Real Estate Wholesaling

Wholesaling Real Estate Basics

Expertise: Real Estate Marketing, Personal Development, Real Estate News & Commentary, Mortgages & Creative Financing, Real Estate Investing Basics, Landlording & Rental Properties, Flipping Houses, Personal Finance, Business Management
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Wholesaling Real Estate Basics
Wholesaling real estate provides an opportunity for someone to build income with little capital or credit. All it requires is ambition and some specialized knowledge. The more ambition you have, the more money you will make. Wholesaling does not require a real estate license. A license is not required to buy or sell any property [...] View the full article: Wholesaling Real Estate Basics on The BiggerPockets Blog. This content is Copyright © 2017 BiggerPockets, Inc. All Rights Reserved.

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Joshua Dorkin is a serial entrepreneur, investor, podcaster, publisher, educator, and co-author of How to Invest in Real Estate. He started BiggerPockets to help democratize the real estate investing landscape for himself and others, aiming to make it accessible for everyone, regardless of income or education. Today, BiggerPockets is the premier real estate investing website online with over one million members and reaching over 70 million people with the message of financial freedom through real estate investing. Joshua, along with his wife and three daughters, make their home in Denver, Colorado, and spend any time they can traveling, exploring, and adventuring. Read more about Joshua’s story in 5280 and Inc.com.

    jf.sellsius
    Replied almost 13 years ago
    An excellent strategy. Just make sure the contract is freely assignable. Many contracts are not assignable without the consent of the seller –in nY at least. Reply Report comment
    jf.sellsius
    Replied almost 13 years ago
    An excellent strategy. Just make sure the contract is freely assignable. Many contracts are not assignable without the consent of the seller –in nY at least.
    Jack
    Replied about 4 years ago
    Why on Earth would you present the seller a contract that isn’t assignable? This would be incredibly stupid.
    Virginia Beach Realtor
    Replied almost 13 years ago
    This is an excellent strategy, however most contracts used in Southeastern Virginia have clauses that restrict assignable contracts. Although, anything can be re-worded and agreed to by all parties (usually for a price), just make sure to watch your back as js.sellsius has illustrated.
    Jack
    Replied about 4 years ago
    See above. Why on earth would you present them a contract that isn’t assignable? INcredibly stupid.
    andy
    Replied almost 2 years ago
    i have been wholesaling in hampton roads for 7 years and have never had an issue with a contract.
    Jack
    Replied about 4 years ago
    See above. Why on earth would you present them a contract that isn’t assignable? INcredibly stupid.
    andy
    Replied almost 2 years ago
    i have been wholesaling in hampton roads for 7 years and have never had an issue with a contract.
    Jordan Stovall
    Replied over 1 year ago
    Hi Andy! I used to live in the Hampton Roads area. I attended HU! I’ve been wanting to get into wholesaling. Would you be open to sharing some tips with me? Thanks! Jordan
    Jordan Stovall
    Replied over 1 year ago
    Hi Andy! I used to live in the Hampton Roads area. I attended HU! I’ve been wanting to get into wholesaling. Would you be open to sharing some tips with me? Thanks! Jordan Reply Report comment
    Jordan Stovall
    Replied over 1 year ago
    Hi Andy! I used to live in the Hampton Roads area. I attended HU! I’ve been wanting to get into wholesaling. Would you be open to sharing some tips with me? Thanks! Jordan
    Virginia Beach Realtor
    Replied almost 13 years ago
    This is an excellent strategy, however most contracts used in Southeastern Virginia have clauses that restrict assignable contracts. Although, anything can be re-worded and agreed to by all parties (usually for a price), just make sure to watch your back as js.sellsius has illustrated. Reply Report comment
    Jeff trower
    Replied almost 13 years ago
    I love this strategy for getting started, I this is how I got started and I am writing extensively about this subject. Like the two previous commentors have said, always have an attorney review your contract or use a double-escrow closing.
    Scott Costello
    Replied over 10 years ago
    Wholesaling is one of the best strategies to have in your toolbox. You won’t be able to handle every deal if you are say a rehabber, so being able to wholesale the property to another investor will allow you to make money on more properties. Good article!
    Scott Costello
    Replied over 10 years ago
    Wholesaling is one of the best strategies to have in your toolbox. You won’t be able to handle every deal if you are say a rehabber, so being able to wholesale the property to another investor will allow you to make money on more properties. Good article!
    Scott Costello
    Replied over 10 years ago
    Wholesaling is one of the best strategies to have in your toolbox. You won’t be able to handle every deal if you are say a rehabber, so being able to wholesale the property to another investor will allow you to make money on more properties. Good article!
    Jim Pitchford
    Replied over 9 years ago
    I have really decided to get involved in real estate wholesaling. I have experience in real estate retailing and flipping, and have invested in real estate and renovated. But, I really only flipped one house. I still own the ones I purchased. I want desparately now to wholesale, because of the need of cash and I have no job. I believe I know how to do it, but tell me if you were a beginner, doing your first house, where would you start? 1. Find a house to lock-up and contract? 2. Find a buyer and market? How would you maket? 3. No financing necessary if you lock-up a lease with option or assignment? The 3-steps above are they essentially where you would start? Thanks Jim Pitchford
    James Mehoffer
    Replied over 9 years ago
    This idea has helped me make several hundreds of dollars in only a couple years.
    James Mehoffer
    Replied over 9 years ago
    This idea has helped me make several hundreds of dollars in only a couple years.
    Anonymous
    Replied over 9 years ago
    Thanks for the great info.
    Anonymous
    Replied over 9 years ago
    Thanks for the great info.
    Iman Yusef-Yahya
    Replied over 8 years ago
    Hey Jish, Thanks for the post! This is a very clear and concise article on wholesaling real estate. Iman
    Joshua Dorkin
    Replied over 8 years ago
    Sure thing Iman. We had someone asking about the basics of wholesaling this morning and I thought that sharing this one again would be beneficial to a lot of people.
    Iman Yusef-Yahya
    Replied over 8 years ago
    Hey Jish, Thanks for the post! This is a very clear and concise article on wholesaling real estate. Iman
    Iman Yusef-Yahya
    Replied over 8 years ago
    Straight, and to the point Josh – always:)
    Daniel Wiafe
    Replied over 8 years ago
    I’m just getting into wholesaling… and am studying up a bit on it before I leap into it. The whole concept of it seems very simple & basic… with a lot of potential for huge money. I know a good contract will have the contigencies in it that allows you to back out in case the deal sucks… but what are some of the risks of wholesaling?
    Jaxnlucy
    Replied over 7 years ago
    I as well am just getting into wholesaling and am studing up on it. I have no experiance and which Someone could help and guyde me. I know the Realestate boom is comming back soon and strong. I am excited however if anyone know of a company whos willing teach please please help 😉
    Joshua Dorkin
    Replied over 7 years ago
    Have you done a search on this, the BiggerPockets Blog, for wholesaling articles? We’ve got dozens of articles on the site covering the topic, and have over 20,000 posts on our wholesaling discussion forums for you to learn from. Start digging around and you’ll find the answers and potential partners you to help you become successful, right here on BiggerPockets. Good luck to you!
    Jaxnlucy
    Replied over 7 years ago
    Thanks Joshua Will Do. Ill Keep you posted 🙂
    Arthur Zaragoza
    Replied about 7 years ago
    It is a great strategy for a quick profit. However, to create long term wealth, I recommend the ‘buy and hold’ strategy for cash-flow and equity growth.
    clint
    Replied almost 7 years ago
    wholesaling is basically a middle-man job with room for much profit. if you do it correctly. and you dont need your own money to start. find investors. show them your business model. and let the logic do the talking. say i have ted. and ted wants to sell a rehab home for 100,000 dollars. whether hes upside down in his payments or hes like a lot of people and bought a property without the knowledge of how the process works. so ted has the property for 100,000. wants to sell it. i ask him a series of questions like “how much work needs to be done” and “when is the last time this room has been updated?” etc. from that and having knowledge of construction and the price of labor and material i can find out repair costs. it also helps to have a friend in construction that can estimate these costs for you. okay so say ted has it for 100,000. the repairs will cost around 10,000. so the total cost will be 110,000 dollars. then after you get this figure, you do the comps. where do you find comps? the MLS. it helps to have a friend who is a licensed agent to help you with this. running comps takes no longer than 30 minutes. so say the comps come back and that neighborhood looks to be around 150,000 for an average home with the appropriate updates. so what you do next is you go to your investor and you say hey ive got this great rehab home for sale for 110,000. you show him the ARV(after repaired value) of 150,000 and show him that he can make 30,000 from this deal. he buys it from you for 110,000 he puts 10,000 into it for a total of 120,000 and then sells it for 30,000 profit. and you, in turn have made 10,000 in a matter of what? a week? 2 days? ive seen as little as 5,400 dollars in 45 minutes. its all how you strategize and use your knowledge.
    clint
    Replied almost 7 years ago
    wholesaling is basically a middle-man job with room for much profit. if you do it correctly. and you dont need your own money to start. find investors. show them your business model. and let the logic do the talking. say i have ted. and ted wants to sell a rehab home for 100,000 dollars. whether hes upside down in his payments or hes like a lot of people and bought a property without the knowledge of how the process works. so ted has the property for 100,000. wants to sell it. i ask him a series of questions like “how much work needs to be done” and “when is the last time this room has been updated?” etc. from that and having knowledge of construction and the price of labor and material i can find out repair costs. it also helps to have a friend in construction that can estimate these costs for you. okay so say ted has it for 100,000. the repairs will cost around 10,000. so the total cost will be 110,000 dollars. then after you get this figure, you do the comps. where do you find comps? the MLS. it helps to have a friend who is a licensed agent to help you with this. running comps takes no longer than 30 minutes. so say the comps come back and that neighborhood looks to be around 150,000 for an average home with the appropriate updates. so what you do next is you go to your investor and you say hey ive got this great rehab home for sale for 110,000. you show him the ARV(after repaired value) of 150,000 and show him that he can make 30,000 from this deal. he buys it from you for 110,000 he puts 10,000 into it for a total of 120,000 and then sells it for 30,000 profit. and you, in turn have made 10,000 in a matter of what? a week? 2 days? ive seen as little as 5,400 dollars in 45 minutes. its all how you strategize and use your knowledge.
    clint
    Replied almost 7 years ago
    wholesaling is basically a middle-man job with room for much profit. if you do it correctly. and you dont need your own money to start. find investors. show them your business model. and let the logic do the talking. say i have ted. and ted wants to sell a rehab home for 100,000 dollars. whether hes upside down in his payments or hes like a lot of people and bought a property without the knowledge of how the process works. so ted has the property for 100,000. wants to sell it. i ask him a series of questions like “how much work needs to be done” and “when is the last time this room has been updated?” etc. from that and having knowledge of construction and the price of labor and material i can find out repair costs. it also helps to have a friend in construction that can estimate these costs for you. okay so say ted has it for 100,000. the repairs will cost around 10,000. so the total cost will be 110,000 dollars. then after you get this figure, you do the comps. where do you find comps? the MLS. it helps to have a friend who is a licensed agent to help you with this. running comps takes no longer than 30 minutes. so say the comps come back and that neighborhood looks to be around 150,000 for an average home with the appropriate updates. so what you do next is you go to your investor and you say hey ive got this great rehab home for sale for 110,000. you show him the ARV(after repaired value) of 150,000 and show him that he can make 30,000 from this deal. he buys it from you for 110,000 he puts 10,000 into it for a total of 120,000 and then sells it for 30,000 profit. and you, in turn have made 10,000 in a matter of what? a week? 2 days? ive seen as little as 5,400 dollars in 45 minutes. its all how you strategize and use your knowledge.
    James Tankersley Jr
    Replied almost 7 years ago
    Excellent information, thanks for being smarter than me which is a good thing.
    Fred
    Replied over 6 years ago
    Wholesaling is an excellent way to make money in real estate.. Even if the contracts are not assignable, there are ways to legally circumvent this.
    george
    Replied over 6 years ago
    Fred, How do you wholesale nonassignable contracts? George
    Fred
    Replied over 6 years ago
    Wholesaling is an excellent way to make money in real estate.. Even if the contracts are not assignable, there are ways to legally circumvent this. Reply Report comment
    Fred
    Replied over 6 years ago
    Wholesaling is an excellent way to make money in real estate.. Even if the contracts are not assignable, there are ways to legally circumvent this.
    george
    Replied over 6 years ago
    Fred, How do you wholesale nonassignable contracts? George Reply Report comment
    Mike
    Replied about 6 years ago
    Great info…Didn’t believe it until I actually started making money!
    Mike
    Replied about 6 years ago
    Great info…Didn’t believe it until I actually started making money!
    Mike
    Replied about 6 years ago
    Great info…Didn’t believe it until I actually started making money! Reply Report comment
    Keith
    Replied over 5 years ago
    I am a licensed realtor, rehabber, and licensed contractor here in Maryland. The market is great for investing here. One of the issues that wholesalers are having here is that they are trying to make to much profit off their deals. Even though the end buyer (a rehabber paying cash) has the numbers to make a decent profit, when he discovers that the wholesaler is going to make close to or more than him on the deal, they back out sometime. In most cases $2,000-$8,000 is a good margin on a deal. It depends on how good of oa deal. Could be more. In this case , the property was under contract for $92,000. Offered to rehabber for $115,000. Needed $25,000 in renovations. ARV was $195,000. Wholesaler $23,000. Rehabber $20,000-$25,000. To much.
    Jack
    Replied about 4 years ago
    So a wholesaler brought this investor a deal that nails the 70% rule, and the “investor” walked away from it because he was jealous the wholesaler had negotiated such a great deal? That is pretty retarded. I don’t know many investors that hate money as much as this idiot. Reply Report comment
    Jack
    Replied about 4 years ago
    So a wholesaler brought this investor a deal that nails the 70% rule, and the “investor” walked away from it because he was jealous the wholesaler had negotiated such a great deal? That is pretty retarded. I don’t know many investors that hate money as much as this idiot.
    Renee
    Replied over 5 years ago
    Thanks for this info. I’m new to investing and want to wholesale. This will help me take the first step. I also enjoy reading the comments….they are just as informative as the article.
    Earl
    Replied over 5 years ago
    I have heard a lot about wholesaling. How do you find sample contingency contracts. I have spoken with a lawyer that deals with real estate but he says I need to have a real estate license. What paperwork is necessary to make this transaction happen.
    H
    Replied over 5 years ago
    Earl, Each state has their own laws. I recommend you go to your local REIA meeting, if you don’t have time for that go on craigslist and find a wholesaler, they should be able to point you in the right direction. H
    H
    Replied over 5 years ago
    Earl, Each state has their own laws. I recommend you go to your local REIA meeting, if you don’t have time for that go on craigslist and find a wholesaler, they should be able to point you in the right direction. H
    Chris
    Replied over 5 years ago
    What’s to keep an investor from waiting until your contingency contract is up and purchasing the house for the same price you had it at? Or for that matter why don’t investors find the houses themselves?
    Lucas Peczek
    Replied about 5 years ago
    This is a great intro article to wholesaling, and I’ve enjoyed reading some of the comments. I wanted to reply to yours Chris seeing as it’s been left unanswered. An investor can absolutely take the chance and wait till the contract you have is up. The risks are that the deal is snapped up by another investor at the last second before it’s up. Or the house seller gets another offer from another investor before you can get yours in, I mean, how do you know when the wholesalers contract is up or how long its been extended? Or maybe the wholesaler just decided to do the rehab themselves. All these are possibilities and in the time I’ve been investing in Phoenix, I’ve seen each of these scenarios play out. My partners and I have lost count to the amount of times new or starting out investors miss out on deals because they think they could do it better themselves, or do a backdoor deal with the seller, only to have the experienced investors snap it up from under them. All they have left are the average deals that make a minimal profit. It’s not that new or novice investors can’t find the deals themselves, but sometimes it takes time, money and experience. Three things that most new investors don’t have. For example, we spend many thousands of dollars every month on different advertising to target those looking to sell their homes BEFORE they hit the MLS, just as many other serious investors do. Our wholesale fee of $3k-$5k offsets some of these costs and if we have a good month with great response, we get several deals for our pool of investors which nets us a nice profit. The profitable deals have the happy investors coming back which gives us an ample supply of buyers waiting for the next deal. That’s just my experience and I agree with Keith a few posts up. Most wholesalers get greedy and buffer in way too much of a fee, making their deals average and in the end, not very profitable for the investor. It’s a business plan that’s set up to fail.
    Chris
    Replied over 5 years ago
    What’s to keep an investor from waiting until your contingency contract is up and purchasing the house for the same price you had it at? Or for that matter why don’t investors find the houses themselves? Reply Report comment
    Chris
    Replied over 5 years ago
    What’s to keep an investor from waiting until your contingency contract is up and purchasing the house for the same price you had it at? Or for that matter why don’t investors find the houses themselves?
    Pierre
    Replied almost 5 years ago
    Can someone tell me the best sources to find the listing of distressed and rehabbed homes. I am willing to pay a monthly fee for that.
    Pierre
    Replied almost 5 years ago
    Can someone tell me the best sources to find the listing of distressed and rehabbed homes. I am willing to pay a monthly fee for that.
    Steve T
    Replied almost 5 years ago
    How do you handle the seller finding out how much you’re making as a wholesaler? Do you do a double close to avoid this or do you just hope that the seller doesn’t get upset by how much you’re making on the property wholesaling it?
    Jack
    Replied about 4 years ago
    Tell them you are a business, not a charity. Maybe one day UNICEF will get into the real estate business, but until then, you are the guy to see. There are a lot of really dumb questions on this thread.
    Jack
    Replied about 4 years ago
    Tell them you are a business, not a charity. Maybe one day UNICEF will get into the real estate business, but until then, you are the guy to see. There are a lot of really dumb questions on this thread.
    Troy Harbin from Valdosta, Georgia
    Replied almost 5 years ago
    As being a new member, and my first reply, I would if it was me just be up front with the seller.Certainly it depends on your relationship with them, but why not be honest. After all wouldn’t it be better to hear it from you than someone else, And who knows maybe they know someone else that may want to sell too.
    Amanda
    Replied about 4 years ago
    What are some options for finding investors?
    Amanda
    Replied about 4 years ago
    What are some options for finding investors?
    Amanda
    Replied about 4 years ago
    What are some options for finding investors?
    Craig
    Replied about 3 years ago
    I would like to see some conversation and information on how to do wholesaling legally. I attended a webinar that addressed how “dangerous and illegal” it is to do bird dogging, co-wholesaling, reverse wholesaling, “locking up” properties, illegal marketing, etc. the way that most investors are doing it. More to the point, the facilitators of the webinar were pointing to the gurus that are telling us how to get properties under contract with $10 earnest money, using no money of our own, etc. We know that wholesaling is legal. The gist of what I’m heard in this webinar is that it is illegal in many states to market properties that the wholesaler does not own, that the wholesaler must not only put the property under contract but must also have the capacity to perform on the contract, that the assignment must be done in a particular way. I didn’t have a problem with what was being said….who wants to get jammed up with the law? My issue was that there was no content on how to do it legally. I get that that is a subject that couldn’t be covered in detail in a webinar but this was a one hour lead in to attend a three day confab in September at $497 a pop in Western US locale that I can’t remember (of course, the price was going to ramp up to $997 unless the web attendees snapped up one of the six remaining spots before they’re gone). I have a good opportunity for a wholesale deal in that the owner/seller is a person that I have a relationship with that I can turn into a nice profit and I want to do it properly and legally. So now I’m going to dig into that. If anyone here can and cares to, maybe they can share some information on how to do a wholesale deal legally. Thanks.
    Mike
    Replied over 2 years ago
    Did you ever find a way to do it legally? I’m just getting started in research.
    Mike
    Replied over 2 years ago
    Did you ever find a way to do it legally? I’m just getting started in research.
    Sahegin Charolia from Houston, Texas
    Replied over 2 years ago
    When you buy a property from a wholesaler, are there closing costs that need to be factored in?
    David Weintraub Lender from Philadelphia, Pennsylvania
    Replied about 2 years ago
    I hate when someone writes “payed”. I mean, c’mon…
    Maggie Ng Investor
    Replied about 2 years ago
    Great article
    Eliseo Medrano
    Replied almost 2 years ago
    knock knock
    Jerryll Noorden Flipper/Rehabber from Wilton, CT
    Replied over 1 year ago
    How can I submit articles for BP?
    Christopher Foster Rental Property Investor from Detroit, MI
    Replied 6 months ago
    Thank you, Josh! Brief and powerful article. My Key takeaway here is to understand your position and then become the best in it.