Is Wholesaling Real Estate Worth It? An Investor's Guide

While lesser known to the general public than its rehabbing and flipping counterparts, wholesaling is an equally attractive real estate investment strategy that deserves more attention. For what it’s worth, wholesaling is an excellent introduction to the housing sector and often serves as the gateway to more advanced exit strategies. It allows new investors to make money while building a solid foundation in the real estate investing industry.

That’s not to say wholesaling isn’t without its challenges. At its core, wholesaling is a real estate exit strategy that requires a mind for due diligence and a recurring time commitment, which leaves most people with one lingering question: Is wholesale real estate worth it?

Wholesaling is worth the time and effort required to execute a deal. According to Forbes, there may be no better time than today to start wholesaling. It has developed a reputation for its relatively low barrier of entry, short turnaround time, and promising return on investment (ROI).

If you want to learn how to get started wholesaling real estate but still have a few questions, we’ve developed this guide to teach you everything you need to know, including:

• What Is Wholesaling Real Estate & How Does It Work?
• Is Wholesaling Real Estate Worth It? 5 Things You Need To Know
• Wholesaling Vs. Flipping Houses
• Pros & Cons Of Wholesaling Real Estate
• Should I Enroll In A Wholesale Real Estate Course?
• Wholesaling Real Estate FAQs
• Final Thoughts On Whether Or Not Wholesaling Real Estate Is Worth It

What Is Wholesaling Real Estate & How Does It Work?

Wholesaling real estate is an effective investment strategy renowned for its ability to promote rapid wealth. It offers several advantages, including a quick turnaround time, minimal capital requirements, and a low entry barrier, making it an excellent starting point for individuals venturing into the industry for the first time.

Simply put, wholesalers connect sellers and potential buyers as a middleman, facilitating transactions that may not have otherwise occurred. They acquire the right to purchase a property at a discounted price and then transfer that right to an end buyer for a profit. The term "wholesaling" accurately describes the wholesalers' role in the real estate market: procuring investment properties below market value and transferring them to retailers (other investors) at fair prices.

When done well, the original property owner receives their proceeds from the sale, the end buyer secures a valuable investment opportunity, and the wholesaler earns a fee commensurate with their involvement. Overall, it creates a mutually beneficial scenario for all parties involved.

The process is involved, which begs the question: Is wholesale real estate worth it? Please keep reading to find out.

Is Wholesaling Real Estate Worth It? 5 Things You Need To Know

The proceeds from wholesaling are almost always worth the time and effort required to complete a deal. That said, it may help new investors to see why wholesaling is worth it. Here are five questions with answers that promote wholesaling for investors of every experience level:

• Is Wholesaling Properties Profitable?
• Is Wholesaling Real Estate Legal?
• Can A Beginner Start Wholesaling Real Estate?
• Do You Need A License To Wholesale Real Estate?
• How Much Money Do You Need To Wholesale Properties?

Is Wholesaling Properties Profitable?

Wholesaling properties can be very profitable. That’s not to say profits are guaranteed, but rather that investors who follow a proven system can make a very lucrative real estate business out of wholesaling properties regularly.

Wholesaling profits will vary dramatically from investor to investor and even state to state. However, the significant potential remains for anyone in any location. According to The Motley Fool, the average wholesaling real estate salary can range from $21,500 to $98,500. Salaries will vary depending on the amount of time wholesalers spend acting as intermediaries and the value of the homes they deal in. Still; wholesaling properties can be very profitable.

For context, the return on a typical wholesale deal is essentially infinite. That doesn’t mean profits are unending, but rather that the investor sacrificed none of their money to make a profit.

Read Also: Wholesale Real Estate Salary | The (ULTIMATE) Guide

Is Wholesaling Real Estate Legal?

Wholesaling real estate is legal if investors adhere to the local laws governing real estate transactions. In particular, investors must disclose that they are the principal buyer in a transaction and intend to sell their contractual rights to buy the home to another buyer.

It is important to note that the wholesaler isn’t buying the home. Instead, they need to enter into a bilateral purchase contract with the seller. The agreement must be transparent and identify the wholesaler's intentions to purchase an equitable interest in the subject property. That’s an important distinction; they aren’t buying a home but obtaining the rights to buy it.

Again, wholesaling is legal as long as investors follow the law. To ensure legality, investors should prioritize transparency and integrity. It is crucial for wholesalers to openly communicate their intentions, as the more transparent they are, the better. Above all else, consult a qualified real estate attorney or professional to confirm compliance before initiating a wholesale deal.

Can A Beginner Start Wholesaling Real Estate?

Is wholesale real estate worth it for new investors? After all, a beginner can start wholesaling real estate, regardless of their previous experience. It is widely considered a beginner strategy for several reasons, not the least of which include:

• Low Capital Requirements: While there are exceptions like the double close, most wholesale deals require little to no capital from the investor. Since the investor isn’t usually buying the home, all of the capital requirements are the responsibility of the end buyer.
• Limited Risk: With little to no capital requirements, wholesalers risk very little on each deal. That said, wholesaling does take time, so it’s essential to respect the time of each person involved in a contract. Remember, time isn’t just money; it’s everything. Losing time on a deal does have consequences, but the loss of money is limited.
• Quick Turnaround Time: Wholesale deals can transpire in as little as a few hours or over weeks and months. Typically, however, investors can expect deals to take about a week, which is relatively short compared to other real estate exit strategies.
• Learning Curve: Wholesale deals require specific knowledge and skills, but they are relatively simple compared to their rehab counterparts. That’s not to say wholesaling is easy, but instead that it’s got a smaller learning curve than fix-and-flip deals.
• Scalability: Many new investors use wholesaling to learn the industry and other exit strategies. As their experience and knowledge grow in a more risk-averse environment, they can make the transition to rehabbing easier.

Read Also: Wholesaling Real Estate For Beginners

Do You Need A License To Wholesale Real Estate?

Investors do not need a license to wholesale real estate. Nonetheless, while a real estate license isn’t required, it may be helpful. With a license, wholesalers will gain access to an invaluable network of like-minded professionals and tools.

Wholesalers who are licensed real estate agents or Realtors will need to disclose their status and exercise even more transparency than those without a license.

Read Also: Can A Realtor Wholesale Property? The (ULTIMATE) Guide

How Much Money Do You Need To Wholesale Properties?

In a perfect world, investors don’t need any money to wholesale properties. As previously discussed, most wholesale deals may transpire without the investor fronting any cash. An earnest money deposit may be necessary for some circumstances, but the capital requirements are much smaller than rehabbing and scaling rental property portfolios.

That said, not all sellers will assign contracts to unfamiliar end buyers. While relatively uncommon, some wholesalers may need to conduct what’s known as a “double close". As its name suggests, a double close will require the investor to make two independent transactions: buy the property themselves and sell it to the end buyer.

Doing so will coincide with many costs, the most expensive of which is purchasing the home. As a result, some wholesalers may need to come up with the purchase price to wholesale the deal.

Attend our FREE training at Real Estate Skills. Gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way.

Wholesaling Vs. Flipping Houses

The ongoing debate between wholesaling vs. flipping houses is justified. Investors may choose one strategy over the other for several reasons. It is worth noting, however, that the wholesaling vs. flipping houses debate may be moot. If for nothing else, both strategies are incredibly viable and lucrative in any local market, so is wholesale real estate worth it? Choosing the suitable method comes down to personal preference.

To help make investors’ decisions easier, let’s look at three of the biggest factors that differentiate each strategy:

• Approach
• Requirements
• Potential Returns

Approach

Let’s look at how the approach can differ from wholesaling to flipping houses.

Wholesaling

Wholesaling involves finding motivated sellers (whether through direct mail, Craigslist, social media, or other means) and attempting to gain the right to buy their home at a specified price. The wholesaler does not try to buy the subject property from the homeowner but rather procures the right to do so.

Once the right to buy is solely theirs, they sell the right to an end buyer for a short-term wholesale fee. Throughout the process, the wholesaler acts as an intermediary, connecting sellers with buyers.

Flipping Houses

Not unlike wholesaling, flippers attempt to find motivated sellers (usually at risk of foreclosure) with on- or off-market properties. Instead of obtaining the rights to buy the homes, flippers close on the property and take over ownership. Once they own the house, flippers will initiate renovations to restore it to its after-repair value (ARV) and attempt to resell it for a higher price.

Read Also: Finding Motivated Seller Leads: Free & Paid Tactics

Requirements

The entry requirements for each strategy are different, so let’s break them down for new investors.

Wholesaling

Wholesaling has fewer entry requirements than flipping. Whether it’s capital or experience, the barrier to entry in wholesaling is much lower than fixing and flipping. For the most part, new wholesalers focus on finding motivated sellers and building a network of cash buyers.

Flipping Houses

Flipping houses is much more capital-intensive and requires more knowledge and “know-how” of its respective industry. Therefore, starting out requires investors to find private and hard money lenders and the deals they desire. At the same time, investors will be expected to learn the ins and out of an entire industry,

Potential Returns

The potential returns of each strategy are unique and worth learning about.

Wholesaling

Wholesaling returns are generally lower than flipping returns. Due to their relatively risk-averse nature and quick turnaround times, wholesales tend to net investors within 5% – 10% of the end buyer’s purchase price.

That said, while returns per deal may be lower, the speed at which a contract may be completed is incredibly attractive. Today’s best wholesalers can complete deals quickly, sometimes in as little as a few days. As a result, returns can scale rapidly over years and decades.

Flipping Houses

Flipping houses, on the other hand, typically offer a higher return. According to ATTOM Data Solutions' latest Home Flipping Report, the average home flipped as recently as last year generated an average gross profit of $67,900, translating into a 26.9% return on investment.

Of course, the higher returns aren’t without their risk. In particular, flipping homes exposes investors to much more risk (like unexpected closing costs or unforced and costly mistakes) than wholesaling homes.

Read Also: Flipping Houses Salary: How Much Do House Flippers Make?

Pros & Cons Of Wholesaling Real Estate

Wholesaling real estate is widely considered one of the best exit strategies in the housing sector. However, not unlike every other investment strategy, wholesaling has both positive and negative characteristics. Let’s look at each so investors can decide if wholesaling real estate is worth it.

Pros Of Wholesaling Real Estate

The pros of wholesaling real estate include, but are not limited to, the following:

• Low Capital Requirements: Traditional wholesale deals require little to no capital on the wholesaler's end.
• Limited Risk Exposure: The lack of required capital exposes wholesalers to less risk.
• Quick Turnaround: Wholesale deals represent some of the fastest turnaround times in the real estate industry, sometimes closing in a few days (or less).
• Learning Opportunities: The low barrier to entry grants wholesalers the ability to learn an entirely new industry without risking too much.

Cons Of Wholesaling Real Estate

The cons of wholesaling real estate include, but are not limited to, the following:

• Relatively Low Profits: While wholesaling returns are lower than rehab returns, they are incredibly attractive for risk-averse investors with little time.
• Market Dependence: The whole concept of wholesaling centers around locating distressed properties, which can fluctuate with the market.
• Relies On A Strong Network: Successful wholesaling usually requires a strong network, typically something new investors don’t have.

Should I Enroll In A Wholesale Real Estate Course?

Aspiring wholesalers are advised to work with an experienced mentor. Learning from someone who is already an accomplished wholesaler can simultaneously mitigate risk, increase profits and instill invaluable confidence in new investors. That said, not all mentors are created equal; some are inherently better than others.

Thankfully, Real Estate Skills has a Pro Wholesaler VIP Program that can mentor new investors with the industry's highest quality knowledge, resources, and support.

Ready to start wholesaling real estate? Join Alex Martinez at his FREE training to learn how to get started with house-flipping and wholesaling!

Wholesaling Real Estate FAQs

Here’s a look at some of the most frequently asked questions investors may reference to determine for themselves if wholesaling real estate is worth it:

• What Is A Typical Wholesale Real Estate Salary?
• What Is A Wholesale Real Estate Contract?
• How Hard Is It To Wholesale Real Estate?
• Is Real Estate Wholesaling A Side Hustle?
• Can I Become A Millionaire From Wholesaling?

What Is A Typical Wholesale Real Estate Salary?

A typical real estate salary doesn’t exist. While the Motley Fool article referenced earlier suggests the average wholesaler can make an annual salary somewhere in the neighborhood of $21,500 to $98,500, the truth is that wages will vary dramatically depending on the state and individual investor.

It is standard practice for wholesalers to charge end buyers about 5% – 10% of the acquisition price. Other wholesalers, however, may charge a flat fee, ranging anywhere from $10,000 – $15,000. Case in point: salaries depend entirely on unique circumstances and the variables associated with every successful real estate deal.

What Is A Wholesale Real Estate Contract?

A wholesale real estate contract, also known as an assignment contract or a purchase agreement, is the foundation of every wholesale deal. Wholesalers will use these contracts to outline the terms and conditions of an agreement between a wholesaler (assignor) and a property seller (assignee).

More specifically, however, wholesale real estate contracts are used by wholesalers to acquire the right to buy a home legally, also establishing the wholesaler's right to assign the contract to another buyer for a small profit.

Download our free wholesale contract PDFs now, and gain the confidence to proceed with your transactions smoothly and efficiently.

How Hard Is It To Wholesale Real Estate?

How hard is wholesaling real estate? To answer that question, it’s important to note that the term “hard” is relative. On the one hand, wholesaling is considered the most straightforward real estate investing strategy—at least when compared to rehabbing and rental properties.

On the other hand, wholesaling requires a lot of hard work to execute regularly and successfully. To wholesale properties, real estate investors must know everything from local laws and regulations to how to find motivated sellers and build cash home buyers lists. Ironically enough, when investors put in the hard work upfront, wholesaling becomes much more accessible.

Is Real Estate Wholesaling A Side Hustle?

Anyone asking themselves, “Is wholesale real estate worth it” should know that they will get out as much as they put in. That said, real estate wholesaling can be a side hustle. It is entirely possible to wholesale real estate in addition to a regular nine-to-five. However, investors treating it as a side hustle will only make returns relative to their involvement.

Can I Become A Millionaire From Wholesaling?

The short answer is “yes.” It is theoretically possible to become a millionaire from wholesaling. However, as previously discussed, wholesaling generally offers less money per deal than its counterparts. Rehabbing, for example, typically provides a higher return on investment but comes with more risk. Therefore, while wholesaling can make someone a millionaire, there may be better ways.

Final Thoughts On Whether Or Not Wholesaling Real Estate Is Worth It

Is real estate wholesaling worth it? It’s a question many curious and aspiring investors have asked themselves. For years, they have seen others succeed in wholesaling houses and wonder if it’s their time to jump in. Instead of sitting on the sidelines waiting for an answer, it may be better to get started today because wholesaling real estate is only worth it to those who take action. A wholesaling business can be incredibly lucrative for those who approach the world of real estate investing with a sound plan and mind for due diligence.

How do I start wholesaling real estate? At Real Estate Skills, our team of experts is ready to provide you with the tools you need for wholesaling. We're committed to providing the knowledge, resources, and support you need to make wholesaling worthwhile. So avoid common mistakes and maximize your returns by leveraging our expertise.