Wholesale Real Estate: The Definitive Guide (2023)

Ever wondered how to start wholesaling real estate?

Todd Baldwin started Baldwin Capital by buying new homes and renting them out—then quickly realized he could make way more money with wholesale property. Today he brings in about $15K/month renting rooms and nearly $2 million annually.

Todd explained to us his wholesale real estate strategies that you can duplicate to make millions with just a few real estate transactions per year.

What is Wholesale Real Estate?

Want to learn all about wholesale real estate? Maybe you’ve asked some of these questions: What is real estate wholesaling?, What is wholesaling real estate (RE)?, Wholesale Definition?, Wholesale Meaning? What is Wholesale?, Wholesaler definition?

Real estate wholesaling is the process of finding sellable homes that aren’t on the market, negotiating to find a seller, and making a profit by selling to a real estate investor before a certain date.

Real estate wholesaling may be focused on:

• A distressed property
• High profit margin homes
• Pre-foreclosure homes

Todd Baldwin told us:

A real estate wholesaling business is a real estate investing strategy that people will commonly use when they don’t have the funds or credit for real estate investing but want to get into the real estate industry.

How is Real Estate Wholesaling Classified?

Real estate wholesaling requires a bit of creativity when it comes to NAICS. Depending on how you operate within the real estate market, you might fall into the following categories:

• 531390: Real Estate Management and Consulting
• 53121: Real Estate Sales and Brokerage
• 425120: Wholesale Trade Agents and Brokers

If you are a licensed real estate agent, you might want to stick with the 53121 NAICS classification.

Otherwise, use classification 531390. Wholesale real estate would fall into the subcategory “other” in the IBIS database. From those figures, we know that this industry’s revenue was nearly $3.7 billion in 2021 and is expected to grow 1.8% per year between now and 2026.

Major Online Wholesale Real Estate Businesses

You’ll find it difficult to find exact data on wholesalers, but these are the largest wholesalers online:

• New Western – by far the biggest real estate wholesaler in the US
• Net Worth Realty – in 21 major cities
• SkyStone Acquisitions – focused on Atlanta, GA
• Core Wholesale Properties – Florida homes to repair
• Arkansas Wholesale Homes – wholesaling real estate in Arkansas

Like Keller Offers, many major players in Real Estate Sales and Brokerage have divisions that are similar to wholesalers and house flippers.

Real Estate Wholesaler vs. Agent

The real estate industry has a variety of views on real estate wholesalers. They are effectively competing with real estate agents because real estate wholesalers pursue home buyers to help them sell homes.

Some agents love the wholesale real estate business because it provides another opportunity to increase their revenue. Todd falls into this category. He told us:

Other real estate agents don’t like wholesale real estate strategies because wholesalers primarily sell to real estate (RE) investors who are cash buyers looking to drive up local market prices by providing long-term or short-term rental properties.

Todd told us:

Check out our interview with him below.

Wholesaling Real Estate vs. House Flipping

Unless they’re house flipping, which involves buying and fixing up a distressed property, real estate wholesalers don’t actually buy properties. Both wholesalers and house flippers might do repairs before the property sells, but the wholesaler has a much shorter time to find potential buyers.

When the wholesaler sells the property, they will make their profit based on the difference between the contract price + repair value and the fair market value. Flipping houses works the same way but can be a more lucrative business because flippers can rent out the property as well.

Another wholesaler, Santino Fillipelli, does a little bit of both wholesaling and house flipping. He will occasionally be a wholesale buyer if the property looks like something he can repair with one of his construction companies. He told us:

Benefits of Wholesale Real Estate

A wholesaling business is highly beneficial for several reasons:

1. Can make nearly double what real estate agents do
2. Helps people get out of distressed homes and improves neighborhoods
3. Much lower startup costs than house flipping
4. Home-based business
5. Lower risk than other real estate investment opportunities
6. Can be run as a multiple listing service
7. Can work from anywhere if selling online
8. High profit margin

So, what kind of risks are there when working with distressed properties?

Risks in Real Estate Wholesaling

Some of the risks of becoming a real estate wholesaler include:

• You might not find an end buyer
• Often takes time to become profitable
• Lots of research and math
• Lots of networking (or SEO for virtual wholesalers)
• Difficulty finding motivated sellers
• Inability to gain access to the property
• Fewer revenue options than other real estate investors
• Short contract duration

You might want to consider whether you are a prolific networker. Todd told us:

Like any real estate job, real estate wholesalers rely on their people skills to find and close wholesale deals. Having solid communication skills to win over potential sellers and buyers can be crucial in this business.

How Does Wholesaling Real Estate Work?

If you’re wondering how to get into wholesale real estate, consider these basics:

1. Set up a business.
2. Find wholesale real estate opportunities.
3. Reach out to the property owner.
4. Sign a wholesale real estate contract.
5. Find a buyer.
6. Close the deal.

Get ready to learn how to wholesale real estate as we further break down this process.

How to Wholesale Real Estate Step-by-Step Guide

Santino described the process like this:

He explained that the leverage he uses to grow his business limits his losses to an original $6,000 investment and a bad credit score.

That’s a bit oversimplified because most businesses rely on some extra steps. You’ll want to:

1. Develop a list of cash buyers.
2. Form the business.
3. Create websites and social media.
4. Create a wholesale real estate contract template.
5. Identify opportunities.
6. Reach out to the property owner.
7. Sign a wholesale real estate contract.
8. Submit to escrow.
9. Close the deal.

Let’s look at each step of how to wholesale houses and other discounted property listings.

Step 1. Build a Solid Buyers List

A successful real estate wholesaler needs relationships with potential cash buyers. You’ll want a cash buyer who is looking to invest before you start entering wholesale real estate transactions. You’ll want to network with:

1. Licensed real estate agents
2. Hard money lenders: Brokers and other people who work with investors
3. Airbnb Superhosts: Check out Ask a Superhost to learn how they operate

Todd explained:

Look for people buying properties at places like:

• Real estate professional meetups
• Groups on social media
• Trade conferences

Next, you’ll want to create a business entity to keep your personal finance and business finances separate.

Step 2. Forming Wholesale Real Estate Companies

Before you start trying to approach homeowners of off-market properties, you’ll want to form a business as either a limited liability company or corporation with your Secretary of State Office (SOS). This isn’t absolutely required, but it will make it easier to find deals if you are a registered professional.

Also, remember to check if you need any local real estate or business licenses. Wholesaling laws vary from state to state, so check with your local business offices.

Do You Need a Real Estate License to Wholesale?

Most states don’t require a wholesaler to be a real estate broker, real estate attorney, or real estate agent to get involved in real estate wholesaling, but you will have to describe yourself as a marketing company that helps buyers find, not sell, properties.

The following locations (and possibly others) have written laws regarding real estate wholesaling licenses:

• Oklahoma
• Illinois
• City of Philadelphia

Make sure you check with your local county clerk or business office to make sure there are no other requirements.

Do You Need a Business License to Wholesale Real Estate?

All states have different laws. Some states may require a business license to negotiate a wholesale deal, others may require a RE Agent or Broker License, and others do not require any licensing. You may be required to pay income taxes or business taxes depending on your state. You’ll need to check on your state SOS website.

If you are wondering about the real estate agent license, Oklahoma, Illinois, and Philadelphia definitely require one. Other states may create wholesaling laws in the future.

Now that you’re up to date on licensure, one wholesale real estate strategy you’ll want to use is creating a website and social media.

Step 3. Create a Real Estate Wholesaler Website and Related Social Media

Wholesale RE investors will need a website and social media presence to look professional when they’re working on a wholesale deal. Without it, how will potential buyers or someone with a wholesale property find you?

When you wholesale houses online, having a website helps you find more cash buyers who can afford the upfront investment with less money going to direct marketing costs.

Todd told us one of the things that makes him different is that he is a social media fanatic. He shares key takeaways so property owners can benefit from each wholesale real estate deal he makes.

Check out our blog on how to build a website to learn how to create your own or hire a website builder on Fiverr.

Step 4. Create a Real Estate Wholesale Contract Template

Every wholesale real estate transaction is effectively two deals: one between you and the property owner and the other between you and the end buyer. Wholesale real estate contracts are necessary for every deal.

You’ll want a purchase contract and a seller contract. There are three types of real estate wholesaling contracts:

• Wholesale Real Estate Assignment Contract
• Wholesale Real Estate Purchase Agreement
• Double Close Contract

Wholesale Real Estate Assignment Contract

A real estate wholesaling assignment contract is a contract where the wholesaler sells the right to purchase the house to an interested buyer. It includes a wholesale fee that is in addition to the price the homeowner agreed to sell the house.

You can download a free printable real estate wholesale contract template PDF online. Make sure to consult a licensed attorney in your state to verify that the template you develop is legally binding.

You will need this contract in conjunction with a wholesale real estate purchase agreement contract, which we’ll discuss next.

Wholesale Real Estate Purchase Agreement

A purchase agreement is a contract that can be used for wholesale deals between the motivated seller and the wholesaler. The contract will include:

• Seller and buyer information
• Property location
• Purchase price
• Payment method
• Zoning restrictions
• Closing costs and terms
• Prorated and delinquent tax terms
• Occupancy terms
• Access to property terms
• Assignment clause
• Terms of default
• Any additional terms
• Buyer and seller signature blocks

You’ll use the purchase contract in conjunction with the assignment contract if other investors will be buying the home. Download our free purchase contract template.

Double Close Contracts

Double closing in real estate investing involves two contracts and two closing costs: One deal is between the homeowner and the wholesaler, while the other is between the wholesaler and the real estate investor.

These are primarily used when wholesaling real estate if:

1. Your profit margin is really high and you want to keep it hidden from the other parties
2. Your state requires wholesaling real estate to use this closing method
3. You do not have a real estate license and the title company requests it

These contracts are basically identical to standard real estate contracts used when buying a home. Real estate agents are not allowed to share closing documents—otherwise, I’d provide a template.

Step 5. Identify Opportunities

Next, you’ll want to identify investment property opportunities that you can get under fair market value and sell to cash buyers for a fair price. We asked Santino where to find opportunities and he told us:

He went on to tell us what he looks for in the way of profit margins:

Establish Your Risk Tolerance

While real estate wholesaling is lower risk than other ways a real estate investor might invest, there are still risks in any real estate deal. You might struggle to attract sellers, or there may be low liquidity to buy houses depending on how the market is doing.

A house that needs a new roof and foundation presents a greater risk than a house that just needs a new air conditioner. Remember to price that into your offer. An air conditioner might justify a $20K to $30K discount, while a new roof and foundation could mean your offer should be for the land value minus demo costs.

Step 6. Reach Out to the Property Owner

Next, you’ll want to reach out to the property owner. You can call them, run direct mail campaigns, or reach out in person. Santino told us you’ll be a successful wholesaler:

Some will be interested and some people won’t.

Be prepared to offer them a real estate deal if they show interest. Most real estate investors expect to pay around 70% of the after repair value (ARV) when flipping homes, which means you’ll need to calculate:

1. After repair value (use comparables in the area)
2. Cost of repairs
3. Maximum allowable offer (MAO)

The repair value is based on the cost of a contractor or the cost of parts and the time to complete various upgrades. The maximum allowable offer will be equal to:

(70% x After Repair Value) − (Cost of Repairs) = MAO

Let’s use an example of a $300,000 market value that needs $20K in repairs.

With that in mind, the highest offer you would want to make the homeowner is:

(70% x $300,000) – $20K = $190K

Anything more than $190K and you’re unlikely to make a profit. But if you can negotiate to get the seller to accept a price of $140K, you’ll definitely make a nice profit.

Step 7. Sign a Wholesale Real Estate Contract

Once you have agreed upon the terms of the offer, you’ll need to get it in writing with the homeowner so you can reach out to real estate investors to find a buyer.

Step 8. Escrow

This stage of wholesaling real estate will be handled by a title and escrow company. The title company will make sure that any liens and tax defaults are identified. They make sure that the deal is ready and that everything goes smoothly for the homeowner, the contract seller, and the end buyer.

Step 9. Close the Deal

After everything has been evaluated, there are closing costs when buying houses. They range from about $1,500 to $7,000 without taxes and can be as high as $30,000 with taxes. Rocket Mortgage has a great article on closing costs.

Once the deal has closed, the homeowner gets the money, you get your wholesale fee, and the buyer has a new property.

Now that you know the process, there are a variety of wholesale real estate resources you may wish to consider.

Resources for Real Estate Investors

Santino emphasized the importance of increasing your knowledge in the industry to maximize your results. Some of the ways you can increase your knowledge include:

1. Find a wholesale real estate mentor.
2. Read wholesale real estate books.
3. Follow wholesale real estate websites and their trends.

Let’s look at each of these.

Find a Mentor

If you are new to exploring how a wholesaler makes money, you’ll want to find someone with experience to help teach you the market. While wholesaling doesn’t require significant capital, the more upfront capital you have, the easier it will be.

If you can interact with someone who has already developed a process, you will learn how to do wholesale real estate faster. Some places you can find RE wholesaling mentors include:

• Facebook groups: Find wholesaling groups.
• Real estate professional organizations: The National Association of Realtors (NAR) has a list of professional organizations, and many have local chapters with meetups.
• Check out our blog on how to find a mentor.

Books About Wholesale Real Estate

This section contains sponsored Amazon links that earn UpFlip revenue when you make a purchase.

Check out some of the popular books for wholesale real estate including best-sellers like:

• How to Wholesale Real Estate: Learn ways to get into real estate wholesaling without money. Find it on Amazon.
• Real Estate Finance & Investments: The 17th edition of this textbook by William Brueggeman and Jeffrey Fisher teaches strategies used in real estate investing.
• 21 Ways To Find Off Market Real Estate: Learn marketing strategies like YouTube, SEO, mailers, remarketing, and other strategies to find real estate that isn’t listed.

Check out other popular books about the real estate wholesaling process.

Real Estate Wholesaling Websites

Looking at what the industry is doing well and what it is doing poorly can also be highly beneficial. Make sure to check out websites for real estate wholesaling to get a better idea of what other wholesalers are doing. Here are a few to check out:

• Real Estate Investing Websites: Builds websites for RE investors
• AssetColumn: Wholesaler and flippers market
• REI Kit: List of sites and groups for RE wholesaling and house flipping

Conclusion

Once you start looking, you’ll encounter a ton of resources for wholesale real estate investing. You just have to decide you want to get into it, build a network, and close some deals. Once you build a little capital, you can start doing more advanced deals like home flipping or fixing up and renting Airbnbs.

What aspects of the real estate market would you like us to write more about?

Sharing is caring!