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Wholesaling real estate refers to a short-term business strategy that investors can use to make quick and steady income.  With wholesale real estate transactions, the wholesaler enters into a purchase contract for a home from a seller, for a small earnest money deposit. The contract spells out the amount the wholesaler will sell the property for and the required time period that the sale should occur.  After the wholesale real estate contract is in place, the wholesaler attempts to find an interested investor/buyer. When an investor/buyer is found, the wholesaler reassigns the contract to the investor at an agreed upon higher price. The difference in prices is known as the wholesale fee and can be 5% to 10% of the property sale price. 

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To begin engaging in real estate wholesaling, you may want to consult with people who are already doing business in real estate and are familiar with how real estate wholesale works.  There are pros and cons to wholesaling, so make sure you do the following, if you are interested in real estate wholesaling:

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First, conduct research to learn the laws of wholesaling in the State in which you plan to conduct business.  Look into the housing market in the neighborhood where you plan to purchase property.

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Second, start looking for properties that are listed below market value and owners who are motivated to sell quickly (like foreclosures), because they are more willing to sell the property for less than what the home is worth.  Find out the fair market value of the property, the taxes, compare properties sold in that area, and determine how much the cost is for any needed repairs to the property.  Make sure that the property you buy is worth the investment for you.  Then, make an offer based on the highest you are willing to pay, minus the cost for repairs.

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Contact the seller of the property and see how you can work together to sell the property.  Present an offer to the seller and secure a property contract.  The most important thing to consider in the contract when wholesaling, is to make sure that the contract includes the right to reassign the contract to another party, as well as a contingency that allows you to withdraw from the contract if you are unable to find a buyer.  It is better to find cash buyers, but that is not always easy.

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When it is time to close the deal with the investor who fits your wholesale real estate transaction, both of you have to agree to terms and conditions.​  Also, keep in mind that some States require a real estate license to wholesale real estate.  Wholesalers who fail to find investors may lose their earnest money deposits. 

The key to being successful at real estate wholesaling is to build a network of investors who will be interested in buying the properties that you find.

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By Jason Torrents

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