You can make a lot of money in real estate as a flipper, real estate agent, with rental properties and even as a wholesaler. Many people may not be familiar with what a real estate wholesaler does, but it is pretty simple. A wholesaler either buys and sells houses very quickly without doing any repairs or they get a property under contract and assign the contract to another buyer. Many real estate investors start out in wholesaling because it can be an inexpensive way to make money in real estate. Most people who want to wholesale don’t make a lot of money because they give up due to the hard work and the dedication it takes to build a successful wholesaling business. However, the investors who set up a successful wholesaling business can make a lot of money very quickly.
How does wholesaling real estate work?
Wholesaling is a simple concept based on buying and selling houses quickly. A wholesaler will either buy houses or get them under contract well below market value and then sell the houses to another investor. Usually, the end buyer has the cash to buy the properties, because there is not enough time to get a loan. The key to being a successful wholesaler is finding great deals and having great buyers. The most successful wholesalers tend to use direct marketing to find sellers and have a huge list of cash buyers who are looking for great deals.
How does a wholesale deal work?
A typical wholesaler might use postcards sent to absentee owners (owners who don’t live in the home) to try to buy the home. Absentee owners are sometimes more motivated because they don’t live in the house and may have bad tenants or no tenants. The wholesaler will negotiate a price with the seller knowing what his buyers will pay. The wholesaler will use a contract that can be assigned and then collect an assignment fee at closing. Real estate agents are usually not involved, but can be. The difference between what the wholesaler agreed to pay the seller and what the investor/end buyer agrees to buy the house for is what the wholesaler makes. Wholesalers may make a couple thousand dollars per deal or much more. I know multiple wholesalers that have made more than $30,000 on one deal.
Can you wholesale houses from the MLS?
Wholesalers may also buy houses from the MLS. When buying from the MLS a wholesaler may have to use a real estate agent and they may have to use a double closing. Many MLS properties like HUD homes and REOs cannot be bought with assignable contracts. A double close is when the title company will use the end investors cash to purchase the home from the original seller. This can be tricky, but if done right the wholesaler will never use their own money. MLS deals are typically harder to wholesale, because more people know about them and many cash investors could buy those houses without a wholesaler. If the wholesaler can negotiate well below asking price or act quickly to get awesome deals it is possible to wholesale from the MLS.
How much money does the typical wholesaler make?
To be honest most wholesalers don’t ever do a deal. They don’t spend the time or money to market to sellers and they don’t take the time to find cash buyers. Many wholesalers do not do the research needed to know market prices and what cash buyers who are flippers or landlords will pay. I think many people believe wholesaling is an easy way to start making money in real estate. There really is no easy way to make money doing anything. It all takes work, knowledge and dedication.
A typical wholesaler won’t make any money because they never end up closing a deal, but that doesn’t mean you can’t make a lot of money wholesaling properties.
How much money do the best real estate wholesalers make?
Just like most professions, there are those that work hard, work smart and make a lot of money. The real estate investors who do this with wholesaling and have systems in place to find deals and buyers make a lot of money. I did a podcast with Mark Skowron in Chicago a few weeks ago. He does from 5 to 15 wholesale deals a month and averages over $5,000 a wholesale deal. If you do the math that is $25,000 to $75,000 a month! He has hired staff to help him do that many deals, but wholesaling has also given him the money to buy rental properties and flip properties as well.
Mark is not the only wholesaler that I know making that kind of money. I know wholesalers in Texas, California, new Jersey and Ohio doing just as good or better. I am not seeking out wholesalers, these are people I meet through my blog or other investors. If you are willing to work hard and put a system in place you make an awesome living as a wholesaler.
How can you be a successful wholesaler?
If you want to be one of those who makes a ton of money wholesaling you can be. It will take time and money to build your business up. Here are the basic steps to building a wholesale business.
- Create a plan for how you will market to sellers and buyers.
- Start building a buyers list by attending REI meetings, auctions or searching for cash buyers.
- Start marketing for properties. Direct marketing (postcards, bandit signs, Craigslist ads) will be your best bet.
- Keep direct marketing for sellers. It takes hundreds or even thousands of marketing pieces to get motivated sellers to respond. It may take months to get your first deal and that is why most people quit.
- Keep marketing for buyers. The more buyers you have the better. Mark Skowron has over 4,000 buyers on his list and is calling new buyers every day. The more buyers you have the more you can charge on the back-end for the properties.
- Once you have deals coming in you need to develop systems. Start testing different postcards and signs to see which perform the best. Hire staff to increase productivity and build a business that you don’t have to do all the work in.
If this all seems hard, that is because it is hard. If you want to make a lot of money in real estate or anything, you are going to have to work hard. If you want some help starting a wholesaling career, Sean Terry has a great program that goes over every aspect of how it is done.
There are no statistics available on what the average salary is for a wholesaler, because so many potential wholesalers never do any deals. There is also no wholesaling organization to keep track of such things like there is with real estate agents. Most people who start wholesaling are looking for easy money without investing any of their own money. If you can create a plan, stick to it and work harder than most you can make a lot of money wholesaling real estate.