If youâve ever wondered how to make money in real estate without swinging a hammer or owning the property long-term, then wholesaling might be your golden opportunity.
Today, weâre breaking down the art of wholesalingâwhat it is, how it works, and how to make sure everyone wins in the process.
đ What Is Wholesaling?
Wholesaling is a real estate investment strategy where the wholesaler puts a property under contract, then assigns the rights to purchase it to another investorâfor a profit.
Letâs say you win a property at auction. After you receive the Memo of Sale (basically, your auction version of a purchase and sale agreement), you now have options:
- Close on the deal yourself (ideally with funding from Flip and Hold Funding đ), or
- Wholesale it to another investor
Instead of buying and renovating, you sell your contract rights to someone elseâfor an assignment fee.
đ How Does a Wholesaler Find Deals?
Wholesalers use multiple methods to find motivated sellers and off-market properties. Some of the most common techniques include:
- MLS (Multiple Listing Service)
- Property auctions
- Direct mail marketing
- Pay-per-click advertising
- Door knocking
- Public records searches
- Word of mouth
Often, these sellers are in situations where they need to sell fast due to things like:
- Divorce
- Death
- Disease
- Financial distress
- Major property damage
These properties typically canât or wonât be listed traditionally with a real estate agent due to time pressure, poor condition, or a desire to avoid showings and inspections.
That creates an opportunity for wholesalers to negotiate a discounted price and put the property under contract.
đľ How Do Wholesalers Make Money?
Once the wholesaler has a property under agreement, they assign the contract to another investor (called the assignee) for a fee.
But here’s the key: every party needs to benefit for the deal to work.
- The wholesaler (assignor) must get enough margin to justify their time and marketing costs.
- The end buyer (assignee) must get the deal at a price that leaves room for renovation and profit.
- And if a lender like Flip and Hold Funding is financing the deal, the price must justify the risk.
If the wholesaler prices the deal too highâkeeping most of the profitâthe deal can fall apart:
- The investor may pass.
- The lender may decline or require more money down.
Wholesaling only works long-term if deals are priced so that everyone wins.