Real Estate Wholesaling: A Beginner’s Guide to Quick Profits Without Ownership

Wholesaling is a short-term strategy for real estate investors who want a fast way to earn income by essentially acting as a middleman between the owner of a property and investors or buyers who want a below-market value (BMV) property. With real estate wholesaling, an investor can make quick profits without ownership by essentially passing on a below-market deal to another investor who is willing to pay more than they did..The difference between the purchase price and the resale price is your profit.”

Real estate wholesaling is commonly contrasted with fix-and-flip deals, another investing strategy focused on a short turnaround. Unlike with a buy-and-hold property, the investor does not intend to own the property and buys it to sell to another buyer or investor without making any significant repairs or improvements.

Wholesaling is an ideal strategy for investors at the start of their journey with limited capital. Experienced real estate investors can use wholesaling to quickly generate profits to fund other investments and diversify their portfolios.

At Privy, our direct-to-MLS data makes it easy to leverage real-time data to identify wholesaling opportunities and find lucrative deals. Privy helps with market research, identifying trends, and leveraging investor data for wholesaling. Privy’s LiveCMA tool also creates investment-focused CMAs, which is useful for wholesalers to understand the investment potential of properties. 

This article is a beginner’s guide to earning quick profits without ownership through real estate wholesaling.

How is Real Estate Wholesaling Different?

Real estate wholesaling is when an investor, aka the wholesaler, puts a property under contract and then finds another buyer to purchase it. The wholesale investor assigns their rights to the new buyer at a higher price, pocketing the difference as profit. Many real estate wholesaling deals focus on distressed properties with investors essentially taking over the role of estate agent to match another investor with the property and seller.

However, many wholesalers also look for properties with motivated sellers but not necessarily distressed conditions, such as owners facing financial issues or a relocation that need a quick sale.

Although commonly compared to fix-and-flip property, real estate wholesaling is more accessible as it doesn’t involve renovations and has no additional costs. Under a wholesale deal, the initial investor enters a purchase contract by paying a small deposit. This contract will also state the amount the wholesaler will sell the property for and the time frame during which the sale must be made.

Once the contract is in place, the wholesale investor will begin looking for a new buyer or investor. The difference between the two contracts is known as the ‘wholesale fee’ and typically ranges between 5% to 10% of the property’s sale price. 

Wholesale investors can focus on properties with sellers who don’t have the time or money to list a property or work with a real estate agent.

It’s worth noting that being a wholesaler may not require a real estate license in your area but it’s crucial to check your local laws before starting. Successful investors with good negotiating skills and communication are ideal for becoming wholesalers to diversify their portfolios and fund new investments.

Real Estate Wholesaling vs. Flipping Properties

Most investors choose between real estate wholesaling and flipping properties. However, savvy investors can dabble between the two investment strategies as they’re relatively similar in purpose. Both real estate strategies use the property as a form of investment, passing it on quickly for a profit. 

The practical difference between real estate wholesaling vs. flipping properties is that the latter usually requires at least cosmetic renovations before being put back on the market. As there’s no need to carry out renovations, wholesaling has a shorter turnaround than flipping properties. It’s also considered to have a lower risk profile as the real estate wholesaler doesn’t actually purchase the property. Wholesale investors also don’t incur the cost of property taxes, insurance, and a mortgage. 

The fact real estate wholesaling requires less capital makes it ideal for newcomers to real estate investing or seasoned investors in need of additional capital to fund another property. A wholesaler will need a network of investors and knowledge of the local market, including its property appreciation potential to be successful. 

Who is Real Estate Wholesaling For?

Although it sounds appealing as an easy form of investing, real estate wholesaling isn’t for everyone. Don’t underestimate the time and work required to get these deals across the line. You’ll need to have all the skills of a successful real estate investor, including marketing skills, communication, and market knowledge. Not only will you need to find the below-market property, but you’ll also need to be able to sell it to another buyer.

Real estate wholesaling is ideal for those with negotiating skills who want a low-risk way of investing in real estate without upfront costs. This type of investing generates capital in a shorter time frame than rental properties or fix-and-flips. There’s no need for investors to have renovation experience or major capital to invest. Wholesale investors can work on more than one deal at once, depending on their network of buyers and sellers.

Step-by-Step Guide for How to Wholesale Real Estate

Although wholesaling real estate doesn’t require the same upfront investment as other strategies, it’s important to do your due diligence, market research, and networking. Real estate wholesalers will typically target properties priced below their market value. However, this type of property means the wholesaler will likely be targeting investors searching for a fix-and-flip property as it may need extensive renovations.

The process of wholesaling real estate is relatively straight forward from finding a motivated seller to getting the proper under contract below market value and then assigning the contract to an end buyer for a fee. 

: Here’s the step-by-step guide to wholesaling real estate.

1. Research the Local Area

It’s important to understand the local market before you start searching for a below-value property. The first thing you should research is the real estate wholesaling laws in your area to determine whether you need a real estate license. 

At Privy, wholesalers can see property transaction history, investor activity, and market trends, which could help them identify areas of high demand and undervalued properties with potential for fast turnaround.

At Privy, our LiveCMA makes it easy to run complicated real estate investment analyses to identify below-market properties and gain a wider context of the local area. Get insights from local investors and outpace the competition with unparalleled data insights with coverage of 97% of US residential properties. 

2. Identify a  Property

The property, whether it’s need renovating or is in foreclosure, will have a motivated seller who is more likely to work with a wholesaler to facilitate a faster sale. It’s possible to find distressed properties on-market that are below value or properties where you may be able to negotiate with the buyer to secure a lower price, which Privy is great at helping with. 

Privy’s automated deal finder feature can help wholesalers identify similar profitable properties in their target market. This can help wholesalers spot the best deals and match them with buyers quickly. Privy’s comprehensive investor data is especially valuable for wholesalers to ensure they are getting the most up-to-date information on properties and quickly identify opportunities..

3. Do Your Due Diligence

Once you find a property, your next step isn’t to contact the seller. Do your due diligence and crunch the numbers to ensure the wholesale deal makes financial sense for you and the seller. Start by determining the market value of the property by looking at comparable properties in the local area by using Privy. 

Don’t forget to account for the cost of any potential necessary repairs as other buyers and investors will factor this into their after-repair value calculation when deciding whether to purchase the property. These calculations will help you determine the maximum offer you can make for the distressed property and still make a profit after selling it to another buyer. Having this number prior to meeting the seller puts you in a better negotiating position. 

4. Contact the Property Owner and Obtain a Contract

After identifying that the deal is profitable, contact the seller and explain how the wholesale real estate process works. Be transparent and make it clear that this type of transaction is fully legitimate and an ideal way to secure a faster sale. Present your wholesaling offer to the seller and put the property under contract after they agree.

Your contract will need to include the right to assign the contract to another party and a contingency to withdraw from the deal if you’re not able to find another buyer within the stated time frame. A wholesaler doesn’t obtain title to the property; they simply gain the right to assign the contract to a new buyer.”

5. Find a Cash Buyer or Investor for the Below-Value Property

Once your property contract is in place, it’s time to find a cash buyer. You’ll want to work with your network of investors to market the property to them and use your networking skills to connect with other investors in the local area. Privy can also connect you with investor-focused real estate agents in the region to expand your network.  

6. Reassign the Contract to Your Buyer

After finding your buyer and pitching them the property, you want to explain the terms and conditions of the wholesaling agreement. You’ll assign your contractual rights over the property to the buyer with a different contract, known as an ‘Assignment of Real Estate Purchase and Sale Agreement’, where the buyer will agree to assume the wholesaler’s responsibility to buy the property.

How to Get Start with Real Estate Wholesaling

You can start real estate wholesaling with little to no upfront capital. It’s an ideal way to break into real estate investing and generate the income you need to fund other investments. If you have the negotiating skills, communication ability, and knowledge of a local market, you can become a real estate wholesaler. 

While it’s easier to act in-person, virtual wholesaling of real estate is also possible in the age of electronic signatures and virtual conference calls. You’ll still want to do your research and understand the local market dynamic if you’re wholesaling outside of your area.

Here are actionable steps you can take to start real estate wholesaling:

• Build a Buyer’s List

Networking is the backbone of real estate wholesaling, from connecting with potential sellers to marketing properties to interested investors. The key to wholesaling is to be able to quickly sell the property on to another buyer or investor. The type of buyer you can approach will depend on the condition of the property. If the property is in disrepair, you may want to narrow your search to investors who focus on fix-and-flip properties or rebuilds. 

Start your journey by building a buyer’s list with all your relevant contacts who may be interested in properties in your target areas. Keep your buyer’s list updated and add new contacts as you continue to network.

You can do this easily in Privy! 

• Use Privy to Find Distressed and Below-Value Properties, as well as mitigate risk. 

Privy’s access to real-time data and detailed market insights can help minimize the risk of overpaying for a property that may not sell at a profit.

Privy is your number one tool for real estate wholesaling, helping to build your network with local market insights and property comps to enhance your data-driven insights. We’re the only real estate platform that gives investors access to direct-to-MLS data updated every 15 minutes to give you the latest insights. 

Our automated deal finder means you’ll never miss out on a below-value property that meets your investor profile. You can also use Privy to connect with real estate agents throughout the United States as we continue to expand our direct-to-MLS data into new markets. Our data gives investors a wider market context to navigate real estate wholesaling and connect with motivated sellers.

• Learn Negotiation Skills

Negotiating is a natural part of real estate, but you’ll find yourself in a unique position when real estate wholesaling. You’ll be acting as both a buyer and a seller as a middleman between the property owner and the final buyer. It’s important to take a curated approach to both the seller and buyer as their motivations and concerns will be different. As a real estate wholesale, you’ll want to acknowledge and validate the buyer and seller’s individual feelings and remove your emotions. 

A key to real estate negotiating is to always be thinking one step ahead with proactive solutions for potential problems. Your negotiation skills will develop as you secure more wholesaling deals and network with investors and sellers. It’s not possible to become a master negotiator overnight, but there are steps you can take to become a better salesperson by learning new negotiation skills or being mentored by a real estate professional.