There are many different ways in which you can make money in real estate, depending on your expertise, budget, and goals.
One of the best real estate investment strategies for making quick money without a long term commitment to a rental property is to wholesale real estate. In this article we will look at what real estate wholesaling is, how it is done, what you need in order to get started, and how much money you can make in this business.
To learn more on the topic of wholesaling real estate properties, watch our most recent video available below:
What Is Wholesaling Real Estate?
While many people talk about real estate wholesaling, few know what exactly this term refers to. Actually, this is a relatively straightforward concept in the real estate industry.
To wholesale real estate means to find a home for sale, put the property under contract with the seller, find a buyer, and assign the contract to the buyer.
Related: The Basics of a Wholesale Real Estate Contract and How to Prepare One
The success of a real estate wholesaling deals depends on the investor’s ability to buy a home much below market value. Usually the best properties for this strategy comprise of distressed properties (which are not in too poor of a condition), homes of motivated sellers, and other off market properties. MLS listings do not constitute an ideal option for this as it’s hard to buy an MLS listed property below market value and because interested buyers can purchase such a property directly from a real estate agent.
Another crucially important set of skills for real estate wholesalers is real estate marketing skills. You have to be able to find a relevant buyer quickly before the contract expires. The good thing is that you can contact both homebuyers and other real estate investors as they both could be interested in an easy and profitable opportunity. However, as a wholesaler, you usually have to provide the property for sale below market value in order to make a lucrative offer.
Something that is commonly heard in the real estate investing world is that to wholesale real estate properties is illegal. While this is not generally the case, there are strict laws and rules which regulate this business. These regulations differ from state to state, so you should check out the local legislation in this regard before you decide to become a real estate wholesaler and make money with this short term strategy.
How Do You Become a Real Estate Wholesaler?
One of the first questions which pops on the mind of many beginner real estate investors is: “Can you wholesale real estate without a license?”
The short answer to this question is: YES!
By legal regulations, you don’t need to have a real estate license in order to wholesale properties. However, if you are a real estate agent, you have to disclose this fact to both the property seller and the property buyer.
Meanwhile, if you are not a realtor, you need to be the principal buyer when buying the property for the seller and the principal seller when selling the property to the buyer.
If you are wondering whether having a license is of benefit to real estate wholesalers, the answer is: Not necessarily. In fact, the vast majority of those who succeed with this real estate investing strategy are not licensed real estate investors.
However, you still need a deep knowledge of the local housing market and the real estate industry in order to make money in real estate with this strategy. You have to be able to find good deals, market properties for sale, and close excellent deals with property buyers quickly and efficiently. Thus, it is highly recommended that you have some experience in the real estate field and start building a strong real estate network in the local market right away. This will help you incredibly in all aspects of real estate wholesaling.
Now, let’s have a look at the exact steps of how to wholesale real estate properties as an absolute beginner:
Step #1: Look for Off Market Properties
When wondering “How do I start real estate wholesaling?”, the first step is to start searching for properties that are appropriate for this strategy. The best property types to wholesale include distressed properties. These can be abandoned properties or other homes in a sub-optimal condition as well as some foreclosures.
The purpose is for the real estate investor to find a property which he/she can buy much below market value so that even after he/she sells it to the final buyer for below market value, the transaction is profitable.
So, generally speaking you should look for off market properties – rather than MLS listings – to succeed with this short term real estate investment strategy.
If you are not sure where to start your off market property search, you can give Mashvisor a try. With Professional and Expert subscription to our real estate investment software platform, you get access to the Mashboard, where you can look up homeowner data in any US housing market. This means that with our real estate investment tools, you can search for properties which match your criteria in any location and get access to the property owner information as well, including name, email address, and phone number. With Expert subscription to our app, you can send emails directly to property owners to enquire about their interest in selling their home or investment property.
Related: How to Find the Owner of a Property in the US Housing Market
Step #2: Negotiate the Purchase Price
Once you’ve found a property which is good for wholesaling, you should get in touch with the seller and negotiate a price. Keep in mind that this is absolutely the most important step when you wholesale real estate. As you will need to sell the property below market value in order to make the deal attractive for the buyer, you need to sign the contract with the seller for as cheap as possible.
That’s where your negotiation skills will come really in handy. Working with motivated sellers of properties in sub-optimal conditions is the easiest option in this case. Such home sellers are willing to drop the price in order to get rid of their property as quickly as possible.
Step #3: Sign a Contract with the Seller
This step is quite straightforward. You should put the property under contract with the owner. This does not mean that you are actually buying the property. That’s the most important advantage of real estate wholesaling when compared to other real estate investment strategies. You don’t need to go through the process of buying an investment property which means that you don’t need to have enough savings for a down payment. Furthermore, you don’t need to deal with the legalities associated with buying and owning a house.
Step #4: Market the Property for Sale
Next, as a real estate wholesaler, you have a property to sell, which means that you need to market it. You should deploy your real estate marketing skills to find a good buyer within the period set in the contract.
Many real estate experts recommend having a buyers list. This is simply a list of potential property buyers whom you can contact to offer the property that you have. This is a quick and efficient way to market a property that you are wholesaling.
In most cases, your buyers list will be composed of real estate investors who are interested in buying multiple income properties and have the cash available as soon as they see a good deal.
That’s why to succeed as a real estate wholesaler, you need to build a vast real estate network of different individuals. This will make both finding properties (or sellers) and finding buyers much easier and faster.
Once again, you can use the tools available on the Mashvisor real estate investment app to succeed as a real estate wholesaler. In specific, on the Mashboard you can look for property owners who bought a relatively small and simple house a long time ago and who seem to have the financial capacity to replace their home with a bigger, nicer one. You can also search for individuals who own an investment property as they might be looking for an easy and affordable opportunity to expand their real estate investment portfolio. With Expert subscription to Mashvisor, you can contact property owners directly from our platform to check if they might be interested in buying a new house.
Related: What Does Mashvisor Do for Real Estate Investors, Agents, and Property Managers?
Step #5: Agree on a Sale Price
Your real estate marketing efforts will culminate with finding a good property buyer. It is important to do that as quickly as possible, before the contract expires, and so that you can move on to the next deal.
Remember that in most cases of real estate wholesaling, the property is sold to the final buyer – whether a homebuyer or a real estate investor – below market value. That’s what makes the deal attractive and profitable for the buyer. If you are selling the property at fair market value, then you face much more competition from MLS listings and other properties for sale.
At the same time, the sale price should be significantly higher than the purchase price. After all, the difference between the two prices is your profit as a real estate wholesaler.
Step #6: Transfer the Contract to the Buyer
The last step when you wholesale real estate is to transfer the contract to the property buyer. The ownership of the house should transition from the property seller to the property buyer.
How Much Money Can You Make Wholesaling Real Estate?
Another question which many beginners have is: “Is wholesaling real estate profitable?”
Once again, the short answer is: YES!
While it all depends on your skills and knowledge as well as on the particular deal, the answer to the question how much real estate wholesalers make can be A LOT.
In general, the average profit when you wholesale real estate properties is in the range $5,000-$10,000 per deal. While this might not sound like a lot for an aspiring real estate investor, you should keep in mind that it should take you no more than a few weeks to wholesale a property. As you become an experienced real estate wholesaler, you can easily handle 2-3 deals at a time and close them within a couple of weeks. This means that you can make thousands of dollars on a monthly basis with real estate wholesaling.
Moreover, it can easily be done on a part-time basis as this short term real estate investment strategy does not require full time commitment.
It’s important to note that the answer to the question “How much money do you need to start wholesaling real estate?” is LITTLE. The only money you really need is for marketing the property for sale. The fact that wholesaling real estate allows you to make a significant amount of money over a short period of time with no long term commitment to owning a property makes it ideal for beginners. Now you know how you start to wholesale real estate properties in 6 easy steps. If you need some help in searching for off market properties for sale and finding homeowners who might be interested in buying another property, sign up for Mashvisor for access to property owners data.