Wholesaling Real Estate FAQ
12 frequently asked questions about real estate wholesaling: how it works, contracts, the MAO formula, building a buyers list, and making your first wholesale deal.
What is real estate wholesaling?
Wholesaling is finding a distressed property, securing it under contract at a below-market price, and assigning that contract to a cash buyer investor for a fee, typically $5,000 to $30,000. The wholesaler never takes title or renovates the property. Profit comes from the spread between the contract price and what the end buyer pays.
Do I need a real estate license to wholesale?
In most states you can wholesale without a license by assigning the purchase contract. However, several states (Florida, Illinois, Oklahoma, and others) have laws that restrict or regulate wholesaling. Always consult a local real estate attorney before wholesaling at scale in any state.
How much money do I need to start wholesaling?
Wholesale deals typically require $1,000 to $5,000 for earnest money deposits, plus marketing costs. Some wholesalers start with as little as $500 using free social media marketing. The low capital requirement is one of wholesaling's main appeals for new investors.
What is an assignment fee?
An assignment fee is what the wholesaler earns when they transfer their purchase contract rights to a cash buyer. If you have a property under contract at $150,000 and sell your contract rights for $165,000, your assignment fee is $15,000. The end buyer closes the deal; you never purchase the property.
What is a double close in wholesaling?
A double close is when the wholesaler actually buys the property and immediately resells it the same day. It is used when the spread is very large, or when your buyer won't accept an assignment. It requires transactional funding (short-term bridge capital) for the first purchase.
How do I find motivated sellers for wholesale deals?
Top sources: absentee owner lists, pre-foreclosure data, tax delinquent leads, probate filings, vacant property lists, and driving for dollars (spotting visibly distressed properties). Re:InvestorHub provides all these data categories so you can build targeted lists in your market.
What is the MAO formula for wholesaling?
MAO (Maximum Allowable Offer) = ARV × 70% − Repair Costs − Your Assignment Fee. Example: ARV $200,000, repairs $30,000, assignment fee $15,000 → MAO = ($200,000 × 0.70) − $30,000 − $15,000 = $95,000. Use the free MAO Calculator at /tools/mao-calculator.
How do I build a cash buyers list?
Search deed records for recent cash purchases (no deed of trust = cash buyer), attend local REIA meetings, network in real estate investor Facebook groups, post deals in investor forums, and use Re:InvestorHub's cash buyers list to identify active buyers in your target ZIP codes.
What should be in a wholesale purchase contract?
A wholesale contract must be assignable ("and/or assigns" after your name), include an inspection contingency or due diligence period, specify the earnest money amount, include a closing date, and have clear assignment language. Always have a real estate attorney review your contract template.
What is virtual wholesaling?
Virtual wholesaling means finding deals and buyers in markets where you don't live, operating entirely remotely via virtual assistants, local contractors for property walkthroughs, and electronic signing for contracts. It lets you target high-velocity markets regardless of your location.
How long does a wholesale deal take to close?
Most wholesale deals close within 7 to 21 days. Most wholesalers request 14 to 30 day closing windows with extension options to give enough time to find an end buyer.
What are the biggest mistakes new wholesalers make?
The biggest mistakes: overestimating ARV, underestimating repairs, building a buyers list after having a deal under contract, not having a signed contract before marketing the deal, and paying too much earnest money without escape clauses. Always lock down your exit strategy before committing.