How to Start Wholesaling Real Estate

Want to get in on the real estate game with little money? Look no further than real estate wholesaling! In real estate wholesaling, the wholesaler commits to buying a home at a certain price, then finds a buyer willing to purchase the home for more than that. 

The difference between the two prices is the wholesaler’s revenue. The homes involved in these sales are usually distressed and these transactions typically have no out-of-pocket costs, so getting started requires very little funding. 

But before you hit the pavement in search of bargains, you’ll need some business savvy. Luckily, this step-by-step guide has all the business insights you need to become a wholesale real estate mogul. 

Step 1: Decide if the Business Is Right for You

Pros and cons

Real estate wholesaling industry trends

Industry size and growth

Real estate wholesaling falls under the real estate sales and brokerage industry. 

• Industry size and past growth – The U.S. real estate sales and brokerage industry is worth $222.3 billion in 2023 after growing 2% annually the last five years.((https://www.ibisworld.com/industry-statistics/market-size/real-estate-sales-brokerage-united-states/))
• Growth forecast – The U.S. real estate sales and brokerage industry is projected to decline 6.4% in 2023.((https://www.ibisworld.com/industry-statistics/number-of-businesses/real-estate-sales-brokerage-united-states/#:~:text=There%20are%201%2C189%2C023%20Real%20Estate,increase%20of%205.4%25%20from%202022.))
• Number of businesses – In 2023, 1,189,023 real estate sales and brokerage businesses are operating in the U.S.
• Number of people employed – In 2023, the U.S. real estate sales and brokerage industry employs 1,372,497 people.((https://www.ibisworld.com/industry-statistics/employment/real-estate-sales-brokerage-united-states/#:~:text=How%20many%20people%20are%20employed,the%20US%20as%20of%202023.))

Trends and challenges

Trends

• Energy efficient homes are commanding higher prices, presenting more profit potential for wholesalers.
• Wholesalers need to build a network of investors to buy their properties. 

Challenges

• Each state has real estate wholesaling regulations that need to be followed.
• More people are investing in real estate, increasing competition

Demand hotspots

• Most popular states – The most popular states for real estate wholesaling are California, Texas, and Florida.((https://www.realestateskills.com/blog/best-states-wholesale))

Price differences across the country

• More expensive – Real estate is most expensive in Hawaii, California, and New York.((https://www.forbes.com/home-improvement/features/states-with-highest-home-prices/))
• Less expensive – Real estate is least expensive in Tennessee, Illinois, and Oklahoma.((https://www.rocketmortgage.com/learn/cheapest-states-to-buy-a-house))

What kind of people work in real estate wholesaling?

• Gender – 31.6% of real estate investors are female, while 68.4% are male.((https://www.zippia.com/real-estate-investor-jobs/demographics/))
• Average level of education – The average real estate investor has a bachelor’s degree.
• Average age –The average real estate investor in the US is 47.7 years old.

How much does it cost to start a real estate wholesaling business?

Costs to start a real estate wholesaling business are minimal, ranging from $500 to $1,800. The main expense is marketing.

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$100 - $500	$300
Business licenses and permits	$100 - $300	$200
Insurance	$100-$500	$300
Initial Marketing Budget	$200 - $500	$350
Total	$500 - $1,800	$1,150

How much can you earn from a real estate wholesaling business?

The average wholesaling deal brings in $12,000. After marketing costs, your profit margin will be about 90%.

In your first year or two, you might do five deals a year, bringing in $60,000 in revenue. This would mean $54,000 in profit, assuming that 90% margin. As you gain traction, you might do 15 deals a year. With annual revenue of $180,000, you’d make a tidy profit of $162,000.

What barriers to entry are there?

There are a few barriers to entry for a real estate wholesaling business. Your biggest challenges will be:

• Gaining a thorough understanding of the real estate market
• Competing with real estate investors

Step 2: Hone Your Idea

Now that you know what’s involved in starting a real estate wholesaling business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.

Analyze your competitors 

Research real estate wholesalers in your area to examine their deals and price points.

• Make a list of real estate wholesalers that offer similar services. 
• Review your competitors’ services – their features, pricing, and quality of homes – and marketing strategies
• Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
• Identify your competitors’ strengths and weaknesses. 

This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.

Why? Identify an opportunity

You’re looking for a market gap to fill. For instance, maybe the local market is missing a wholesaler who specializes in high-end properties.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products or services

When you’re wholesaling real estate, you’re essentially selling a contract to the home seller.  The contract gives you the right to purchase the property at a certain price and find a buyer that will pay a higher price within a specified amount of time. 

When you enter into the contract, you’ll give the seller what’s called a good faith or earnest money deposit, which is usually 1-3 percent of the purchase price. If you don’t find a buyer in the specified amount of time, you’ll lose that deposit. 

Who? Identify your target market

You’re going to have two target markets. First, you’ll have to market yourself and your skills to sellers of distressed properties. This is a broad group, so you should spread out your marketing to include Instagram and Facebook.

Then you’ll have to market homes to buyers, who will usually be investors. Your best bet to find real estate investors is LinkedIn. 

Where? Choose your business premises

In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Wholesale Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “home sales” or “property sales”, boosts SEO
• Name should allow for expansion, for ex: “Elevate Realty Group” over “Swift Equity Partners”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation. 

Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward. 

Step 4: Create a Real Estate Wholesaling Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: Provide a concise summary of your wholesaling real estate business plan, highlighting your goals and the value you’ll provide to investors and sellers.
• Business Overview: Explain your real estate wholesaling venture, focusing on how you’ll identify and secure lucrative properties to sell to investors.
• Product and Services: Describe the properties you’ll deal with, such as distressed homes or off-market properties, and outline the services you’ll offer, like property evaluation and negotiation.
• Market Analysis: Analyze the local real estate market, identifying trends, potential hotspots, and areas where your wholesaling business can thrive.
• Competitive Analysis: Identify other real estate wholesalers in your area, detailing their strengths and weaknesses and explaining how you’ll differentiate yourself.
• Sales and Marketing: Outline your strategies for finding and connecting with property sellers, investors, and real estate professionals, including networking, online advertising, and direct outreach.
• Management Team: Introduce key team members involved in your wholesaling business, emphasizing their expertise in real estate, negotiation, and deal sourcing.
• Operations Plan: Describe your daily operations, from property sourcing and due diligence to negotiations and contract assignments.
• Financial Plan: Present financial projections, including startup costs, revenue forecasts, and profit margins for your wholesaling real estate business.
• Appendix: Include additional materials, such as sample property listings, testimonials from satisfied investors, or case studies of successful deals, to support your wholesaling real estate business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to real estate wholesaling. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your real estate wholesaling business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts. Here’s how to form an LLC.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation. Read how to start a corporation here.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. 

You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a real estate wholesaling business. 

Step 8: Apply for Licenses/Permits

Starting a real estate wholesaling business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You generally do not need a real estate license to wholesale real estate, but you need to make sure that you do not act as a real estate agent in any way. Sometimes it’s a fine line between wholesaling real estate and being a real estate broker, so be careful. Check your state’s laws regarding real estate wholesaling to make sure you stay in compliance.

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your real estate wholesaling business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as Deal Machine or REI, to manage your leads, emails, deal flows, and pricing. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Create a website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. 

Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Schedule Consultation Now”. This can sharply increase purchases. 

Marketing

Here are some powerful marketing strategies for your future business:

1. Direct Mail Campaigns: Invest in targeted direct mail campaigns to reach property owners, utilizing well-crafted letters that highlight the benefits of selling to a wholesaler.
2. Social Media Advertising: Leverage social media platforms to run targeted ads, showcasing your successful deals, testimonials, and the advantages of selling properties quickly through your services.
3. Local Community Engagement: Attend local events, sponsor community activities, and collaborate with local businesses to build a strong presence and gain trust within your target neighborhoods.
4. Collaborate with Real Estate Agents: Forge partnerships with real estate agents, offering them a commission for leads that result in successful deals, creating a mutually beneficial relationship.
5. Implement a Referral Program: Encourage satisfied clients, real estate agents, and other industry professionals to refer potential sellers to you by establishing a referral program with attractive incentives.
6. Educational Content: Create informative content through blogs, podcasts, or webinars, educating potential sellers about the benefits of wholesaling and positioning yourself as an expert in the field.
7. Strategic Bandit Signs: Place well-designed bandit signs strategically in target neighborhoods, ensuring they adhere to local regulations, to generate leads from motivated sellers.
8. Utilize Real Estate Auctions: Attend or host real estate auctions to discover distressed properties and connect with property owners interested in quick and hassle-free sales.
9. Implement SEO Strategies: Optimize your online content for search engines, focusing on local keywords and phrases to improve your website’s visibility and attract motivated sellers actively searching for solutions.
10. Offer Creative Financing Solutions: Stand out by providing flexible and creative financing options that appeal to sellers looking for alternatives to the traditional sales process.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your real estate wholesaling meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your real estate wholesaling business could be: 

• Investment properties that will turn into gold
• Real estate consulting to get your home sold fast
• We’ll get your home into contract and sold in 30 days 

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a real estate wholesaling business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in real estate wholesaling for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in real estate. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a real estate wholesaling business include:

• Deal Scouts – search for potential properties
• General Manager – scheduling, accounting
• Receptionist – greet clients in the office

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Wholesaling Real Estate Business – Start Making Money!

Real estate wholesaling is challenging, but it can be very profitable, and you can start for virtually no money. You’ll be helping homeowners who are in trouble and offering great deals to buyers. 

The real estate market is ripe with opportunity, so you could turn your wholesaling business into a major real estate investment firm. Now that you understand the business side of it, the sky’s the limit!