How to become A Real Estate Wholesaler

Land has been the best investment from time immemorial. Real Estate Wholesalers are the savvy middlemen who earn a quick profit from connecting the seller of a property with potential buyers, often without spending more than a trifling sum on the entire transaction.

• Estate Wholesaler
• Property Sourcer

What do Real Estate Wholesalers do?

A Real Estate Wholesaler would typically:

• Buy a distressed property from a seller at a discount/price lower than the market average and transfer the ownership of the property to a potential buyer at a profit
• Enter into a wholesaler contract with the seller to gain exclusive purchasing rights to the property at a set price
• Sell rights to the property to the end buyer, as per the terms and conditions in an “assignment of contract”
• Use transactional funding to purchase and transfer the property without using their own money
• Get closely acquainted with their target market;  amass and set aside necessary funds to run the business smoothly
• Begin building a list of potential buyers, so no time is wasted once there is a contract to transfer
• Network and build a good business relationship with the buyers, based on trust and a comprehensive understanding of the latter’s real estate interests
• Invest a fair amount of cash into marketing to help stand out in a highly competitive real estate market
• Find discounted/distressed real estate properties that are guaranteed to make a profit; follow leads at real estate auctions and through public records/online sites
• Approach the seller, negotiate for a price which will bring in a tidy profit, and come to a profitable agreement in a professional and trustworthy manner
• Use the rundown condition of the property and the estimated costs of repair and renovation to convince the seller to close the deal quickly
• Hire a team of real estate professionals, comprising a title company, an appraiser, and a contractor to ensure the property is legitimate and can fetch a decent profit
• Assess the renovations and repairs needed to provide potential buyers with a credible investment strategy and to prevent them from decreasing the sale price
• Advertise the property on popular online sources, by distributing flyers, and sending emails to the curated list of potential buyers
• Seek real estate investors interested in closing a quick deal, fixing the property and selling it again for a profit
• Negotiate a profitable deal, using the contractor’s and appraiser’s estimates to their advantage
• Make sure the negotiated price includes appraisal fees, title fees, contractor’s walk-through fees, and marketing and bird-dogging fees in addition to their estimated profit
• Offload the contract or property, using either assignment of contract or double-closing as an exit strategy
• Make certain the ownership is transferred properly before the predetermined date of settlement/closing as noted in the contracts signed with the seller and buyer 
• Hand over the keys to the property to the new buyer

Real Estate Wholesalers may divide their time between working at a computer in their office and meeting prospective sellers and buyers. A home office is a viable option for networking online or via phone. You may frequently travel to view interesting real estate properties and close deals.

Real Estate Wholesalers may have an erratic work schedule, including early mornings, evenings, weekends, and holidays, based on the availability of eligible properties and potential buyers and sellers.

Finding a new job might seem challenging. Real Estate Wholesalers can boost their job search by asking their network for referrals, contacting companies directly, using job search platforms, going to job fairs, leveraging social media, and inquiring at staffing agencies. Self-employment is possible. 

Real Estate Wholesalers are generally employed by:

• Fix & Flip Investment Companies
• Long-Term Rental Investment Firms

Professional associations and organisations, such as The International Association of Real Estate Professionals (IARP), are crucial for Real Estate Wholesalers interested in pursuing professional development or connecting with like-minded professionals in their industry or occupation. Membership in one or more adds value to your resume while bolstering your credentials and qualifications.

• High competition due to the saturated condition of the real estate market
• Frustration from having to filter through a large number of low-quality leads to locate one worth pursuing
• Stress due to the inconsistent nature of the job and, consequently, revenue

Potential Real Estate Wholesalers must have worked with a brokerage company or licensed broker where they would receive the necessary training to excel in their chosen career. You may be expected to have the requisite knowledge and training before joining the brokerage company or licensed broker.

Reach out to real estate groups in your neighbourhood to understand the mindset of sellers, flippers and landlords, hone your communication skills, familiarise yourself with the local market, and develop an efficient network of contacts.

Prior work experience as an administrative assistant, sales associate, or customer service representative will also appeal to prospective employers.

Although not mandatory, a bachelor’s or associate degree in real estate, business, or finance would help aspiring Real Estate Wholesalers gain essential insights into the field and prove their worth in the job market. 

A degree in real estate would especially lay a solid foundation in the basics of commercial real estate. Students would be equipped to make more informed decisions about properties, mortgages, and trending interest rates.

An ideal programme would include real estate law, property management and development, and real estate investments and appraisal. In addition, quite a few online courses will enhance your knowledge of wholesale real estate.

A combination of education, experience, and testing is generally required to gain certification, though requirements differ from region to region. Successful certification programs protect public welfare by incorporating a Code of Ethics.

Accredited certification in sales from an objective and reputed organisation can help Real Estate Wholesalers stand out in a competitive job market and allow you to become an independent consultant.

Generally, one does not need a licence or registration to practice real estate wholesaling. However, some locations offer licensure in real estate inspection, allowing successful candidates to inspect the property for a buyer or seller under the indirect supervision of a professional real estate inspector.

Although real estate wholesaling is legitimate, certain real estate transactions may require a broker’s licence. Make sure your work complies with local laws and regulations.

Typically, licensure requires an application, processing fees, an examination, and relevant education and experience. Check with local or national real estate organisations whether you need the abovementioned licences.

Prospective Real Estate Wholesalers may also need to undergo an employment background check that can include but is not limited to a person’s work history, education, credit history, motor vehicle reports (MVRs), criminal record, and medical history, use of social media, and drug screening.

Performance, experience, and the acquisition of professional qualifications drive the career progression of Real Estate Wholesalers who will be able to increase their profit margin and their clientele. 

You can become Real Estate Agents or Realtors after obtaining a licence. You can also open your own real estate brokerage firm with sufficient funds, expertise, and clientele to back you up.

Candidates with a passion for real estate investments, adequate knowledge of the industry, relevant sales experience, and a robust professional network can close deals faster and get better returns.

Continuing professional development (CPD) will help an active Real Estate Wholesaler build personal skills and proficiency through work-based learning, a professional activity, 

formal education, or self-directed learning. 

Hone your ability to find eligible properties and potential buyers and your negotiating skills. Continue to build your list of potential buyers and earn their trust, so you can transfer more properties and increase your net profits in a shorter period.

Complete real estate courses that will allow you to pass an exam for certification and registration. You can join the list of licensed Real Estate Agents/Realtors qualified to practice in a particular location. This process is also mandatory for those who wish to open their own real estate brokerage firm. Check with your local real estate board for the exact requirements.

Real Estate Wholesaler vs House Flipper

Although they frequently work together, A Real Estate Wholesaler’s job is significantly different from that of a House Flipper.

Real Estate Wholesalers invest minimal funds in distressed properties, which they seek to buy and sell for a neat profit as quickly as possible.

On the other hand, House Flippers invest considerable sums of money and time in the remodelling and renovation of distressed properties and then sell them in return for higher purchase margins.

The Nuts and Bolts of Real Estate Wholesaling

In addition to a sound understanding of the local market, successful Real Estate Wholesalers must have excellent communication and interpersonal skills. 

Time is the most valuable currency. Be honest and up-front with the sellers, and do not waste their time by beating around the bush. 

A canny wholesaler already has one or two potential buyers from their curated list in mind as they close the deal on a property. Nevertheless, ensure that specific property interests a potential buyer before making relevant, timely offers so they understand you have their best interests at heart. 

Timely follow-ups after the buyer takes possession of the property will go a long way in maintaining the established rapport. Their recommendations will help increase your prospective client base, and any constructive feedback will only serve a good purpose.

In Short

A shrewd Real Estate Wholesaler uses one of two exit strategies or plans to offload a contract or property. 

When the wholesaler enters into a contract for the right to purchase a property and then transfers the contract to the end buyer, it is known as an assignment of contract. The wholesaler sells the right to purchase the property, rather than the property itself.

When it isn’t possible to go ahead with a wholesale contract because the seller or the local law is against it, the wholesaler purchases the property and almost immediately sells it to the final buyer, using transactional funding. This process is called double closing.

Although an assignment of contract and double closing are the same, due diligence and thorough research of the laws and regulations related to a particular deal will ensure you don’t get slapped with double taxation or other unforeseen issues.

Transactional funding, also known as ABC funding, flash funding, same-day funding, or a one-day bridge loan, is a process where the investor borrows short-term capital at high-interest rates to close a deal.

Hit the Jackpot

Real Estate Wholesalers can make a tidy profit based on the discount they can negotiate on a distressed property, the sale price negotiated with the end buyer, and the frequency of their property transfers.

It is recommended that wholesalers take inputs from a title company, an appraiser and a contractor before beginning negotiations with the seller and buyer. 

An investor-friendly title company will confirm that the property in question is legitimate, find out whether it has any liens, and help with the settlement. The appraiser assesses the property and determines its value to help the wholesaler determine its optimal purchase and sale price. The contractor will assess the property’s renovation needs and develop a ballpark ARV (after-repair-value), so the wholesaler has an advantage when negotiating the deal with the buyer and the seller.

Homing in on Eligible Properties

Real estate auctions are a good place to begin looking for distressed properties that will add to the wholesaler’s income. REO (real-estate-owned) homes that come to be owned by a mortgage company or investor when they cannot be sold at an auction are also valuable.

You can look for short-sale properties where the owner is in dire financial straits and sells their property for less than the amount due on its mortgage. Search public records for recently inherited properties and homeowners behind on mortgage payments. 

The Real Estate Wholesaler can also post ads, bulletins, and signs of their own on street corners and other areas of high visibility. Attend online and in-person meetings of your local real estate wholesale group to share available listings of distressed properties. Online sources and wholesaling websites help wholesalers find distressed properties in their area of interest.

Hire a property finder or bird dog who scouts the neighbourhood, conducts cold calls, and reaches out to a wider audience so that they can locate attractive properties. The wholesaler doesn’t pay the property finder if the deal doesn’t materialise

At a compound annual growth rate of 3.2 per cent, the global real estate industry is predicted to rise from $2687.35 billion in 2020 to $2774.45 billion in 2021.

It has its unique set of frustrating and stressful challenges; however, real estate wholesaling with its propensity for tidy profits in the absence of formal academic qualifications, licences, and deep pockets, continues to appeal to fledgling real estate investors.   

If you are driven, disciplined, and organised, there is no limit to how much money you can make in your wholesaling career.