Real Estate Wholesaling – How Does It Work?

Things To Know

Real estate wholesaling is a business in which investors, either companies or individuals, will purchase distressed or under-market-value homes and assign contractors to fix them up for the purpose of selling them at a higher value. Real estate wholesaling is one of the best ways to make money from real estate without ever having to purchase capital. For sellers, there are so many reasons to sell your home to a cash buyer.

That said, real estate wholesaling isn’t for everyone and takes a bit of work. To make the most out of being a real estate wholesaler, you must network with sellers and investors, as well as research your local market

Real Estate Wholesaling In Motion

When a wholesaler goes through the process, it typically works out like this:

A real estate wholesaler will search for a distressed or under-market-value home that a seller wants to get rid of quickly. They will then give that seller an offer, which will typically turn into a negotiation. Once the two parties agree on the price, they will put the home under contract.

Next, the real estate wholesaler will find a cash buyer or investor who wants to purchase the home. The idea is to find someone who wants to purchase it for more than the price they offered so they can make a profit once they flip the home.

The investor will get a contract with a higher price and the wholesaler will end up with the difference. The standard wholesaler cut is anywhere from $5,000 to $10,000 or more.

Difference Between Real Estate Wholesaler and Agent

A real estate agent is someone who represents a buyer or seller in the real estate coordination process. Real estate wholesalers do not coordinate buying and selling, but rather act as middlemen between sellers and investors.

Wholesalers get a flat fee when cutting a deal while a real estate agent will get a commission with every transaction. This commission typically amounts to anywhere from 5% to 6% of the overall price.

To become a real estate agent, you must pass state exams and get your license. You do not need a license to become a real estate wholesaler. The only exception is if you are making more than one home transaction per year in the state of Illinois.

Difference Between Real Estate Wholesaler and Investor

The investor is different from the wholesaler, as they are the entity that purchases the property. A good investor will usually purchase a property with the intention of letting the value appreciate prior to selling it.

Investors also buy distressed properties to flip them or rent them out for passive income.

The main difference is that an investor has to have capital and a real estate wholesaler does not.

How To Get Into Real Estate Wholesaling

If you don’t have capital, entering the world of real estate wholesaling is a great way to begin investing. Prior to securing a deal, it is important to plan, research, and network.

Make sure to get in touch with us here at TruBuyers if you want to learn more about how we operate as a real estate wholesaler.

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