How to Start Wholesaling Houses

Matt TeifkeAugust 4, 2022

The,Real,Estate,Agent,Hand,Holding,Money,And,Explains,TheWe all know how wholesaling works. It involves buying in bulk so you can resell an item for a profit. But how does that translate into home sales?

When it comes to wholesaling houses, there is no buying in bulk. But it does involve buying at a discount and selling for a profit.

In this process, the wholesaler finds a discounted property, usually below market value. They will enter a purchase and sale agreement with the owner. This will allow the wholesaler to find a buyer while under contract. 

When they find the buyer they don’t sell them the property. Rather they sell them the contract they have with the owner which gives the buyer the right to buy the property. 

Once all the paperwork is signed, the seller owns the bare legal title while the buyer is the equitable owner. You can also do a double closing which will allow the wholesaler to buy the property and then immediately sell it to the buyer without rehabbing it. 

How To Get Started Wholesaling Houses

I’m excited about this topic because most people don’t talk about it, especially on the brokerage side. As you’re looking for opportunities, you have to find something that there’s value that somebody would want to pay more for to be able to wholesale the deal. That’s the name of the game. 

I would recommend finding somebody who’s done it before. Find a way to add value for them, plug in with them, bring them deals, JV with them. Meaning bring them an opportunity that you guys split. The wholesale fee on wholesalers are everywhere. Real estate agents wholesale, there’s people that only wholesale. There’s large companies that nationally wholesale and you can find wholesalers really easily with bigger pockets. You can find them on Facebook groups. You can talk to realtors, but the best way I would say is learn first, then understand what the process is like.

What is the contract that’s needed? How do you get the contract in place? It’s a standard contract. Your buyer signs that contract and gives you the ability to assign it. So, go knock on some doors, send out mailers, make cold calls, and make low offers. You can wholesale properties that are on the MLS. You can wholesale land deals as well.

A lot of times you run into the situation where somebody simply doesn’t want to list. You just add that to the tool belt that you have like, “Hey, well then I’ll go wholesale instead.” This deal, you’ve got to find the right title company that will allow wholesale to take place. Not every title company will allow it or will work with it, or even knows how to do it.

Then you can find a mentor to walk you through the process. Look up stuff online, or on YouTube. It’s everywhere. I think it’s extremely important, but the number one thing you need to know is that you have to find value. You can’t just wholesale something just because you found it. You’ve got to find something that, you know, people will want to pay more for.

So what’s critical to that is understanding the market and understanding values. For an example, if you found a house for call it $200,000, let’s say that they wanna sell for $200,000 and you think if you put $50,000 into it then it would sell for $300,000. So it’s 50,000 in profit in the best case scenario.

We’re not getting into like commissions and everything. Just to keep this example simple. Well, you would want to get that under contract at like $150,000. And then you’d wholesaler for $170,000, and you’d make a $20,000 wholesale fee. Then the person at $170,000 puts the $50,000 in, and there’s a little bit more room for profit.

So get out there and you can find them through calling, talking to people, referrals, door knocking, mailers, you can find divorce lists etc.. You can find utility shutoff. I know people that employ FedEx drivers or UPS drivers, and they give them $500 per deal if they see a vacant house while driving. Go drive around and look for houses that look vacant and then find motivation to sell and properties that are below value, and that’s how you wholesale.

 

What Contracts are Involved in the Wholesaling Process?

Once you determine that a property is a worthwhile wholesale project, you will need to set a contract to buy with the owner or lock it up so it’s under your control. You can do this through either of the following methods:

Assignment Contract: An assignment contract involves signing a deal with the seller that allows you to move your purchase rights to another person (i.e., the buyer). You will need to put down earnest money to secure this contract, but no further financing will be necessary. Once you find a buyer, you will sell them your purchase rights for a profit. The buyer will then take over for the closing process.

Contract to Buy: This involves you signing a contract to buy the property. Two closes will be necessary, one for your purchase and one for the buyer’s purchase. In addition to putting down earnest money, you will also need to pay closing costs. The buyer transaction should cover your costs as well as closing fees. 

 

What’s the Difference Between Wholesaling and Flipping?

Contract,For,The,Sale,Of,A,New,Home,(lorem,IpsumOne of the biggest differences between wholesaling and flipping is that house flippers buy the property while wholesalers do not… unless there’s a double closure involved. But even in those cases, the home is immediately passed on to the buyer.

Flippers take on a bigger risk because they put more money into the home. In addition to buying the home, they also make renovations while wholesalers do not. And because wholesalers don’t do renovations, they are able to make a profit sooner. 

However, flippers have a more stable pool of buyers to work with. 

Wholesalers generally work with investors that they are constantly having to network to find. Flippers sell to buyers and if they choose a good property in a good location, it’s likely a buyer will come along soon enough. 

Some people start off as flippers and move on to become wholesalers, while others go the other way around. Some stick to one or another. There really is no right or wrong here, it just depends on which career move feels right. 

Benefits of Wholesaling Houses

Wholesaling houses provides many advantages. For example:

  • Wholesaling is a great way to break into the world of real estate as it is low risk. 
  • It doesn’t tie up capital while the rehab is underway.
  • It is one of the quickest ways to make money in real estate. Some people have completed wholesale transactions in just a few hours. 

 

How to Break Into Wholesaling

Male,Hand,Turning,Page,Of,Custom,Kitchen,Drawing,To,FinishedWholesaling sounds great so far, but it’s not all easy money. You must know what you’re doing to get started. Read on to find out valuable tips that will help you break into the industry. 

Research the Market

It’s important to start by researching the market. This will help you get a grasp on how much homes are going for, what types of properties are available and what neighborhoods make the best investments. Your research should also include getting familiar with the wholesaling process so you have a good idea of what’s involved. 

Create a Buyer’s List

As a wholesaler, it will be up to you to find buyers quickly. The sooner you find a buyer, the faster you earn a profit and the less chance you have of your contract running out before the transaction is completed. 

If you have a buyers list together, you will be able to contact these individuals the second you find the right property. You can find prospective buyers by attending real estate networking events, sending out emails and posting on social media. You can also use bandit signs (general signage) to share your contact information throughout the area. 

Get Your Capital Together

Wholesalers require capital so they can buy contracts. If you’re not independently wealthy, you will need to begin networking with private and hard money lenders so you can access loans quickly when you need the cash. 

Find  Wholesale Deals

Happy,African,Black,Family,Couple,Customers,Renters,Tenants,Sign,MortgageThe next step is to scour your area for deals. The best way to do this is to search up distressed properties in your area. These are ideal as owners will want to get rid of them so they will be likely to accept below market deals. 

You can find distressed properties by looking on platforms like Zillow, Realtor.com and Craigslist. You may also locate them by searching public records in your area. People that have recently inherited properties and those that are behind on payments may also be eager to sell. 

Decide on Your Exit Strategy

There are two ways to profit as a wholesaler. You can sell your contract or you can do a double closing where you buy the house and immediately sell it to the buyer. Most wholesalers will go for the former which allows them to profit from the process without ever owning the property. 

Double closing is not used as often as it requires the wholesaler to pay closing costs. However, this strategy may be utilized if the buyer is willing to pay a lot more for the property. 

You can use different strategies in different situations, but the one  you choose should be decided on early in the transaction. You should also be familiar with what’s involved with each to ensure you do everything by the book. 

 

How to Ensure Success as a Wholesaler

Woman,Hand,Money,And,Piggy,Bank,With,House,Model,OnThere are several things you can do to ensure your success as a wholesaler. Here are some tips. 

Take Real Estate Classes for a Real Estate License

You do not need a license to wholesale real estate. However, it is helpful to have some knowledge of what’s involved in the buying and selling process

To get a real estate license, you must take several classes that will educate you on various real estate transactions. While a license is not necessary for wholesaling, the classes that prepare you for a license will provide you with the background you need to be successful. 

Develop a Strong Marketing Campaign

Wholesaling differs from house flipping as it involves enticing buyers and finding deals. You can’t expect buyers and deals to just fall into your lap. You will need to seek them out via a strong marketing campaign that may consist of:

  • Bandit signs
  • A well-designed website
  • Social media marketing
  • Networking
  • Craigslist ads
  • Blogs
  • Email campaigns

Building a marketing campaign is not cheap and you will need capital to support this side of your business. But if you can produce a good ROI, it will be well worth the investment. 

Network with Other Professionals

Hand,With,A,Key,And,A,Wooden,Key,Ring-house.,BackgroundNetworking is important for any real estate professional, but it’s especially crucial for wholesalers. Wholesalers must be able to find good deals on properties to make money and this is not easy to do. Most deals will be found by word of mouth, and the more people you communicate with the better. 

There are many ways to increase your real estate network. These include joining real estate groups, attending real estate conventions and doing online networking. You can even turn social activities and community events into a chance to network. 

Make sure you have business cards on hand to give out to the people you meet so they can contact you if they hear of anything. 

Know the Math

A successful wholesaler should know what it takes to turn a profit. This means they must be familiar with home prices in the area so they can determine when they are getting a deal. 

They must also know how much repairs will cost so they can prove that the home is a good investment. Many wholesalers work closely with contractors so they can get estimates before they proceed with a deal. 

Taxes, insurance, utilities and maintenance costs will must be paid while the house is under contract further adding to expenses. 

A wholesaler must known exactly how much they will spend and what they will need to do to turn a profit. 

Understand How to Yield Conversions

Earlier, we discussed how important the right marketing strategies can be in the wholesaling business. But tactics such as creating a website and posting on social media will not work on their own to yield conversions. You will need several touchpoints to work potential clients down the funnel

The aim of your initial strategies should be to set up a meeting. Once you meet with clients, you should be prepared to provide them with information and handle their concerns. It may take some trial and error before you see any success, but the process will get easier over time. 

How Much Money Do You Need to Start Wholesaling?

Real,Estate,Agent,With,Client,Or,Architect,Team,Discussing,ProjectYou don’t need a lot of money to start wholesaling nor will you need excellent credit. Your biggest expense will come in the form or marketing. 

It’s advisable to start with free marketing resources to get your business off the ground. If you need to invest in more extensive marketing, consider bringing in a partner that can assist with funding and bring their expertise to the table. 

 

How Much Can Wholesalers Make?

The amount you make on wholesaling depends on several factors including how much the home is worth, how much you can sell it for, the market in the area you are looking at, and the cost of repairs needed. However, most wholesalers make $5,000 to $10,000 a transaction. 

As you gain experience and grow your network you will be able to get more transactions completed and gain more income. 

 

Is Wholesaling a Good Career Move?

Wholesaling is beneficial to those who can get enough contracts to reach their financial goals. It’s also appealing because you can get started for very little money.

However, wholesaling takes a lot of time and effort and it’s especially difficult to get your first contract. Some feel it is not worth it. But those that stick with it will find it easier to secure contracts as they go. 

Here are some wholesaling pros and cons to consider if you are thinking of getting started in the industry:

Pros: 

  • Little upfront money needed to get started
  • The potential to make a lot of money in a short period of time
  • It’s a good way to get your foot in the door in the real estate industry

Cons: 

  • Lower profit margin than other real estate transactions such as flipping
  • Dependent on finding buyers and sellers which takes time
  • Wholesalers are under contract to find a buyer in a certain amount of time. If they fail to do so, they may lose out on the income. 

It can be difficult to get started as a real estate wholesaler. But once you get your career off the ground, you will bring in a considerable profit without having to spend a lot of money. Do you feel wholesaling is the right move for you to make?

About the Author

Matt Teifke has touched every area of real estate. He is the Founder of Teifke Real Estate (TRE), TRE Homes property management, Longhorn Construction & Development and TRE Property Solutions. As the Principal Broker of TRE, he employs over 140 agents and staff. Matt also holds a Masters in Real Estate, Valuation, Analysis, Investment from Texas A&M University.

If you have questions about wholesaling, please reach out to Matt here.

Last Updated: 8/4/2022

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