Real Estate Wholesaling

I Used to Write Off Wholesaling: Here’s What Changed My Mind

Expertise: Personal Development, Real Estate News & Commentary, Business Management, Personal Finance, Real Estate Investing Basics
62 Articles Written

For those of you that know me, this article may come as quite a shock! I have nine flips in progress, and technically, I have never wholesaled a house.

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In the past two years, I have learned so much about investing from my blog and BiggerPockets, it is mind blowing. I thought I knew it all when I started my online journey, since I have been buying and selling flips for years as well as buying rental proprieties. I realized I did not know it all very quickly when I started hearing terms like the “70 percent rule,” which I had never heard of.

Once I got over the fact that there was a lot I did not know, I started to soak in as much information as I could. I am now a much better investor, making much more money than when I first found the online real estate investing world.

My Initial Viewpoint on Wholesaling

When I first heard of wholesaling, I knew what it was, but I had never researched it or paid much attention to it. I did well with flipping, and I thought wholesaling was a lesser form of investing.

Over the last year, I have learned a lot about wholesaling and have had to put my own personal beliefs to the side — because I realized they were wrong. My first thoughts about wholesaling was it was a way to try to start investing in real estate without much money, but that most people failed at it and that there was not much profit in it.

I then saw some people having success with wholesaling, and I discovered direct marketing and how you can get more deals moving away from the MLS. I thought wholesaling had a place in investing for those looking to start learning the business and their market. I thought, Wholesaling is a great way to learn to find deals, which is a very important skill to have in the real estate investing world.

Then, this last week, I attended a meeting with some very high level real estate people from throughout the country.  The common theme was they all wholesaled properties, except for me.

Why Wholesaling May Be Better Than Flipping Houses

When I discussed with other investors what we did and how we made money, people were not very impressed when I said I flipped 10-15 houses a year. In fact, a few had a look of how can you do that and stay sane? I quickly discovered that many in the group were making more money wholesaling than I was flipping houses — and they had no intentions of “moving up” from wholesaling to flipping. In fact, a growing group of investors had gone from flipping to wholesaling. Their thoughts were that it took less money to wholesale, there were fewer headaches involved, and you can do so many more deals wholesaling than flipping that it was by far a better business model.

Related: 3 Tips for Wholesalers From an End Buyer’s Perspective

After some deep thought about my own business, I was starting to think they may be right. Here are some advantages to wholesaling properties:

  • No cash is needed when you wholesale if you use an assignment of contract or double close
  • No contractors are needed when you wholesale
  • The buyers are investors who are paying cash; no financed offers and picky owner occupied buyers
  • You don’t hold houses for months while they are being repaired and listed
  • You eliminate the risk of a market change when holding properties for months

Less Money Per Deal in Wholesaling?

Wholesaling a house usually nets less money than when you flip one, but not always. On my flips, I usually average about $30,000 in profits, but it takes me six months to flip a home because I am constantly waiting on contractors.

Although I might make $30,000 on a flip and a wholesaler may make $5,000 to $10,000, they can do five wholesale deals in the time I can do one flip. Given the time it takes to flip a home, I am not making more money than if I were doing more deals.

How Many Wholesale Deals Can Be Done a Month?

The guys I met with are doing 5 to 15 wholesale deals every month and making on average over $5,000 on each wholesale deal. That is a lot of money, and they never have to hire any contractors!

Related: 8 Killer Resources for Savvy Low-Budget Wholesalers!

One of my biggest headaches is contractors and getting to them to fix houses in a quick manner. When I saw the money these guys were making wholesaling, I had to completely rethink my business and how I was doing things. They were making more money with wholesaling than I was flipping, and they had a lot less risk.

It takes a lot of work to wholesale that many properties. It takes a lot of direct mail, a lot of follow up, great staff working for you and a great system. The funny thing is, I have most of those things already in place; I just need to change the way I do business.

Will I Stop Flipping and Become a Wholesaler?

No, I don't think I will stop flipping, because even after all the contractor headaches, I still love doing it. But I may still start wholesaling more properties and only keep the flips with the most profit. I am going to change the way I market to people, and hopefully, I will have many more deals that I can wholesale or flip and make money in both worlds.

What’s your opinion on wholesaling? Is this an avenue of real estate investing you’d be willing to try?

Leave me a comment with your thoughts on wholesaling below!

Mark Ferguson has been a real estate investor and real estate agent/broker since 2002. He has flipped over 165 homes in that time, including more than 70 in the last three years. Mark owns more than 20 rental properties that include single family homes, as well as commercial properties like a 68,000-square-foot strip mall. Mark has sold more than 1,000 homes as a real estate agent and is the owner/managing broker of Blue Steel Real Estate in Greeley, Colorado. Mark started the InvestFourMore blog and website in 2013, which has hundreds of articles on real estate. Mark is constantly sharing his insights, case studies, and interesting things that happen to real estate investors on both his blog and well-known sites like Forbes.

    Adrian Valdez from Newark, NJ
    Replied about 5 years ago
    I think wholesaling is an amazing. It allows people like me who have had the worst year ever financially to be able to rebound and start filling the bank accounts again. and if you get good at it it allows you to transfer into a more long term goal (buy and hold or creating a business).
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied about 5 years ago
    Thank you for the comment Adrian! It sounds like you have had some great success.
    Matthew
    Replied almost 5 years ago
    I was wondering if you might be able to provide me with some help or tips. I have wanted to get into wholesaling but I have been having a hard time trying to find properties. Moreover, once I find a property I am not sure how to even approach them because for the few I have found they are always asking above market value. Do you have any suggestions? Anything would be helpful. Thank you!
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied almost 5 years ago
    How are you finding properties? It takes a lot of work, marketing and skill to find cheap properties.
    Daniel Francis Real Estate Broker from Kyle, TX
    Replied about 5 years ago
    My opinion is whatever the deal dictates. Flip it, wholesale it, keep it, take it down Sub2, list it…. any deal is a win so do the deal that feels right for that house/situation. When you do your own marketing and you are finding sellers, the real power comes from being ready to do anything with it!
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied about 5 years ago
    Very true daniel, but at some point you have to walk away from deals as well. Because it may take more time to make it work than is worth it.
    Larry Russell
    Replied about 5 years ago
    Excellent post! I use to look at flipping and wholesaling as work and not investing. But at the end of the day, it’s all work if you’re looking to replace your job income with real estate investment activities. As Daniel stated, “whatever the deal dictates” is my current philosophy and new approach to real estate investing.
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied about 5 years ago
    Thank you Larry, All investing takes work, it is simply a matter of how much work compared to the money it brings in.
    Chris Codina
    Replied about 5 years ago
    How are you going to change your marketing techniques?
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied about 5 years ago
    THe first thing I did is take my cell phone off the marketing material and set up a dedicated line where I can call back every call.
    Matthew
    Replied almost 5 years ago
    Why are you taking your cell phone number off of your marketing materials and setting up a dedicated line? How is that going to help?
    Matthew
    Replied almost 5 years ago
    Why are you taking your cell phone number off of your marketing materials and setting up a dedicated line? How is that going to help?
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied almost 5 years ago
    Because I can call back every number that calls whether they leave a message or not.
    Brian Gibbons Investor from Sherman Oaks, California
    Replied over 4 years ago
    I’ve had good success with PatLive.com in the past, ally friendly voice that understands the Real Estate Investing business.
    Sean T. Rental Property Investor from MA
    Replied about 5 years ago
    Thanks for the post!
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied about 5 years ago
    Thanks Sean!
    Joseph Ball Residential Real Estate Agent from Groveland, Florida
    Replied about 5 years ago
    Newbies see this and think they have discovered the golden secret. As an experienced investor, you know that wholesaling and “flipping” are sophisticated transactions, requiring experience and more. It isn’t what you may see on TV. It is not for newbies.
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied about 5 years ago
    Joseph, What do you suggest newbies learn if they should stay away fro flipping and wholesaling? I think newbies should decide what they want to do no matter what it is and put all their efforts into it until they have mastered it. We were all newbies at one point.
    Joseph Ball Residential Real Estate Agent from Groveland, Florida
    Replied about 5 years ago
    I think NEWBIES should start by learning the basics. Buy a bread and butter 3/2 in a reasonable neighborhood. Rent it. Manage It. Sell it. Learn small. Maybe buy another, then two more. After some experience, try other venues, such as flipping, wholesaling, building, retailing, notes, other. But not until they learn. If I were an investor approached by a NEWBIE, I would talk first, to learn experience level. If a NEWBIE, I would respectfully make an excuse to leave. I simply don’t think it is the place to start. I enjoyed your article.
    Kristi Patton from Little Rock, Arkansas
    Replied about 5 years ago
    So, I have heard a lot about wholesaling on different podcasts, but admittedly I don’t understand exactly what it means to wholesale a property. Is there a spot on this site that describes the exact definition and process of a wholesale that a total newbie can understand?
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied about 5 years ago
    Basics of wholesaling. 1. Buy a home and sell It right away without making any repairs. Usually sell to an investor with cash. 2. Get a contract on a home and assign that contract for a fee to another person; usually an investor.
    Rich Cee Investor from Cape Coral, Florida
    Replied about 5 years ago
    Mark, Basics of wholesaling are just that, basic. What are the tougher bumps in the road. Wholesaling 201, 301, 401 insight?
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied about 5 years ago
    That would take three more articles and to be honest I am not the expert on wholesaling since I have technically never wholesaled a house. i would check out the bigger pockets blog category on wholesaling to get more insight.
    ssinnv
    Replied about 5 years ago
    Buy directly from seller not from MLS ? Otherwise maynot may not be cheap
    Frantzces Lys Real Estate Agent from Silver Spring, Maryland
    Replied about 5 years ago
    Great post! I’m starting with wholesaling to build some capital but you really have to be a marketing genius and a savvy negotiator. It takes practice, testing and much evaluation. It’s a business. I think wholesaling in between what your major niche is a great idea. While you’re waiting 6 months to finish a rehab and close you could still wholesale in between. Of course every thing takes time and effort. Thanks for sharing!
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied about 5 years ago
    Thank you! It does take a lot of time and patience for direct marketing.
    Robert L. from Ventura, California
    Replied over 3 years ago
    Hi Fratzces, I’m curious if you have been able to do well with wholesaling?
    Joe McCall Rental Property Investor from St Louis, MO
    Replied about 5 years ago
    This is a great post. I have said the same thing for years. I too used to look down on “Wholesaling”, thinking it wasn’t sexy or sophisticated enough for me. I wanted the “BIG” deals. Little realizing that there are a whole lot less spinning plates and moving parts in wholesaling – plus a lot less risk. You can rehab a deal and make good money. But look at how much you have at risk when doing fixing and flipping houses. Plus, in the same amount of time that you rehab and sell that house, you could have wholesaled 6 houses. This is why I argue that wholesaling should be what beginners learn first – before they start rehabbing houses. Rehabbing takes much more skill. It should not be where someone starts. Learn the ropes with wholesaling. Learn how to find great deals first.
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied about 5 years ago
    Thanks Joe, I also looked down on wholesaling, but I never fully Understood the process of the high level wholesalers. I think every new investor should focus on finding deals and if wholesaling them works. Do it.
    Karen Rittenhouse Flipper/Rehabber from Greensboro, NC
    Replied about 5 years ago
    Hi Mark: Our thought process went much like yours! We spent the first 5 years buying our holds, the next couple of years doing flips, now we’re full time wholesalers (to pay off our holds) and LOVING IT!! As you found, we can make about as much wholesaling as flipping with way less time/money/effort. We’ve sold 16 wholesale deals in the past 21 days and have purchased about 50 in the past 10 months. We avoided wholesaling for years and now find it to be our newest passion. Good luck to you with yours!
    ssinnv
    Replied about 5 years ago
    I did few flips but knew nothing about WS. How to find the deals for WS? Reply Report comment
    Brandon Delk from Cumming , GA
    Replied almost 2 years ago
    Karen: Obviously a real old thread, but I’m just now studying to begin REI. I’m curious how you are locating that many properties. I know there are certain programs to which you can purchase a subscription to find vacant houses and such, but outside of vacancies, it seems as though in my Atlanta market, there isn’t much meat on the bone to appeal to an end buyer, and for me to make anything off of it.
    Karen Rittenhouse Flipper/Rehabber from Greensboro, NC
    Replied almost 2 years ago
    @Brandon Delk We spend a lot on direct mail marketing – about $15,000 per month, and have been doing direct mail marketing since 2007. The only way to find great discounted deals is to speak directly with the seller and most of that comes through direct mail marketing. You must get to where the seller is calling you and not already on some list that every one is purchasing. Thanks for asking!
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied about 5 years ago
    Nice work Karen!
    ssinnv
    Replied about 5 years ago
    I did few flips but knew nothing about WS. How to find the deals for WS?
    Frankie Woods Investor from Albuquerque, NM
    Replied about 5 years ago
    This article is absolute gold! I have never considered wholesaling in this light before. I need to get after my direct mail campaign to take advantage of this! Thanks for othe article!
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied about 5 years ago
    Thank you Frankie!
    JPaul Mills
    Replied about 5 years ago
    Mark I’m so glad you wrote this blog. I have been actively wholesaling since July and I have been very successful at it. All my brothers are in contracting trades so I will soon move on to doing flips as well. But my ideal business plan is to only do one flip at a time while still scaling my wholesaling business up and up. Thanks for your post and have a blessed day.
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied about 5 years ago
    Thank you and that sounds like a great plan!
    Patrick
    Replied about 5 years ago
    Mark,what kind of marketing budget do you think the wholesalers have wholesaling 5-15 houses per month? Just a rough estimate.Thanks
    Karen Rittenhouse Flipper/Rehabber from Greensboro, NC
    Replied about 5 years ago
    Hi Patrick: Probably $10,000 minimum per month. National average is $2500 in marketing to buy a house. Even if you get that down to $2000 per house, you’re looking at a minimum $10,000 to buy 5. Naturally, there’s some variation with what you want to buy and where your market is, and some months you’ll buy more – some month’s you’ll buy fewer, but those are national averages. Good luck!
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied about 5 years ago
    I would guess from $5,000 to $10,000 a month.
    Patrick
    Replied about 5 years ago
    Thanks,Mark!
    Patrick
    Replied about 5 years ago
    Thanks,Karen!
    Ellen Kuzniar from Hammond, Indiana
    Replied about 5 years ago
    Mark, great information. My plan is to get my business set up early 2015. My goal is to start in wholesaling also as my financials could definitely use some help. I have been doing lots of reading and attending my local Creative Investors meetings. Thanks for sharing this story.
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied almost 5 years ago
    Thank you Ellen!
    Sharon Vornholt from Goshen, KY
    Replied about 5 years ago
    Excellent post Mark- You have outlined some of the reasons I like wholesaling. There is less risk and I have at times made as much money (or more) that folks made that had a problematic flip. You get in (and out) quick. I think what every investor needs to understand is that it is not a “one or the other” proposition. You can add wholesaling to any other investing strategy and use those chunks of cash to have a safety net on rehabs, pay down rentals or for your monthly expenses while you also work on your “favorite” real estate investing strategy. Sharon
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied almost 5 years ago
    THank you Sharon!
    Larry T. Flipper/Rehabber from Rochester, NY
    Replied almost 5 years ago
    I’ve only wholesaled a couple of properties and only by happenstance. But I know the big investors in my area wholesale in addition to other things. And I view it as one of the essential investing skills that I need to acquire. It is part if the real estate investing vertical, to speak in business talk. I need to be able to source my own deals. Besides, like you intend, wholesalers often keep the best deals for themselves. I want some of those “best” deals.
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied almost 5 years ago
    That is going to be my strategy. Keeping the best deals while wholesaling the rest.
    Larry Wood Real Estate Investor from Chalmers, Indiana
    Replied almost 5 years ago
    I have only wholesaled two properties so far but I love it. My circumstances being what they are and my age, wholesaling is going to be my primary focus. All the pro reasons stated are so true. I am hoping to create a list of dependable solid buyers and basically be working for them finding the properties they desire to purchase. B
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied almost 5 years ago
    I am working on a buyer list as well!
    Hadrian Farrow Security Officer from Roosevelt, New York
    Replied almost 5 years ago
    Great article Mr Ferguson i am a Newbie and i have been looking for a starting point and seeing that i am already scared i will play it safe for the time being, and try the wholesaling as my vehicle to advance my goals as an investor, but i do need some assistance. i hope u can lead me to the right source. thank you!
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied almost 5 years ago
    Thank you! Keep reading and reading!
    Anne James Homeowner from Rio Linda, California
    Replied almost 5 years ago
    Mark, thanks for the article. It was good to hear others affirm wholesaling as an essential skill in real estate investing which can be added to any other investing strategy. Also, it was encouraging to hear wholesaling is a good place to start as a new investor. Since joining the PB community, I read and heard “find a good deal.” From what I am reading, acquiring and honing the wholesaling skills aids the real estate investor in recognizing profitable deals.
    Mark Ferguson Flipper/Rehabber from Greeley, CO
    Replied almost 5 years ago
    For sure Anne!
    Matthew
    Replied almost 5 years ago
    I am curious about how you go about finding properties to wholesale and negotiating to get them at a good price. I have been doing short sales and it is pretty simple and basic how to find them and explain the situation and options really. However, I have wanted to get into wholesaling, mostly because it has always been a big interest, but I have been having a hard time trying to find properties. Moreover, once I find a property I am not sure how to even approach them because for the few I have found they are always asking above market value. Do you have any suggestions? Anything would be helpful. Thank you!
    Michael Askew Wholesaler from Charlotte, North Carolina
    Replied almost 5 years ago
    Mark I really enjoyed reading this post. As a person who is new to real estate investing, it is refreshing to hear that wholesaling is a good way to get your feet wet before taking on the bigger risk of flipping houses.
    Megan Carpenter REI from Littleton, Colorado
    Replied almost 5 years ago
    I was planning with doing some wholesale deals to start with REI career, but now that I read how lucrative it can be I am seriously reconsidering building a STRONG SUSTAINABLE system that will continually be finding deals.
    Andrew Cordle from Alpharetta, Georgia
    Replied almost 5 years ago
    Great wholesaling article!
    Gerardo Dominguez Real Estate Agent from Chicago, IL
    Replied over 4 years ago
    Great article Mark! I just recently had the same change of mind about wholesaling.
    Brian Gibbons Investor from Sherman Oaks, California
    Replied over 4 years ago
    Interviewing Cash Buyers is the first step to Wholesaling, knowing the area and what kind of terms and how much of a rehab are they willing to do it whether not they have financing either through IRAs or through Hardmoney. It’s a little bit like dating: one cash buyer will not buy one another cash buyer will buy, location, ARV, ow much and type of repairs, etc.
    Patricia Maryman from Conway, Arkansas
    Replied about 4 years ago
    In wholesaling, do I inform the cash buyer that I am wholesaler upfront? How do I handle this?
    Robert L. from Ventura, California
    Replied over 3 years ago
    Hi Patricia, Hopefully you’ve already received your answer. Thought I’d add for others, like myself, who just came to this article. Much about real estate involves being upfront about what your intentions are. If someone (i.e. Buyer or Seller) does not agree or like what you are doing, then it is probably best to just move on. At least you rest easy that you were transparent with your intentions. I believe that a lot of the contention people have towards “investors” in general is due to investors that are either being shady or they do not disclose.
    Paul North Wholesaler from Lincoln, Nebraska
    Replied about 4 years ago
    Great post Mark; thanks for sharing!
    Ron Woods Investor from St. Louis, Mo
    Replied over 3 years ago
    Wow Mark, you just turned me all around. I’m trying to wholesale in build up cash to flip, and your telling me I would generate more cash in less time by wholesaling. Hmmm. Many thanks for your take on this.
    Robert L. from Ventura, California
    Replied over 3 years ago
    Be safe… For those unlicensed and interested in wholesaling. Make sure you know the federal and state laws concerning the assignment of contracts. Notice that Mark is a Broker, so it is likely legal for HIM and other brokers or licensed agents acting on behalf of a broker. It is going to be to your advantage to speak with a lawyer before getting slapped with a fine by the RE related authorities. At least, get to know the laws for your state’s RE authority. Not sure if I’m repeating this as a comment. I skipped over a few comments to see if there were any recent comments.
    Ryan Lee Investor from Keaau, Hawaii
    Replied over 3 years ago
    Like this post. Thanks.
    Garrick Hall from Indianapolis, Indiana
    Replied almost 3 years ago
    where do i find assignment contracts and purchase and sale agreements for my state, im know to real estate and i’m getting started with wholesaling. i understand the concept now i’m need to know where to get the contracts from?
    Karen Rittenhouse Flipper/Rehabber from Greensboro, NC
    Replied almost 2 years ago
    @Garrick Hall Any real estate attorney should have these for you. And you can ask other investors at your local real estate investor meetings (Google to find those in your area). But never use a contract unless it is approved by your attorney.
    Eliseo Magallon from Lawrenceville, Georgia
    Replied over 1 year ago
    oh yeah, for sure going to start doing this
    Joe Feerick
    Replied over 1 year ago
    Hello All – I am currently pursuing my RE Agent license. Will me being a licensed agent allow me to legally operate wholesale deals or would I need to pursue the RE Broker license? I am based in New Jersey. Thank you!
    Karen Rittenhouse Flipper/Rehabber from Greensboro, NC
    Replied over 1 year ago
    Hi Joe: You don’t need a real estate license to legally wholesale properties. The reason is that you purchase the property and resell it so, because you’re the owner, you don’t need a real estate license. The transaction becomes just like a for-sale-by-owner. For any property you are personally involved with, you don’t need a license. If you are listing or selling for others, you are the middle man and in those transactions you need a real estate license. Being a licensed agent is mostly a retail job. Real estate investing is a whole different profession!
    Nicole Cardona
    Replied 10 months ago
    These threads are old but if anyone reads this… when you approach a seller should you say I can find you someone to buy your house for cash?
    Peter Padalino Rental Property Investor from Centennial, CO
    Replied 3 months ago
    Hi Mark, I'm an investor here in Colorado and have seen many of your posts. As I was looking through BP for Wholesaling articles, I came across this old post. I'm curious, do you still have the same opinion of wholesaling 5 years later and if so, are you actively engaged in the strategy? I have 6 rentals and have my first flip currently on the market, and I've been wrestling with the idea of getting into wholesaling. If you happen to see this reply, I'd love to hear where you currently stand on this issue. Thanks!
    Alfred Johnson from Rocky Mount, NC
    Replied about 2 months ago
    @Karen Ritttenhouse Hello Karen, just looked at your post from over a year ago. Really appreciate you. I am looking at wholesaling to finance my beginning in REI. Any advice on how to get started wholesaling? I attended a meetup recently where the organizer was pitching an academy at a cost of $1,300 whereby mentoring is involved and an entire system to follow. The organizer even said they'd see me through the first (3) deals and more if I continued on. Just wanted your take on this.