Real estate wholesaling offers an excellent entry point into the world of real estate investing, especially for beginners who want to start without needing large amounts of capital. Wholesaling is the process of finding discounted properties, securing them under contract, and selling the contract to an end buyer for a profit. The best part is that you don’t need to buy the property outright—your focus is on connecting motivated sellers with real estate investors.

In this guide, we’ll walk you through each step, from the initial idea to launching a successful real estate wholesaling business.

Step 1: Understand Real Estate Wholesaling

Before diving in, it’s essential to grasp the basics of real estate wholesaling. Here’s how the business model works:

• Find Distressed Properties: You identify properties that are undervalued or owned by motivated sellers, such as those facing foreclosure or needing quick cash.
• Get the Property Under Contract: You negotiate with the seller to get the property under contract for a price below market value.
• Assign the Contract to a Buyer: Instead of purchasing the property yourself, you assign the contract to another buyer (usually an investor or house flipper) for a higher price.
• Make a Profit: The difference between the price you negotiated with the seller and what the buyer pays for the contract is your profit.

Step 2: Research Your Market

To start wholesaling, you need to understand your local real estate market. Focus on researching:

• Neighborhoods: Identify which areas are in demand among buyers and investors. Look for markets where properties are selling quickly, and investors are actively seeking opportunities.
• Property Values: Know the average prices of homes in your target areas, so you can spot a good deal when you find one.
• Types of Buyers: Learn about your potential buyers—cash investors, house flippers, landlords, etc. Understand what kinds of deals they are looking for.

Action Items:

• Check online listing platforms like Zillow, Realtor.com, and Redfin.
• Attend local real estate investor (REI) meetups to understand what types of properties buyers are interested in.

Step 3: Build Your Real Estate Network

Your success in real estate wholesaling heavily depends on your network. You need a strong pool of buyers and investors who are ready to purchase deals quickly.

Key Relationships:

• Cash Buyers: Investors who can buy properties quickly without needing to rely on financing.
• Real Estate Agents: Can help you find leads and sell contracts faster.
• Title Companies: Ensure that your contracts and deals are legally sound and ready to close.

Action Items:

• Attend REI meetings, real estate conferences, and local events.
• Build your buyers list by collecting contact information from investors.
• Join online wholesaling communities such as BiggerPockets and Facebook groups.

Step 4: Create a Business Plan

Now that you understand the market and have started networking, it’s time to develop a clear business plan. Your business plan should outline:

• Business Goals: What do you want to achieve? How many deals per month? How much profit per deal?
• Target Market: Define the neighborhoods and types of properties you will focus on.
• Marketing Strategy: How will you find motivated sellers? Will you use direct mail, cold calling, or digital marketing?
• Operational Plan: What systems will you use to track leads and manage contracts? Will you hire assistants or work solo?

Action Items:

• Write down your business goals and vision.
• Outline the steps you’ll take to find properties and buyers.

Step 5: Set Up Your Legal and Business Structure

Before you begin closing deals, you’ll need to set up a legal structure for your business. Most real estate wholesalers operate under a Limited Liability Company (LLC) to protect personal assets and gain credibility with buyers and sellers.

• Register Your Business: Form an LLC and register it with your state.
• Obtain Required Licenses: In some states, you may need a real estate license to wholesale legally.
• Get a Business Bank Account: Keep your finances organized by opening a separate business bank account.
• Contract Templates: Have your contract templates (e.g., purchase agreements and assignment contracts) reviewed by a real estate attorney.

Action Items:

• Set up an LLC through your state’s business portal or services like LegalZoom.
• Consult a real estate attorney for advice on wholesaling in your state.

Step 6: Find Motivated Sellers

Now, it’s time to start sourcing deals. Your success in real estate wholesaling relies on finding sellers who are motivated to sell at a discount. These sellers may include:

• Distressed Homeowners: Facing foreclosure, needing quick cash, or dealing with divorce.
• Absentee Owners: Owners of rental properties who live far away or don’t want the hassle of managing tenants anymore.
• Inherited Properties: Sellers who have inherited a home they don’t want to maintain.

Marketing Strategies:

• Direct Mail Campaigns: Send letters or postcards to homeowners offering to buy their property for cash.
• Bandit Signs: Place signs around neighborhoods with messages like “We Buy Houses for Cash.”
• Cold Calling: Use public records or purchase lists of distressed homeowners and call them directly.

Action Items:

• Build a list of distressed property owners through public records, absentee owner lists, or probate leads.
• Choose a marketing strategy (direct mail, cold calling, bandit signs, etc.) and start executing.

Step 7: Get Properties Under Contract

Once you find a motivated seller, you’ll need to negotiate and get the property under contract for a price lower than market value. Be sure to:

• Research Property Value: Use online tools or contact agents to estimate the property’s after-repair value (ARV).
• Negotiate the Price: Aim to secure the property at 70% of the ARV minus any repair costs.
• Use an Assignment Clause: Ensure your contract includes an “assignment” clause that allows you to transfer the contract to another buyer.

Action Items:

• Practice negotiation strategies with sellers to secure properties at the best possible price.
• Make sure all your contracts include an assignment clause.

Step 8: Build Your Buyer’s List

As you start getting properties under contract, you’ll need to have a list of buyers ready to purchase the deals. Ideally, you should build your buyer’s list before you even get your first property under contract.

Ways to build your buyer’s list:

• Network with Investors: Attend local REI meetings and networking events to meet cash buyers.
• Social Media: Post available deals on real estate investing groups on Facebook, LinkedIn, and BiggerPockets.
• Email Marketing: Create a newsletter with updates on available properties and send it to your buyer’s list regularly.

Action Items:

• Start an email list or database of investors.
• Continuously add new buyers to your list by networking and marketing your deals.

Step 9: Assign the Contract

Once you have a buyer interested in purchasing the property, it’s time to assign the contract. Here’s how the process works:

• Sign an Assignment Contract: This legally transfers your original purchase agreement with the seller to the buyer for a fee.
• Earn Your Wholesale Fee: The buyer pays you an assignment fee, which is typically the difference between the price you agreed upon with the seller and the price the buyer is willing to pay.
• Close the Deal: The buyer and seller close the deal through a title company, and you get paid once the transaction is completed.

Action Items:

• Work with a title company to handle the closing.
• Ensure the assignment contract protects your interests and is legally sound.

Step 10: Rinse and Repeat

Congratulations! You’ve completed your first wholesale deal. Now it’s time to refine your processes and scale your business. Use the data and experience from your first deals to improve your marketing, lead management, and buyer outreach strategies.

Action Items:

• Track your key performance indicators (KPIs) such as lead conversion rate and average deal size.
• Continue networking, marketing, and sourcing deals to keep your pipeline full.

Conclusion

Real estate wholesaling is an excellent way to break into the real estate investment world with minimal capital. By following this step-by-step guide, you can go from idea to launch and build a profitable wholesaling business. With hard work, consistent effort, and a focus on finding the right deals, you’ll be well on your way to success.

If you’re ready to take your wholesaling business to the next level, consider using REI Podio CRM by Integroforce for top of the line CRM solution that streamline your workflows, automate follow-ups, and help you scale your business.