Wholesaling Real Estate For Beginners: 8 Do's & Don'ts You Can’t Ignore

Real estate investing traditionally demanded significant capital investment, presenting a formidable barrier to entry for many aspiring investors. However, opportunities like real estate wholesaling have emerged, offering a more accessible entry point for those with limited upfront capital. Investors acquire real estate contracts at below-market values in this niche and sell their equitable interest to earn a profit.

While real estate wholesaling is accessible, achieving success in this field is not guaranteed and requires astute decision-making and adherence to industry best practices; this naturally leads to critical questions: What are these best practices? What strategies should wholesalers adopt, and what pitfalls should they avoid?

Fortunately, you don't have to navigate this landscape alone. In our series "Wholesaling Real Estate for Beginners," we dive into the foundation of successful wholesaling. This guide includes a curated list of eight common mistakes to avoid, paired with eight strategic solutions to help you succeed. Each point is thoroughly explained, ensuring you know what to avoid and what actions to take to thrive in the wholesaling business.

Here's a preview of the critical missteps to steer clear of, followed by comprehensive advice on the suitable approaches to adopt:

• Do Not Forget The Inspection Contingency Clause
• Do Not Manipulate Your Numbers
• Do Not Only Wholesale Deals That Are A Win For You
• Do Not Speculate On The Numbers Of A Wholesale Deal
• Do Not Attempt To Market Or Sell The House
• Do Not Focus On Too Many Deal Acquisition Methods At One Time
• Do Not Send The Deal To Every Cash Buyer You Know
• Do Not Assume Every Deal Will Work Out

1. Do Not Forget The Inspection Contingency Clause

The Don't: To thrive as a real estate wholesaler, never submit a purchase agreement to a property owner without including an inspection contingency clause. Failing to include this clause means you're committed to purchasing the property regardless of its condition or whether or not you find a buyer, thus risking your money.

The Do: Always include a home inspection contingency clause in all your wholesale purchase agreements. While not necessarily a prerequisite, including it in every wholesale real estate contract is highly advisable. This clause grants you the right to legally inspect the wholesale property before finalizing the deal. Should you find any issues, it gives you the leverage to renegotiate the terms of the sale or back out altogether.

More importantly, including an inspection contingency clause allows you to wholesale risk-free. Why? The inspection contingency clause also doubles as a backout plan. If you fail to find a buyer within the agreed timeframe, you can exit the contract without any consequences or impact on your earnest money deposit.

In other words, the inspection contingency clause is a safety net for beginners in wholesaling real estate. It enables you to back out of a legal contract due to property issues or when finding a buyer becomes challenging; this allows you to fully retain your earnest deposit and move on to wholesaling properties likely to sell faster rather than investing your time and resources in a lost cause.

We recommend including a 7-day inspection contingency clause in all your wholesaling agreements. This timeframe provides enough flexibility to appraise, market the contract, and secure an end buyer. However, you must promptly withdraw from the agreement if you can’t find a buyer within this period. Failure to do so obligates you to purchase the property or forfeit your earnest money.

Read Also: What Are Contingencies In Real Estate? The (Ultimate) Guide

2. Do Not Manipulate Your Numbers

The Don't: Do not inflate a property's after-repair value (ARV), lower repair costs, or manipulate wholesaling values to make your deal more appealing to end buyers.

The Do: Send your cash buyers the real numbers

Most beginner wholesalers tend to inflate the ARV and deflate a property’s repair costs to appeal to cash buyers. This strategy might get their attention initially, but isn’t a good idea.

Generally, cash buyers for wholesaling properties are seasoned real estate investors in niches like house flipping and buy-and-hold exit strategies. They're often knowledgeable about local market conditions and property values. Additionally, they have the resources to assess a deal’s profitability independently and will not only disregard real estate deals with manipulated numbers but also wholesalers who send them such deals.

Our wholesaling real estate for beginners tip: Always give your cash buyers accurate numbers regardless of how badly you want them to buy your contract or benefit from the purchase price.

You'll need to put in some elbow grease, research local repair costs, calculate ARV using comps, and grasp other essential wholesale-related metrics to give them accurate values. However, the effort will be worthwhile as you’ll build trust and establish yourself as a credible source among cash buyers; this ultimately results in your long-term success.

3. Do Not Only Wholesale Deals That Are A Win For You

The Don’t: Don’t make the wholesaling transaction all about your profitability.

The nature of wholesaling transactions is that you get paid if you successfully sell your equitable interest in the contract. That means earning whether or not the homeowner and the cash buyer benefit from the sale.

The Do: Ensure the wholesaling deal is a win for every party.

While you can charge a wholesale fee that detracts from sellers and buyers, the key to becoming a successful wholesaler is creating a win-win situation for all parties.

By securing a deal that benefits property owners, you establish positive relationships and increase the likelihood of referrals to other distressed property owners. Similarly, when you hook your end buyers up with profitable foreclosure and wholesaling deals, they'll turn you into their go-to source.

As a result, you set yourself up for even more profits by easily generating wholesaling leads and always having a ready market for wholesale properties. In doing so, wholesaling real estate for beginners becomes much more manageable.

Read Also: Wholesaling Real Estate For Beginners: How To Get Started In 8 Steps

4. Do Not Speculate On The Numbers Of A Wholesale Deal

The Don't: Avoid speculating wholesaling real estate numbers and metrics.

Speculating numbers and metrics when wholesaling real estate involves making assumptions about financial figures typical to wholesale deals, such as the ARV, repair costs, and potential profit margins.

The Do: Mind due diligence on your wholesale real estate strategies by researching comps and analyzing market data to make informed estimates and decisions.

The real estate market is constantly evolving. External factors like interest and inflation rates, shifts in market trends, and changes in consumer preferences directly impact real estate demand. Consequently, even the slightest changes in these conditions can instantly influence a property's value. That means what may seem like a profitable real estate deal today could lose its appeal in days or weeks. Therefore, it's crucial to avoid speculating wholesaling values.

Instead, historical sales comparables can be used to understand property appreciation trends in the target area and to determine the fair market value of property now and in the future. Additionally, research current market trends, including supply and demand dynamics, to assess a property’s potential for appreciation.

If you’re new to wholesaling, consider networking with local investors and other industry professionals. You can quickly get started by signing up for Real Estate Skills' Ultimate Investor Program, where you will learn from experts and fellow real estate professionals.

Doing so helps you gain insights into market trends and perspectives that inform your valuation processes. These steps ensure you make decisions and formulate property reports for your homebuyers based on solid data rather than assumptions.

For in-depth training on real estate investing, Real Estate Skills offers extensive courses to get you ready to make your first investment! Attend our FREE training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!

5. Do Not Attempt To Market Or Sell The House

The Don’t: Don't present yourself as a property seller, buyer, or marketer.

A wholesaling real estate transaction typically involves finding distressed properties for sale, securing the rights to buy them through a contract, finding a buyer, and selling your contract rights (equitable interest) to them.

The Do: Position yourself as a wholesaler.

Only property owners, licensed real estate agents, and Realtors have the legal authority to facilitate property marketing and buying and selling processes in the U.S.

You do not fall into either category as a wholesaler unless you have a real estate license.

Your role is simply that of a wholesaler seeking an end buyer to whom you can sell your equitable interest in the property. Therefore, always market yourself as a wholesaler to avoid potential legal problems.

6. Do Not Focus On Too Many Deal Acquisition Methods At One Time

The Don't: Avoid juggling every possible deal acquisition strategy at once.

Trying to use every possible deal acquisition strategy at once can lead to inefficiency and diluted efforts.

The Do: Systemize your marketing approach.

Wholesale real estate strategies abound, from the multiple listing service (MLS) to direct mail campaigns, driving for dollars, and networking. Each strategy offers unique benefits and challenges. For example, using the MLS grants you access to various motivated sellers but also subjects you to stiff competition. Still, overcoming the competition is possible by dedicating focused effort to MLS lead generation.

So, systemize your efforts simultaneously instead of utilizing every strategy you know.

Note that we aren't suggesting you limit yourself to one strategy. Instead, streamline your approach by concentrating on one method until it's highly effective, and then delegate ongoing execution to your team before you move on to mastering another approach.

Alternatively, if you excel at a particular strategy, consider assembling a team to handle other deal acquisition strategies on your behalf; this ensures a consistent pipeline of leads and deals, regardless of fluctuations in the effectiveness of individual strategies. Wholesaling real estate for beginners can be done alone, but there’s no replacement for a solid team you can trust.

Read Also: How To Do Direct Mail Marketing For Real Estate

7. Do Not Send The Deal To Every Cash Buyer You Know

The Don't: Do not blast out a wholesale deal to every cash buyer.

Wholesale real estate for beginners often involves blasting out real estate deals to every cash buyer in the area, hoping to quickly secure a buyer and move on to the next deal. While this approach may widen the property’s exposure and accelerate the buyer-finding process, it also risks another investor going behind to secure the contract for themselves.

Moreover, managing relationships with many potential buyers will be quite a sport. They target different properties—some invest in rental properties, while others specialize in flipping houses under foreclosure. You’d have to seek out different leads to satisfy their investing needs, making wholesaling quite a hustle. So, avoid blasting your deal to every interested buyer.

The Do: Find and work with a few local cash buyers.

Not every interested buyer on your network has your best interests at heart. So, rather than amassing extensive cash buyers lists, focus on cultivating relationships with a few active local buyers.

Work on establishing enduring partnerships with house flippers who consistently flip at least four properties per month. These active investors are always looking for promising opportunities and will consider you a reliable source, especially if you diligently source properties with good profitability potential.

As a result, you’ll always have a ready market for your wholesaling contracts. Even when an investment property isn’t suitable for their current portfolio, these established investors will refer you to other like-minded investors, thus expanding your network of quality cash buyers.

Beyond having a ready market for your deals, wholesaling real estate for beginners prioritizes quality over quantity. Instead of pursuing every potential wholesaling property, you’ll focus on properties that align with your cash buyer's portfolio. This strategic approach simplifies your lead generation efforts and enhances the overall efficiency of your real estate business while ensuring you get paid.

The best part? You won’t have to worry about anyone undercutting you, making wholesaling real estate strategies a more gratifying experience.

That said, here are some wholesale real estate tips to help you build quality cash buyer lists:

• Network Locally & In Person: Attend local real estate networking events, seminars, and workshops to meet and connect with active cash buyers. Networking in person facilitates stronger, meaningful connections and fosters trust.
• Online Platforms: While in-person networking is incredibly effective, online networking also works. So, join REI-related social media groups, real estate forums, and programs like the Real Estate Skills Ultimate Investor program to engage other investors. Ensure you participate in discussions or share valuable insights to position yourself as an authority in your niche; this will attract cash-buying investors and make them more willing to work with you.
• Referrals: Once you build a good relationship with one or two buyers, ask them to recommend you to other quality cash buyers. Since they're already an expert in their trade, their recommendations will position you as a credible wholesaler, speeding up relationship-building with the referrals.
• Consistency: Regularly update your cash buyers with new opportunities and maintain an open line of communication with them to nurture the relationships

*Want to learn the proven strategies for finding cash buyers? View our video below where Alex Martinez covers How To Find Cash Buyers For Wholesaling! [FREE]

8. Do Not Assume Every Deal Will Work Out

The Don't: Don’t assume every offer you send out will work out.

The real estate industry is generally highly competitive. There’s stiff competition even in highly specialized short-term niches like wholesaling houses. That means not every offer you send out will be accepted. The same cash buyers you’re presenting deals to receive multiple others and even more attractive offers from other wholesalers. Similarly, other wholesalers also target the same properties you seek, meaning that even investment property owners have multiple options. So, not every deal you work on will close.

The Do: Send out multiple offers to maximize conversion rates

From our experience here at Real Estate Skills, it takes sending multiple offers, usually about 10-15, to secure a purchase contract. With countless other wholesalers competing for the same deals as you, success isn’t always straightforward. Fortunately, with consistent effort and the willingness to put in a little extra work, it still is possible. So, put in extra work finding properties and send in multiple offers monthly to maximize your reach and closing opportunities.

Final Thoughts On Wholesaling Real Estate For Beginners

Mastering the dos and don'ts of wholesaling is crucial for anyone entering this field. Our guide on "wholesaling real estate for beginners" equips you with essential strategies to successfully navigate the industry's complexities. Following these practical tips can lay a solid foundation for profitable and sustainable real estate wholesaling ventures.

For even more informative tips and strategies, sign up for our free real estate training course to learn how to wholesale real estate like a pro.

*Disclosure: Real Estate Skills is not a law firm, and the information contained here does not constitute legal advice. You should consult with an attorney before making any legal conclusions. The information presented here is educational in nature. All investments involve risks, and the past performance of an investment, industry, sector, and/or market does not guarantee future returns or results. Investors are responsible for any investment decision they make. Such decisions should be based on an evaluation of their financial situation, investment objectives, risk tolerance, and liquidity needs.