What Is a Real Estate Wholesaling Business?

If you've been looking into ways to get started in real estate without needing a lot of money or experience, you've probably come across the term "real estate wholesaling." But what exactly does that mean?

In simple terms, real estate wholesaling is a short-term investment strategy where an individual—known as a wholesaler—finds a property that is being sold below market value, gets it under contract, and then assigns that contract to another buyer (usually a real estate investor), earning a profit in the process.

Let’s break that down and explain how this works.

How Real Estate Wholesaling Works

Wholesaling is all about finding discounted properties—typically distressed homes or properties from motivated sellers—and connecting them with investors or buyers looking for deals.

Here’s a step-by-step example:

Find a Property Below Market Value
The wholesaler identifies a home that may be in poor condition, inherited, or that the owner wants to sell quickly.
Negotiate and Get the Property Under Contract
The wholesaler enters into a contract with the seller to purchase the property at an agreed price, say $120,000.
Assign the Contract to a Cash Buyer or Investor
Instead of buying the property, the wholesaler assigns the contract to another buyer for a higher price—say $130,000.
Earn a Wholesaling Fee
The wholesaler makes the difference between the contract price and the sale price. In this case, it’s $10,000.

What Makes Wholesaling Unique?

The key thing to understand is that wholesalers don’t usually buy the property themselves. Instead, they are selling the rights to buy it—this is known as contract assignment. It’s a legal and common practice in many areas (though laws vary by state).

This makes wholesaling an attractive option for beginners because:

You don’t need large amounts of capital.
You don't need to repair or renovate the property.
You can learn real estate with minimal risk.

It’s like being the “middleman” in a transaction—but with the potential to earn $5,000 to $20,000+ per deal if done right.

Who Are the Buyers?

Most of the time, wholesalers sell to:

House flippers looking for cheap properties they can fix and sell for a profit.
Buy-and-hold investors who want rental properties at a discount.
Cash buyers who are looking to close deals quickly.

This is why having a good network of investors is key to wholesaling success.

Pros of Real Estate Wholesaling

✅ Low Start-Up Costs
You don’t need to buy the house, so you’re not risking big money.

✅ Fast Profits
Wholesaling deals can close in days or weeks.

✅ Great Learning Opportunity
You get to learn about real estate, negotiations, and contracts without a big investment.

✅ Scalable
Once you build a buyer list and a lead pipeline, you can close multiple deals per month.

Cons and Challenges

❌ Hard to Find Good Deals
You’ll need to put in effort to find motivated sellers.

❌ Legal Restrictions in Some States
Some states have rules requiring a real estate license to wholesale legally.

❌ Buyers May Back Out
You’re relying on your end-buyer to close the deal, so having backups is important.

❌ Reputation Matters
If you don’t act ethically or honestly, word travels fast in real estate circles.

How to Get Started in Wholesaling

Learn the Basics
Read books, watch YouTube videos, or take an online course about wholesaling real estate.
Build a Buyer’s List
Connect with local real estate investors. Go to meetups, online forums, or use platforms like Facebook and BiggerPockets.
Find Leads
Look for distressed properties, foreclosures, probate homes, or FSBO (For Sale By Owner) listings. You can use tools like PropStream or Driving for Dollars.
Understand Contracts
Use a standard real estate purchase agreement and learn how the assignment clause works.
Market the Property
Once you have a property under contract, market it to your buyer list with all the essential details (price, repair estimates, photos, etc.).
Close the Deal and Get Paid
Once the end buyer agrees, assign the contract and head to the closing table.

Is Real Estate Wholesaling Legal?

Yes, real estate wholesaling is legal in most parts of the U.S.—as long as it’s done correctly. Some states are cracking down on illegal or misleading practices. It’s smart to: