that you could potentially make a profit out of selling.

Can you make a lot of money wholesaling houses?

There is money to be made by wholesaling houses. The amount that you will be able to make wholesaling homes will completely vary based on the area that you are in, the deals that you find as well as the amount that the buyers you find are willing to pay. Normally you should expect to make at least a couple of thousand dollars for each home that you manage wholesale. The number of homes that you can sell will be one of the biggest influences on the amount that you can make through real estate wholesale. The profit that you make from each sale will also be a big determinant of the amount that you make each year.

Is wholesaling real estate profitable?

 Wholesaling can be an incredibly profitable business if you are doing it right. On average, the profit that real estate wholesalers make for each property deal falls somewhere between $5,000 and $10,000. The most important thing in this business though is to try to keep consistency in making deals. If you can’t turn your wholesaling into a business that allows you to make consistent profits then you will not end up generating as much profit as you may have originally wanted to generate.

Normally the best way to create consistency is by maintaining multiple different projects in various stages through your pipeline at all times. What this means is that you should never wait to close on a deal to try and find the next one. You should have multiple projects lined up at any given time so that you can easily move projects along your pipeline.

Establishing that portfolio and pipeline will require you to spend time acquiring industry knowledge. This will include knowledge on how to find deals as well as information and skills that allow you to be more persuasive when contracting a potential buyer for a home. The more time that you dedicate to these practices the more you will be able to create a business out of wholesaling houses.

How long does it take to learn wholesale real estate?

The amount of time that it will take you to establish yourself in wholesale real estate will be more than the time that it takes for you to learn the basics of this industry. In many ways learning how to wholesale real estate is something that you could on a theoretical basis learn within a few days. However, to make it in this business basic information is not enough. The development of key communication skills can be extremely important as managing to convince potential buyers can often require a lot of work. What’s more as the real estate in your area keeps changing you will need to keep yourself informed and on top of real estate trends to successfully establish yourself as a wholesaler.

What are the first steps to wholesaling?

If you are first starting your wholesaling business you will need to start actively working on creating connections, finding deals and buyers, and preparing for the work that is ahead of you. While there is no set guide on everything that you need to do to be successful in wholesaling by following the steps outlined below you will be able to energetically make your first moves in this industry.

1. Find deals

There is perhaps no step more important than this one. Without good deals, you will not have anything to sell. Therefore, as soon as you start in this industry you will want to take the time to establish the necessary skills and knowledge to be to find good deals. Making connections with real estate agents, driving through neighborhoods to find properties for sale, direct mailing, and searching online for great deals can all be methods for finding those first few houses that you can turn a profit from. This step will at first require a lot of your time and attention but as you become more established and experienced you will be able to find deals much faster than you were previously able to.

2. Learning how to find the buyers

If the seller accepts your offer, then you will need to submit your contract to your closing agent. As soon as you have submitted you will want to begin your search for a new buyer. If you have secured a good deal finding a potential buyer should not be too hard. Listing regarding the property can be posted to Craigslist or other online websites. If you have an already established network with other wholesalers then you could potentially also call them to see if they have buyers interested in the property you found. These joint ventures can make it easier for you to sell the property off as you will not only have your network but also your partner’s network to draw on for buyers.

How fast can you get your first wholesale deal?

You can close your first deal within 30 days or less if you are meticulous in the way that you plan everything. Closing your first deal quickly should be easy so long as you follow quick and actionable steps to make the deal happen faster.

Step 1: Finding buyers

This may seem counterintuitive but you should start developing your network of cash buyers as quickly as possible if you want to get into the real estate wholesaling business. These cash buyers are not necessarily people who are interested in one specific property, instead, they may be investors of potential home buyers that are looking around to find a great deal. Having a pre-established network means that as soon as you find good property deals you will have an initial group of people to send the potential property to. This can be the key to finding and closing a deal within 30 days of starting your wholesaling business.

Step 2: Finding an escrow company

Find a title or escrow company that will be able to close on double closing deals quickly. Without the proper assistance from an escrow company, you will never be able to get into the wholesale business. Their collaboration is more important than even finding deals, because without them even if you find a deal you will not be able to take the actions that are required to make a double closing deal.

Step 3: Find the deal

This is where the fun begins, once you have some of the basic aspects of your business set up you will be able to start looking for sellers who are interested in selling their home for cash. This may seem surprising to you, but in reality, many homeowners want to make the sale happen as swiftly as possible and as such, they are willing to accept lower offers in cash to sell faster. These are the sellers that you are looking for. Once you find them, you can then get a contract in place with your escrow agent.

Step 4: Close on the deal

Once you have both your seller and buyer in place you can swiftly close on the deal with the assistance of your agent. By having potential buyers and the escrow office set up before you even find the deal you can help speed up the process tremendously.

What are some examples of wholesalers?

Real estate wholesaling is simple if looked at through an example. Think of this case, a homeowner has a house that because of the many years has become distressed and requires renovations. As such, they did not believe they would be able to sell. The wholesaler then appears and offers them a deal to put the house under contract for a price. This price will be lower than the value of the home if it was repaired. Once under contract, the wholesaler will contact his network of cash buyers who are willing to pay more for the home than what the owner was requesting. The cash buyer is usually an investor looking for a profitable fixer-upper. Once they complete renovations they too will sell the house for even more profit.

Therefore, in this deal the original seller would have gained as they would have sold a home they no longer wanted, the wholesaler would have made a profit off of the difference between the original deal and the price the investor paid. Finally, the investor would gain money from flipping the home for profit.

What are the steps to wholesale a house?

Wholesaling a real estate property is fairly easy so long as you follow the steps outlined below.

1. Find deals on properties for sale

2. Negotiate the offer with the owner

3. Submit the contract to an escrow office

4. Find a cash buyer

5. Create an agreement for the property sale with the buyer

6. Coordinate the closing with your escrow office so that the buyer pays the necessary amount for the property in time.

Is wholesaling legal in Florida?

Wholesaling is in Florida, however, if you are not a real estate agent you may find limitations in how you can market a property and arrange for the legal transfer of the property. This is why a good escrow officer can be essential when wholesaling real estate in Florida.

How much can you make wholesaling real estate in a year?

The amount that you can make wholesaling real estate will vary based on your success In the industry. New wholesalers could make around $50,000 in their first year, while established wholesalers could make as much as $600,000.

What do real estate wholesalers do?

Real estate wholesalers put houses under contract with a seller and cash buyer. Then they arrange for the purchase of the property from the homeowner at a lower price, and the sale of the property to a cash buyer for a higher price. In this way, they make a profit out of the sale.

How much do wholesalers mark up real estate?

Normally the markup for wholesale real estate can be anywhere between 5-10% depending on the type of property and the price they can sell it to a cash buyer for.

Summary

Wholesaling real estate is a great way for those without the funds to enter the real estate market. When done properly it can generate a good income for those who engage in this practice. By selling properties to a cash buyer for a profit, wholesalers can make profits on properties that they never paid money for.