What is Wholesaling Real Estate? [Pros & Cons Every Beginner Should Know]

what is wholesale real estate

There are a lot of ways to earn and invest in the real estate market. From house flipping to leases and finally REITs, the market is sprawling with opportunities! However, there is still one industry that is often overlooked by beginners but cherished by veterans; and this is real estate wholesaling. 

Real estate wholesaling is easily the best fit for beginners as it isn't capital intensive and can yield profits in less than a month! It brings a new approach to the world of real estate, where investments are known to take years to mature.

That being said, the real estate market can be daunting for new investors who don't know which market to venture into. This is why I have created the guide to shed light on real estate wholesaling. Below, you will learn all you need to know about wholesaling real estate, its pros, cons, and how to join a community of veteran real estate investors. 

What is Wholesaling Real Estate?

Put simply, real estate wholesaling is when an individual investor, known as "the wholesaler", acquires a contract from a landlord or property owner and assigns that same contract to a third party, usually the end buyer. 

This arrangement is tripartite, meaning it involves three parties; the initial seller, the wholesaler, and an end buyer. Wholesaling real estate is probably one of the best short-term investment plans, and so far, it has proved to be an excellent way for beginners to break into real estate investments. Why? Because you don't need any money, a license or anything. You need the legwork. This is the most effortless entry into real estate. All it requires is finding a discounted property.

Examples of Real Estate Wholesaling

There are no set examples of real estate investing. This is mainly because real estate wholesaling is a concept where a seller, for any reason, decides to enter a wholesale contract with a middle man, who then sells the property to a buyer.

For example, if someone wants to sell a house, a wholesaler will say they will buy it for $200K. In reality, they are not actually buying it, and they are selling it to another investor for a much higher price. Once the wholesaler manages to sell the house for, let's say, $350k, the wholesaler will give the original seller their $200k. And take the remaining $150k as profit.


Differences Between Real Estate Wholesaling and Flipping

Real estate wholesaling is often mistaken for another kind of real estate investment called house flipping. These two share some similarities, but they are worlds apart. 

 The first difference between these two real estate investment concepts is the capital requirement. House flipping usually requires more capital than real estate wholesaling, which usually requires little or no capital. 

Asides from this, wholesaling is much more of a hands-off process because you don't really have to rehab a property or involve yourself in any other intricate process. All you need to do is find a buyer and get your pay.

3 Pros of Real Estate Wholesaling

what is wholesaling real estate

As earlier mentioned, wholesaling is a more convenient option for beginners in the real estate industry. Some of the other benefits of real estate wholesaling include:

1. Earn Profits in a Shorter Time Frame

Wholesaling is one of the only real estate ventures where you can get a deal done within 20-45 days. This means you can make vast amounts of income within a short period if you know your way around the wholesaling market.

2. Become Immersed in the Real Estate Industry

Real estate wholesaling is an excellent opportunity for beginner investors to get fully immersed in the real estate industry. It will teach you virtually all you need to know about selling real estate. Wholesaling is the perfect place to learn marketing, organizing, negotiating, and even how to close your first deal. 

3. Accessible to Those with Limited Cash and Credit

You don't need a lot of capital to start real estate wholesaling. This is why it is the most ideal form of real estate investment for newbies.

3 Cons of Real Estate Wholesaling

Although it might look like wholesaling is the holy grail of real estate, it also has its disadvantages. Some of these are:

1. Unpredictable Cash Flow

Unlike other forms of real estate investments where residual income is expected, e.g., rent from tenants, earnings from wholesaling are scattered and might take months to achieve. 

2. Dependent on Finding Buyers

Sometimes, it can be frustrating to find buyers for your property. This is usually because there are more sellers than buyers in the world of wholesaling. So competition is quite stiff.

3. Buyers List can be Difficult to Maintain

One common problem wholesalers face is keeping track of all their end buyers. Wholesalers have to stay on top of dozens of buyers constantly and, at the same time, seek new properties that are up for sale. 

Is Real Estate Wholesaling Illegal?

Investors often question the validity of wholesaling. Well, I understand where they are coming from. Wholesalers are licensed real estate brokers, so how in the world do they sell properties? The answer lies in the fact that wholesalers don't really sell properties at all; they only sell the rights of ownership over a property. 

How to Become a Successful Real Estate Wholesaler

The first step to getting good at anything, real estate wholesaling included. This article has taught you the basics of what real estate wholesaling is. Next, you will need to learn techniques professionals use in the wholesaling industries. And you can do this by being part of the Everyday Investor Community. 

Get Reliable Real Estate Investment Tips

At Everyday Investors, our objective is to make real estate investment easy by helping you make the right choices. We give you solid investment ideas to adopt on your real estate deals. We also host free webinars concerning real estate investing and teach the latest real estate trends on our online platforms. 


Lastly, our goal is to help investors get started and make the best return on their money from every development project they embark on. Get more FREE content on how to invest in real estate by joining our community list.

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