The real estate wholesale industry is a lucrative and exciting world, but navigating the waters is no mean feat for a first-timer. Successful wholesalers often spend years learning the tricks of the trade and perfecting their step-by-step system from start to sale.
Luckily, our beginner’s guide to wholesaling real estate skips over the time spent finding the way and sums up how to secure your first wholesale deal and turn it into a career.
What Is Real Estate Wholesaling?
Real estate wholesaling works around a purchase and sale agreement between the seller, interested buyer, and a middleman- a.k.a. you. Rather than buying houses to sell, the wholesaling business relies on contracts signed by a motivated seller agreeing to let a property go at a set price and a cash buyer ready to sign beside them.
The real estate wholesaler does not own the property at any time, but they do have equitable interest for a certain amount of time. This allows them the freedom and legal right to formal title and to make decisions about the sale of the property.
Many newer real estate investors focus on distressed properties in need of repair or “flipping,” as a lot of cash buyers are interested in this type of project. Flipping houses takes a certain type of seller and buyer; the finding of whom is something else wholesalers focus on.
A lot of wholesale properties come from situations where the traditional selling route is not viable, either through lack of time or money.
Discounted properties are often given to a real estate wholesaler to flip in times of urgency or desperation. Others just don’t want to go through the drawn-out process that comes with selling a property traditionally.
How do Real Estate Wholesalers Earn Enough Money?
A wholesale real estate agent can generate income in two main ways. An assignment fee is the figure real estate investor agents are paid by the buyer in exchange for the rights to the property on top of the price of the house. It is essentially a finder’s fee paid to the wholesaler for bringing the buyer and seller together.
The other way real estate wholesalers earn is by selling the property for more than the agreed asking price from the selling side. If you can get more money than the seller agreed on, you keep the difference.
Wholesaling Real Estate Investing: The Risks and Rewards
Wholesale deals may have lucrative potential, but they are no walk in the park. Like any industry based on investments that hope to pay off, wholesaling houses has its pros and cons.
Benefits of Wholesale Real Estate Investing
If you’re a wholesaler, you might invest much less money because you don’t need to buy and modify a house. Instead, you only focus on generating leads and attracting sellers. However, every option has advantages and disadvantages, so there are other things you should keep in mind as well.
What Are the Downsides?
There is no knowing how much money you are going to make at first, and it can remain unpredictable throughout your career. Wholesaling houses work like any commission-based job, in that you rely completely on sales to provide income.
Real estate wholesaling can generate revenue quickly and leave you cash happy, but it does not increase a person’s net worth. If this is something important to you, you should start investing money earned through flipping houses into other long-term assets.
Is Wholesale Real Estate Investing for You?
You know the risks and are ready to accept them, but how do you know if the wholesaling business is right for you? Ask yourself the following questions:
Are you thick-skinned? Wholesale real estate investors are offering people below market value on their properties, which can be a tough gig.
Do you have unwavering drive and determination, even during hard patches? Wholesaling is inconsistent, even for the most successful in the industry, so you need to be highly motivated.
Can you support yourself during the startup process? It can take a while to get things profitable, so you must be prepared for anything.
Becoming a Wholesale Real Estate Investor: Eight Steps to Success
In this beginner’s guide to wholesaling real estate, we have trimmed all the fluff and facts and figures to get down to basics: what does it take to become a successful wholesaler?
The investing business is notoriously tricky, especially when first finding your feet. Equally guileful is the real estate business, so the combination can be difficult to navigate.
Following this beginner’s guide is a smart place to start when investing in real estate wholesaling. Remember, this is just an overview, and there is a lot more involved in wholesale real estate deals that should be further explored.
Our guide is a series of tips on how to start wholesaling real estate with style and start making money on your own terms, rather than a comprehensive explanation of what real estate transactions look like.
Find Your Spot in the Wholesaling Real Estate Industry
It all starts with the right location. You must identify a gap in the real estate investing market and shape yourself to fit it. Big cities have the most opportunities as a whole, although rural communities have a lot of virtual wholesaling potential.
Before settling on a location, research the rental properties, housing prices, and local regulations regarding house flipping.
One of the most common wholesaling mistakes is failing to do thorough homework about the place you plan to launch a business.
Layout a Marketing Plan for Your First Deal
Your first deal is what can make or break you. Getting that initial sale under your belt is what kickstarts your career, so you need to do all you can to find it- and fast! Because of the urgency, the marketing may work a little differently.
Direct mail on a large scale is a quick way to find buyers and secure your first wholesaling real estate deal, but it doesn’t work alone in the long run.
Expand your Real Estate Marketing
Have a plan in place for future marketing as your business develops. You must generate steady leads to survive in this competitive industry, and consistency is the way to do it.
Make sure your online presence is optimized with a strong SEO website and social media presence. Invest in some high-quality email marketing software, as this is (along with direct mail) the most effective way to generate leads.
You can also integrate cold calling and whatever other tactics that suit your profile, but whatever you do, go all in.
Never Forget to Follow Up
It is almost unheard of to close a deal during the first conversation. Follow up using a detailed step-by-step system so that nothing slips through the cracks. Very few sellers accept the offer straight away, even if you manage to find cash buyers ready to commit.
Follow-ups should be one of the biggest parts of your job. It can take up to a year to close a deal, so set this time frame and decide on a practical follow-up routine. Remember that around 80% of real estate sales are closed after at least five conversations, so patience is a virtue.
Find Motivated Sellers and Loyal Buyers
Without buyers and sellers, you have no business. Lead generation through marketing is essential to find the people who are ready to commit on both sides.
Know Your Numbers
Study the markets and be realistic about your prices. Always consider the repair value on a property and how it is likely to affect a buyer’s budget. Setting prices too high for buyers and too low for sellers is sure to be detrimental to your success and reputation, so balance profits with reasoning.
Go for the Close
Closing the deal is what it’s all about. This is where you make your money. Brush up on your selling skills and fine-tune them with experience.
Effective pricing, savvy strategies, and a well-organized structure are all essential practices that your business must have to be successful.
Invest in training resources that teach best practices for sales and negotiating, especially as your business expands and you bring in other team members.
Manage the Data Effectively
One of the best ways to learn is to look back at what you have already done. By implementing intelligent data handling software and systems, you ensure that you have a clear picture of how things are developing.
Everything from what postcode is bringing you the best lead and what time of day is best to send an email to the magic numbers that seal the deal- data is knowledge, and knowledge is power. Look into professional software that can streamline this entire process and take your business to the next level.
The Bottom Line![]()
Simple and effective strategies are the cornerstones of successful real estate wholesaling. There is no dark secret or over-complicated algorithm- just look, listen, and act.
Generating leads in both the local market and further afield for your loyal cash buyer’s list and a group of motivated sellers is the first step to start successfully flipping deals.
When done well, real estate wholesaling is a lucrative and fulfilling career packed full of opportunities. With a real estate license, a boatload of work ethic, and some intelligent moves, anyone can launch a real estate investing company from the ground up.
