Real Estate Wholesaling: How Does It Work?

May 26, 2022


Many real estate investors find it challenging to deal with properties. It can be difficult to navigate your way in this industry, and sometimes, it comes with an expensive price. You can also add the time it will take you to buy a property and put it back on the market. But if you really want to make a great profit in this industry, you have various available options, and real estate wholesaling is one of them.

How Does Real Estate Wholesaling Work?

Real estate wholesaling is one of the profitable strategies in this industry with minimal capital. This is how it works. Let’s assume that you know someone in your neighborhood who owns a home that needs a lot of work for repairs and renovations. You then approached the homeowner to discuss the price and get the house under contract. However, settling on the property is not your goal.

Your primary objective is to assign the said contract to another investor who will do the entire home renovations and repairs before putting it back on the market. So you’re going to sell the house to the investor at a wholesale price or a price less than the market value. Then, the investor will have the chance to compete with other real estate investors for the property. After that, you will get paid for the work you did when you secured the contract and assigned it to a particular investor. So that’s how real estate wholesaling works. You get cash for it, and the investor will also earn a significant profit after fixing and flipping the house.

Be Familiar With the Rules

Real estate wholesaling can be tricky depending on the jurisdiction where you come from. For instance, if you’re living in Maryland, you can’t earn a commission in any real estate transactions unless you are a licensed real estate agent. So there are various rules and regulations that you need to be aware of governing who can legally make a commission.

With that being said, the best thing you can do is to get in touch with a qualified real estate attorney so that you will know how you can legally wholesale real estate properties in the state you’re living in. Always remember that it’ll be better to be safe by making yourself informed with the rules and regulations around this matter before venturing into wholesaling.

Do Your Research

One of the most important things you need to know before striking your first wholesaling deal is to be aware of the market you’ve chosen. You can’t just simply get a particular house under contract and assign it to an investor. You have to check and do your research to see if the property's location is marketable. It’s because it’s your goal to make sure that the properties you’re getting are at a desirable price enough for fixing and flipping, including the profit intended for you as the wholesaler.

Invest in Time and Effort

Real estate wholesaling may seem so easy, but it’s undoubtedly tough and challenging for many investors out there. In fact, you can find many successful real estate wholesalers across the country who rely on large networks that will usually take time to build. Besides that, you can also hear countless stories of wholesalers who paid large amounts of deposits for a particular property bought at foreclosure auctions. But they weren’t able to find a buyer on the specific deadline. As a result, these wholesalers have forfeited their deposits.

However, if you’ve already built a big network of investors who are willing to work with you as a wholesaler, you can avoid this horrible thing from happening in the future. As mentioned earlier, it’ll require much of your time and effort to build that network, but it’ll surely pay off in the long run.

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