Wholesaling Real Estate: The Complete Guide to Getting Started Without Big Capital

Wholesaling is one of the few real estate strategies that lets you profit without buying property, getting a mortgage, or risking your savings. You find a deal, lock it under contract, and sell that contract to another investor for a fee.

Sounds simple. And the mechanics are simple. But executing well takes skill, hustle, and a clear understanding of the rules.

This guide breaks down exactly how wholesaling works, what it costs, where people screw up, and how to build it into a real business.

What Is Real Estate Wholesaling?

Wholesaling is the process of contracting a property from a seller and then assigning that contract to an end buyer—usually a fix-and-flip investor or landlord—for a profit.

You never actually close on the property. You're selling the right to purchase at the price you negotiated.

Here's a simplified example:

• You find a distressed property. The seller agrees to $120,000.
• You put it under contract with a $1,000 earnest money deposit.
• You find an investor willing to pay $140,000 for the property.
• You assign the contract to that investor for a $20,000 assignment fee.
• The investor closes directly with the seller. You collect your fee at closing.

Your total investment: $1,000 in earnest money (which you get back at closing) plus whatever you spent on marketing and [driving for dollars](/blog/driving-for-dollars-guide).

How the Wholesaling Process Works Step by Step

Step 1: Find Motivated Sellers

This is the hardest part and where most wholesalers fail. You need sellers who are willing to sell below market value. These are people facing:

• Foreclosure — they need to sell fast before the bank takes the property
• Inherited property — they don't want to manage a house in another state
• Divorce — both parties want out quickly
• Tax delinquency — back taxes piling up, no money to pay them
• Tired landlords — burned out from managing tenants and deferred maintenance
• Code violations — facing fines they can't or won't fix

You find these sellers through:

• Direct mail campaigns — sending letters or postcards to targeted lists (absentee owners, [pre-foreclosure](/blog/buying-foreclosure-guide), tax delinquent). Expect a 1-3% response rate. Budget $0.50-$1.50 per piece including postage.
• Driving for dollars — physically driving neighborhoods and noting distressed properties (overgrown yards, boarded windows, code violation notices). Apps like DealMachine let you snap photos and pull owner info on the spot.
• Cold calling — purchasing skip-traced lists and calling property owners directly. Expect to make 200-400 calls per deal.
• Online marketing — Google Ads, Facebook ads, SEO-optimized websites targeting "sell my house fast [city]" searches. Cost per lead: $50-$200.
• Bandit signs — "We Buy Houses" signs at intersections. Check local ordinances—many cities fine you for these.
• Networking — building relationships with probate attorneys, divorce lawyers, property managers, and other professionals who encounter motivated sellers.

Step 2: Analyze the Deal

Before making an offer, you need to know three numbers:

1. After Repair Value (ARV) — what the property is worth fully renovated. Pull comparable sales from the last 90 days within a half-mile radius.
2. Repair costs — what it'll take to bring the property to market condition. Walk the property or get estimates from contractors. Common ranges: light rehab ($15-$25/sq ft), medium rehab ($25-$45/sq ft), heavy rehab ($45-$75/sq ft).
3. Maximum Allowable Offer (MAO) — the most you can pay and still leave room for your buyer to profit.

The standard MAO formula:

MAO = ARV × 0.70 − Repair Costs − Your Wholesale Fee

Example:

• ARV: $250,000
• Repairs: $40,000
• Your fee: $15,000
• MAO = $250,000 × 0.70 − $40,000 − $15,000 = $120,000

If the seller accepts $120,000 or less, you have a deal worth pursuing.

Step 3: Get It Under Contract

You need a purchase agreement that includes an assignment clause. This clause gives you the right to assign the contract to another buyer.

Key contract elements:

• [Inspection contingency](/blog/contingencies-explained) — gives you a way out if the deal doesn't work (typically 7-14 days)
• Assignment clause — language like "Buyer and/or assigns" in the buyer field
• Earnest money deposit — typically $500-$2,000 for wholesale deals. This goes to the title company or attorney.
• Closing timeline — 21-30 days gives you enough time to find a buyer

Never use a standard realtor purchase agreement without modifications. Have a [real estate attorney](/blog/how-to-build-real-estate-team) in your state review your wholesale contract.

Step 4: Find Your End Buyer

You need a buyers list. This is your most valuable asset as a wholesaler.

Build it through:

• Local REIA meetings — Real Estate Investor Association meetings are goldmines. Show up, network, collect cards.
• Facebook groups — search "[your city] real estate investors" and join every active group.
• Craigslist and Facebook Marketplace — list the property (disclose you're assigning a contract, not selling the property).
• Cash buyer lists — pull recent cash purchases from county records. These are active investors.
• Auction attendees — people bidding at foreclosure auctions have cash and want deals.

When you have a deal, blast it to your list with:

• Property address and photos
• ARV with comps
• Repair estimate
• Your contract price plus assignment fee
• Projected profit for the buyer

Step 5: Assign the Contract and Close

Once you find a buyer, you execute an Assignment of Contract agreement. This document:

• Identifies the original contract
• Names the new buyer (assignee)
• States the assignment fee
• Requires a non-refundable deposit from the buyer (typically $2,000-$5,000)

The title company or closing attorney handles the rest. Your assignment fee is paid at closing from the buyer's funds.

Double Closing: The Alternative to Assignment

Sometimes you don't want the seller or buyer to see your profit. A double close (also called a simultaneous close or back-to-back closing) involves two separate transactions:

1. A-B closing: You buy from the seller
2. B-C closing: You sell to your end buyer

Both happen on the same day, often at the same title company. Some title companies allow you to use the end buyer's funds to close the A-B transaction (transactional funding). If not, you'll need transactional funding from a private lender—typically 1-2% of the purchase price for a 1-3 day loan.

Double closing makes sense when:

• Your assignment fee is large (over $20,000) and you don't want to create friction
• The seller's contract prohibits assignment
• You want to keep your profit private
• The spread is thin and knowing your fee might kill the deal

What Does Wholesaling Actually Cost?

Here's a realistic startup budget:

Most wholesalers spend 3-6 months and $3,000-$8,000 in marketing before closing their first deal. The average wholesale fee ranges from $5,000 to $15,000 per deal, with experienced wholesalers in hot markets earning $20,000-$40,000 per assignment.

Legal Considerations You Can't Ignore

Wholesaling legality varies by state. Some states have cracked down on practices they view as unlicensed brokerage.

States with specific wholesaling regulations:

• Illinois — requires disclosure that you're assigning for profit
• Ohio — recent legislation requires wholesalers to disclose their role
• Oklahoma — limits the number of wholesale deals without a license
• Texas — wholesalers must use specific contract language

General rules to stay legal:

1. You must have equitable interest in the property (a signed contract) before marketing it
2. You're marketing the contract, not the property itself
3. Disclose that you're not the owner
4. Don't advertise the property as "for sale" on the MLS without authorization
5. Consult a real estate attorney in your state before your first deal

Several states now require wholesalers to register or obtain limited licenses. The trend is toward more regulation, not less. Stay informed about your state's requirements.

Common Wholesaling Mistakes

Overestimating ARV. New wholesalers cherry-pick the highest comp to inflate ARV. Use conservative numbers. If you're wrong, you lose your buyer's trust and the deal falls apart.

Underestimating repairs. Walk the property. Bring a contractor if possible. Don't guess on a roof, foundation, or HVAC—those are $5,000-$25,000 line items that change the math completely.

No inspection contingency. Without one, you're stuck if the deal doesn't work. Your earnest money is at risk.

Weak buyers list. If you can't move contracts in 7-14 days, you'll lose deals consistently. Build your list before you start marketing to sellers.

Ignoring follow-up. Most motivated sellers don't say yes on the first contact. The money is in the follow-up. Set up a CRM and follow up at 7, 14, 30, 60, and 90 days.

Not disclosing your role. Trying to hide the fact that you're wholesaling creates legal risk and erodes trust. Be transparent with sellers about your intentions.

Scaling a Wholesaling Business

Once you're closing 2-3 deals per month consistently, here's how to scale:

1. Hire acquisition managers — pay them $40,000-$60,000 base plus a percentage of each deal (10-20% of the assignment fee)
2. Hire dispositions managers — dedicated to finding and managing buyers
3. Systematize marketing — automate direct mail sequences, drip campaigns, and follow-up
4. Add virtual assistants — offshore VAs can handle cold calling, skip tracing, and lead qualification for $5-$8/hour
5. Expand markets — virtual wholesaling lets you operate in multiple cities simultaneously

Top wholesaling operations close 15-30+ deals per month with teams of 5-15 people.

Is Wholesaling Worth It?

Wholesaling works best as:

• A way to learn real estate with minimal risk
• A cash-generating machine to fund other investments (buy-and-hold, flips)
• A full-time business for people who enjoy sales and marketing

It doesn't work if you're looking for passive income, hate rejection, or aren't willing to invest in marketing consistently.

The wholesalers who fail are the ones who treat it as a get-rich-quick scheme. The ones who succeed treat it as a marketing business that happens to involve real estate.

Related Articles

• [[Industrial Real Estate Investing](/blog/industrial-real-estate-investing)](/blog/industrial-real-estate-investing)
• Land Investing Beginners
• [Lease Option Investing](/blog/lease-option-investing)
• Mixed Use Property Guide
• [Mobile Home Park Investing](/blog/mobile-home-park-investing)

Frequently Asked Questions

Do I need a real estate license to wholesale?

In most states, no—but you need equitable interest (a signed contract) before marketing. Some states are tightening regulations. Check your state's specific rules and consult a local attorney.

How much money do I need to start wholesaling?

Realistically, $3,000-$5,000 for initial marketing, earnest money deposits, and contract review. You can start with less using free methods like driving for dollars and networking, but it'll take longer.

How long until I close my first deal?

Most new wholesalers take 3-6 months. Speed depends on your market, marketing budget, and how many hours you put in. Consistency beats intensity.

Can I wholesale properties listed on the MLS?

Technically yes, but it's difficult. Listed properties are priced at or near market value, leaving little room for a wholesale fee. Off-market deals are where the margins exist.

What's the difference between wholesaling and flipping?

Flippers buy the property, renovate it, and sell it for a profit. They take on financial risk, manage construction, and need capital. Wholesalers never own the property—they profit from the contract itself.

Is wholesaling ethical?

When done transparently, yes. You're providing a service: connecting motivated sellers who need fast, hassle-free sales with investors who want discounted properties. Problems arise when wholesalers mislead sellers about their intentions or lock up properties they can't close on.