How Wholesaling Real Estate Works
Getting Started in Real Estate Wholesaling: What is Real Estate Wholesaling and How Does it Work?
If you’re getting started in real estate but have limited capital or credit, or simply want to explore a path that avoids rehabbing, tenants, and broken toilets; wholesaling properties is an excellent opportunity for you.
Wholesaling real estate will require some ambition and a bit of specialized knowledge. But it is one of the most tried and true methods for generating cash quickly.
In the real estate market of today, where demand from investors for good real estate deals continues to grow, effective wholesalers who can bring these deals to investors are in high demand and can make a lot of money in almost every market in the US.
Here’s real estate wholesaling explained…
What Is Wholesaling Real Estate?
To put it simply, wholesaling real estate occurs when a property is available to be bought for less than it’s worth—often because it’s in bad condition or because the seller is motivated to drop their price.
Your job is to get it under contract at that “wholesale” price. Then, you sell it “as-is” for a little bit more to a cash buyer, who makes a substantial profit when they resell it again someday, or by keeping it in their portfolio as a rental property.
How do you make money? Simple…you make the difference between the contract price (between you and seller) and what your buyer agrees to pay for it. This usually means $3,000-$10,000 or more!
How Does Wholesaling Real Estate Work?
As a wholesaler, you’re focused on finding two things – a good deal and an investor to buy it. Finding a great deal often means looking at distressed properties that require a significant investment to renovate or improve, and making offers to buy them, typically for around 70% of their future value, minus any repair costs.
Watch this Max Offer Tutorial video to learn more about calculating the cost of your real estate rehab projects.
Think of all the boarded-up, junky houses you might have seen in your city or county while driving around. If the price is low enough that an investor feels they can make a healthy profit, the property’s condition becomes irrelevant.
The idea with wholesaling is that you do NOT have to purchase the property yourself or come up with funds to close on the deal. Instead, you’re simply selling or “assigning” the contract to another buyer.
There will be situations where you may want to or need to do a “double closing” but the idea is to avoid those situations.
Who is Your Target Buyer?
The objective is to flip the house as quickly as possible to a seasoned buyer who can pay in cash and close quickly without having to qualify for a loan. So how do you find private money investors with the funds to buy these homes?
It’s not hard. In this market, there are many investors looking for great wholesale real estate deals. Building a network of investors is something that happens as you network locally, or by talking with those who respond to your “For Sale” ads.
What happens if you can’t find a buyer? If you’re unable to sell the property prior to the expected closing date (usually 30 days or less), the contract is terminated, and you can simply walk away as long as you have included some kind of contingency in your agreement. (More in this in future articles in this series).
What Are the Benefits of Wholesaling Real Estate?
There are several reasons why if you’re considering getting started in real estate, wholesaling may be the most attractive method for you:
- A wholesaler does not need to invest any funds of their own into a property.
- You do not have to have good credit or be able to qualify for a loan.
- Low risks: Once the sale is complete, a wholesaler no longer has any legal responsibility to that property. This is much less stressful than being a landlord and worrying about repairs, lawsuits, and unclogging toilets!
- You can turn a fast profit within 30 days, unlike rental property, which takes longer to see a return on investment.
Look at who else benefits… The seller is able to sell their problem property, which may or may not have sold otherwise. And, they did so without having to invest any cash and sweat equity of their own. Additionally, they get to sell the property quickly, without having it linger on the market for weeks or months!
And, the investor/buyer you found is able to purchase an excellent investment property well below market value without needing to do any of the searching on their own.
In layman’s terms, a wholesaler could be considered a middleman of sorts. A seller offers to sell a house, a wholesaler puts the house under contract, and a buyer purchases it (from the seller directly, usually).
To give a more specific example, a wholesale real estate deal might look like this:
- A house would have a fair market value of $150,000, but it needs an additional $25,000 in renovations or improvements first.
- The seller does not want to invest that $25,000 so they put it under contract to a wholesaler like yourself for $80,000.
- You email an investor, who looks at the house and is willing to purchase it with cash for $90,000 in its current condition, within 2 weeks’ time.
The result is that:
- The seller sold his or her house without needing to invest any more money in it.
- You made a $10,000 profit in less than a month.
- The buyer, or investor, has the potential to make $30,000 in profit or more after the renovations are complete.
*These numbers are just an example. Depending on your market, you may be able to find deeper discounts on properties or have your buyers accept smaller discounts in a higher-competition markets.
So, if you have a keen eye for a great deal and the ability to network and negotiate deals, wholesaling could be a very profitable opportunity for you—even if you’re brand new and just getting started in real estate.
The learning curve is low, and both sellers and investors will love you. All you need to succeed in this business is the ability and willingness to learn and hustle.
Some Helpful Resources
- [Software] Get the brand new cloud-based Rehab Valuator Lite software to help calculate max offer and create marketing and deal summaries for your cash buyers
- [VIDEO] Watch this case study of a wholesale deal
- [VIDEO] Watch case study #2: Wholesaling Rental Properties
- Confused by some real estate terms you see in this article? Check out our Real Estate Glossary!
This is very informative, thanks for sharing.
Great! Please reach out if you ever need anything.
Yesssss!! Finally some step by step help. I’m a newbie and everyone who knows anything, pretend not to know..Thank you so much for your time and wisdom. I’m so excited!!
Great and very smplistic article on the basics of wholesaling.
Thank you for sharing wholesaling for beginners’ May God continue to bless you, as you help others.
Blessings, in Jesus name!
Hi Danill, your content really is on point for someone, like myself just starting out. As soon as I get this concept down-packed, I’m getting the RV Premium. Thanks so much for these lessons
You explained that so well. Thank you so much for sharing that information. Do you recommend getting an LLC and a website to start a wholesaling business?? And where can I go to find investors?
Thank you for commenting.
In regards to starting an LLC that’s really up to you. If you feel it may be beneficial you may want to start an LLC for your wholesaling business.
Here is a great tutorial that covers using Rehab Valuator to find cash buyers for your deals- https://rehabvaluator.com/case-studies/how-to-find-thousands-of-cash-buyers/
This is a great opportunity thank you.question.do you guys not print the course out.i mean like paper back.its nothing in the world like the smell or the joy of reading a book.not computer screen, but book??
Great info, thanks!
Where exactly do you find these deals? It sounds great. So, I find a deal then put it under contract then look for an investor and add my finder fee of 3,000 to 10,000 dollars. Then have the investor buy the contract. Am i correct on that summary? I just wanted to clarify. Thank You
Thank you for commenting.
Yes, your summarization is correct.
Here is a link to a great case study we published on finding off-market deals: https://rehabvaluator.com/wholesaling/how-to-find-off-market-real-estate-deals/
Thank you, somebody finaly got it. This is the best example demonstration. I have seen since I have been. You made it so simple. Continue on.
Yes Daniel please continue to write these articles they are very helpful and informative.
Thanks and keep up the good work
main work has been with lease options, but looking to expand, so…..YES, continue.
one time Richmond nurse, MCV for both the undergrad work and my masters !
Sounds good, Alicia! Thanks for your feedback!
Mike- awesome! I live 3 minutes from MCV. All of my development is within walking/biking distance to MCV right now.
Danill Thank you for taking the time to instruct us how wholesaling should be done the correct way I really appreciate your wisdom.
You’re welcome, Jesse! More good content on the way – going to go deeper!
thank you Dan you for explaining that more clearly to me I need to find buyers first
Yes Daniil, Please keep writing the series. I love watching your videos because they are very informative… With all of the Knowledge you know about Real Estate Investing, You can Teach your own class for 18 months and just give us a Certificate when we complete your course. Lol. I’m just saying.. (( Daniil Kleyman’s School for Real Estate Investing )).
I like your idea, Allen! “Daniil Kleyman School of Real Estate”. With certificates and everything 🙂
Hey Daniil, Yes please continue writing this series Wholesaling 101 it is very helpful. Looking forward to part 3 thank you…
Hey, Daniil… You’re in GRAVE DANGER of being ejected from the R-E Gurus’ Club for your basic course -starting- on step 1, and step 2, and step 3, etc. More often than not, your counterparts begin their basic trainings with step #97, then jump to step #163, then #244, and #389 before asking “Now, wasn’t that easy?” [offering noplace for responses, of course]. Anyway, lotsa kudos from your many ardent fans [and delighted ‘RehabValuator Premium’ owners]…. including me.
Hey Kahl. Good to hear from you! I definitely like to break things down step by step. Much easier to actually learn that way! Hope you’re doing well!
Thank You for course it help me
Thanks so much for taking your time to do this series. It is like a refresher course on something I have done and made good money. Keep the info coming.
You’re welcome, Ernest! Glad to hear it
Like it!just need Funding.
Thank You Daniil, The way you explained everything, my kids could understand wholesaling. I have looked at both videos and read the excellent examples. Look forward to receive any other knowledge you wish to share with me about this business.
please continue to write on the subject of wholesaling!
Wow!! This is some great information… Please keep writing, I’ve been trying to find out the nuts and bolts about wholesaling for quite sometime now, but in more simpler terms like your series. Thank you so much for your knowledge and willingness to share with us. Keep up the
Daniil your teaching materials are premium in every sense of the word. I get so fed up with all the supposed experts and “gurus” who constantly “bait and switch” and would have you believe they are the next best thing to “sliced bread”…in reality 99% of their so-called training is the same old tired and worn out crap. It’s Carlton Sheets on “meth”…but in the end pure crap. Worthless and of no value period. Continue with the excellence you exhibit currently and your legacy in the REI industry will be as staunch and reputable as “Lady Liberty” herself. Well done!
Thanks, Alan. That really means a lot!
Great introduction to Wholesaling!
I appreciate the explanation and I have great interest in wholesaling.
Mahalo (Thank You) – Alex
I have been receiving all of your emails and I thank you so much for all of the training you provide to us for free. I have paid 100s of dollars to other clubs and so call gurus and still come away not knowing any more than when I came…. but you have made it all so simple and I can’t wait to purchase the Premium package and get started wholesaling.
This is exactly our goal Stacy! We look forward to hearing of your many successes.
SPOT ON!!!! I’ve read about 10 articles on wholesaling this week and this one makes the most sense. I definitely understand the process through your teachings. Now I’m confident enough to get going consistently. I Truly appreciate your help!
We’re happy to help. If you ever have any questions please let us know.
Great. I was concentrating on was flips. This opens up a great new market. Awesome software. Great for advertising properties. Thanks s bunch!
Great information, Clear and up to the point.
Thank you Daniil Kleyman! WAY TO GO!
LISLOR And ASSOCIATES
I want to learn how to work in this business n profit. THANKX
We’ve emailed you directly but I also wanted to reply to you here as well.
The No BS Wholesaling 101 course is an online education course that can be accessed on any device wherever you have internet. The course consists of 7 modules and over ten hours of videos on step-by-step wholesale training. This course starts with the basics and takes you all the way through training on closing the deal so you get paid. In addition, this course grants you access to useful, downloadable resources such as sample legal contracts and call scripts. To make it better, this course is currently on sale for a one-time payment of $18. If you are interested in this course, I have included the direct link here: rehabvaluator.com/no-bs-18
Have a great day and keep an eye out for our email as we’ve included info with additional free resources to help you out. Have a great day!
Hi Dan! Great question. Thank you for the suggestion. In our No BS Wholesaling 101 course we offer transcripts for each module that you can actually print out. We wanted to make sure that this information can also be available to everyone who visits our site. This link https://rehabvaluator.com/no-bs-18?fbclid=IwAR2Hxt1i0sSa2Oh9D_sxi3g3l-blN5bWZcX5q5ZSrJJGw-dgUX3zNiTbE2s will take you to our Official Guided course where the transcripts can be printed. Just $18!