What is Wholesaling Real Estate?
Wholesaling is finding off-market properties at a discount, getting them under contract, and then selling (assigning) that contract to a cash buyer for a fee. You never actually buy the property. You're selling your rights to purchase it.
Think of it as being a deal finder. You find motivated sellers who need to sell quickly, negotiate a price that leaves room for an investor to make money, and then connect them with buyers who want turnkey deals.
Wholesaling requires minimal capital (you're not buying properties), no credit checks, and no rehabbing. It's how many real estate investors get started.
How Wholesaling Works (Step by Step)
- Find a motivated seller - Someone who needs to sell quickly and will accept a below-market offer
- Negotiate and sign a contract - Get the property under contract at a price that leaves room for profit
- Find a cash buyer - Locate an investor willing to pay more than your contract price
- Assign the contract - Transfer your rights to the buyer for an assignment fee
- Collect your fee - Get paid at closing when the buyer purchases the property
Your profit is the difference between your contract price with the seller and what the buyer pays you for the contract.
Finding Wholesale Deals
The foundation of wholesaling is finding motivated sellers. Here are the primary methods:
Marketing Methods
- Direct Mail - Postcards and letters to targeted lists (absentee owners, pre-foreclosure, tax delinquent)
- Cold Calling - Call sellers directly using skip traced data
- SMS Marketing - Text campaigns to motivated seller lists
- Driving for Dollars - Find distressed properties while driving neighborhoods
- Online Marketing - PPC ads, SEO, social media for inbound leads
Target Lists
- Pre-foreclosure / Notice of Default
- Tax delinquent properties
- Absentee owners
- High equity homeowners
- Probate / Inherited properties
- Code violations
- Vacant properties
A good investor CRM helps you manage these lists, track outreach, and organize follow-up.
Talking to Motivated Sellers
When a seller responds to your marketing, you need to qualify them and build rapport. Key questions:
- Why are you selling?
- How quickly do you need to sell?
- What's your situation with the property? (mortgage balance, repairs needed)
- Have you had any offers?
- What would you need to walk away happy?
Listen for motivation indicators: timeline pressure, financial distress, out-of-state burden, inherited property they don't want. The more motivation, the more likely they'll accept a discount.
Calculating Your Maximum Allowable Offer (MAO)
The MAO formula tells you the most you can pay while leaving room for your buyer to profit:
Example: A property with $200,000 ARV needing $30,000 in repairs, and you want a $10,000 assignment fee:
MAO = ($200,000 × 0.70) - $30,000 - $10,000 = $100,000
Your contract price with the seller should be at or below $100,000. This leaves room for your buyer to make their profit after rehabbing.
Use a deal analyzer to run these numbers quickly.
Getting Under Contract
Once you agree on a price, you need a purchase agreement that allows assignment. Key elements:
- Assignable contract - Language allowing you to assign your rights ("and/or assigns")
- Inspection contingency - Time to inspect and back out if needed
- Reasonable earnest money - Typically $500-$2,000 (you want this refundable via contingencies)
- Adequate closing timeline - 30-45 days gives you time to find a buyer
Have a real estate attorney review your contracts, especially when starting out.
Finding Cash Buyers
You need a list of investors ready to buy. Sources:
- Recent cash sales - Pull county records for recent cash purchases
- REIA meetings - Local real estate investor association meetings
- Facebook groups - Real estate investing groups in your market
- Your network - Other wholesalers, flippers, landlords you meet
- Bandit signs - "We Buy Houses" signs often reach active buyers
Build your buyer list before you have deals. Know what they want: price range, location, property type, condition they'll accept.
Assigning the Contract
Once you find a buyer willing to pay more than your contract price, you assign the contract:
- Sign an assignment agreement with the buyer
- Collect a non-refundable assignment deposit (protects you if they back out)
- Send assignment to title company
- Buyer closes with the original seller
- You receive your assignment fee at closing
Your fee is typically $5,000-$20,000 per deal, depending on the spread. Some deals are smaller, some much larger.