Real estate wholesaling is a controversial topic, for sure.
Yet it remains a popular way to make money in real estate. And we think we know why. In 2017, the average gross profit made per home flip was $68,143. Hate it or love it, wholesaling is an attractive way to drive profits, both for investors and investor-buyers. So should you give it a try? Maybe.
Before you do any type of wholesale deal, there are some important things to know.
First, what exactly is real estate wholesaling?
Depending on who you ask, it’s either the best way to make some real money or the fastest way to degrade the reputation of the entire real estate industry.
Here’s a straightforward definition from Investopedia:
“Real estate wholesaling occurs when a party (the ‘wholeseller’) contracts with a home seller, markets the home to potential buyers, and then assigns the contract to one of them. The wholesaler makes a profit, which is the difference between the contracted price with the seller and the amount paid by the buyer. The goal in real estate wholesaling is to sell the home before the contract with the original homeowner closes.”
Think of it this way:
A company like Amazon enables wholesalers to sell you pretty much anything you want (clearly within reason) via a digital platform. In essence, real estate wholesaling operates along the same principles. The wholesaler finds a distressed property that’s being sold at a discounted price and makes an offer. When accepted, they sign a contract to buy the property and either assign the contract to another buyer (e.g., investor) or do a double close (where they buy and sell at the same time). And the wholesaler pockets the difference.
Quick profits, low risk and the advantage of being your own boss, what’s not to like? But many real estate professionals remain skeptical about the legitimacy of making wholesale plays.