top of page
Homepage

A Beginner Investor’s Guide to Real Estate Wholesaling in 2023

  • Writer: Chris Joseph
    Chris Joseph
  • Sep 27, 2023
  • 5 min read

Updated: Sep 28, 2023

Real estate wholesaling has exploded in popularity as a way for investors to profit from flipping properties without needing large amounts of capital. But how exactly does it work? This guide explains what wholesaling is, its key benefits and challenges, and how new investors can land their first deal.

"Wholesaling is the art of finding a great deal and passing it on to someone else for a profit." - Jerry Norton


What is Real Estate Wholesaling?


Wholesaling involves finding discounted investment properties, securing them under contract, and then assigning contracts to end buyers for a fee. Wholesalers source undervalued or distressed homes from motivated sellers and sell them to real estate investors at a markup who will rehab and resell or rent them out.


The 5 Basic Steps of a Wholesale Deal


1. Locate a discounted property from a motivated seller through marketing and lead generation

2. Make an offer and negotiate a purchase agreement at below market value

3. Find an investor buyer interested in acquiring the property

4. Assign the original purchase contract to the investor for an assignment fee

5. Investor performs renovations if needed and sells or rents the property


A wholesaler brings together sellers and investor buyers and facilitates deals without taking ownership. They earn income from the assignment fees paid by investors.



Benefits of Real Estate Wholesaling


1. Low Barrier to Entry


Wholesaling offers low startup costs compared to other real estate strategies. You can begin wholesaling without large amounts of capital or financing. Marketing, lead generation, and negotiation skills drive success.

"Wholesaling is a great way to get started in real estate investing because it allows you to build your network and learn the business without risking a lot of money." - Brandon Turner

2. Potential for High ROI


Successful wholesalers generate sizable profits relative to the time and money invested in each deal. Attractive ROI is achievable even for beginners who secure discounted properties and double end fees.


3. Swift Way to Get Started


You can start wholesaling in days, weeks or months versus the longer timelines for acquiring rentals or flipping houses yourself. Wholesaling can help you quickly build momentum and cash flow to scale your investing business.



4. Flexible Schedule


Wholesaling works well for those wanting a flexible schedule compared to the intensive demands of property management and renovations. Time freedom appeals to many new investors.


5. Helping Homeowners and Investors


Wholesaling provides a way for homeowners struggling to sell quickly to avoid foreclosure. It also supplies inventory to local investors improving neighborhoods through renovations.




Potential Drawbacks to Understand


1. Highly Competitive


Wholesaling’s low barrier to entry means lots of new investors compete for the same discounted deals. Success requires differentiating yourself through superior marketing and nurturing motivated seller relationships.


2. Legal Gray Areas


Some states prohibit wholesaling under real estate license laws. Understand regulations where you operate and consider getting a license to avoid violations. An attorney can advise.


3. Risk of Double Closings


If using single closings, wholesalers risk losing assignment fees if deals fall through. Double closings (briefly acquiring the property first) reduce risk but require financing.


4. Time Consuming Lead Generation


To succeed, wholesalers spend extensive time locating discounted properties and motivated sellers. This marketing and networking is not passive and takes persistence. However, there are many new A.I. tools being developed to automate the lead generation process.



How to Land Your First Deal


1. Build a Powerful Marketing Funnel


Leverage direct mail, digital ads, networking, and referrals to build a funnel supplying motivated seller leads. Nurture your leads through calls, emails, and texts to convert them to closed deals. Real estate is a “people business” and building relationships is key.


2. Understand Motivated Seller Indicators


Why would a seller be motivated to sell their property? There are thousands of reasons, scenarios, and circumstances happening every day that create property selling opportunities. Do thorough research to identify signs of motivation like vacancies, inherited properties, expired listings, out-of-state owners, probate, divorces, illnesses, and pre-foreclosures. Create targeted lead lists using PropStream and follow up with property owners to understand motivation and get the property under contract.


3. Master Evaluating Property Value


Getting sellers under contract below market value is crucial. Estimate after repair value accurately by studying comps and understanding repair costs in your sub-market. Become an expert in your niche & your sub-market and deals will begin to flow to you.


4. Create Systems to Find Buyers


Build a network of investors, flippers, and landlords interested in discounted inventory. Market effectively through email, social media, and bandit signs. Ask real estate agents/brokers to introduce you to ideal investor buyers. Attend real estate professional meet-ups in your area. Use sites like eventbrite.com, MeetUp.com and Facebook groups to network locally. There are investors out there ready to buy your deals.


5. Negotiate Win-Win Deals


Approach negotiations professionally and ethically to build trust with sellers. Disclose as-is condition and any important property details so sellers fully understand their situation. Aim for fair deals benefitting all parties, win-win!




Books on Wholesaling Real Estate


There are dozens of books on Amazon about real estate investing and wholesaling. One of our favorite investor educators is Jamil Damji. Jamil is an experienced real estate investor who runs one of the largest wholesale operations in the U.S. and he is the co-host of A&E’s hit TV show Triple Digit Flip. He recently published a great book on wholesaling entitled How to Wholesale Real Estate: The No-Cash Strategy to Build a Scalable Business. Investors can also benefit from reading The Book on Rental Property Investing by Brandon Turner and Wealth Without Cash by Pace Morby.




Free Wholesaling Education Courses


YouTube is a great place to start when seeking knowledge from experienced real estate investors. There are a number of experienced investors that have created free courses to teach you the basics of wholesaling real estate. We’ve listed a few of our favorite FREE real estate investing videos and courses here:



Free Quick Guide to Analyzing Property Deals & Evaluating Comps


Subscribe to our newsletter and get instant access to our quick guide that provides you with key real estate Terms, and Property Evaluating Formulas to help you analyze properties like a pro and determine whether they are winning deals.



Let’s Get Started Wholesaling Real Estate!


Wholesaling can be financially and professionally rewarding. Follow the tips above to launch your wholesaling business. Hard work, persistence, and a passion for helping sellers and investors will set you up for success. Use PropStream to locate motivated sellers, identify undervalued properties, build targeted lead lists, and elevate your marketing. Let's build your wholesaling empire!



Comments

bottom of page