Wholesaling

What is wholesaling?

Wholesaling is a real estate strategy where the wholesaler finds a deeply discounted property, usually from a motivated seller facing foreclosure, inheritance, disrepair, or urgency, signs a purchase contract, and then sells (assigns) that contract to an end buyer, typically a flipper or landlord, for an assignment fee. The wholesaler never takes title; they are paid for finding and controlling the deal.

The economics live inside the end buyer’s math. A flipper following the 70% rule will pay at most 70% of ARV minus repair costs, so the wholesaler must contract below even that to leave room for their fee, typically $5,000 to $15,000 per deal. The real work is marketing for motivated sellers (direct mail, cold calling, driving for dollars), accurately estimating ARV and repairs, and maintaining a list of cash buyers who close reliably.

Wholesaling is often pitched as no-money-down entry to real estate, but it is a sales business, not passive investing, and its legal footing demands care. Several states have tightened rules requiring licensure to market properties (versus assigning contracts) or capping unlicensed activity, and ethical practice requires transparency with sellers about intent to assign. Deals also fail when wholesalers overestimate ARV, underestimate repairs, or cannot find a buyer before closing, reputation with both sellers and buyers is the durable asset.

Worked example

A wholesaler contracts a dated house from a motivated seller at $95,000. Comparable renovated homes sell for $180,000 and repairs run $35,000, so a flipper using the 70% rule would pay up to $91,000... the deal is too thin. At a $85,000 contract price instead, the wholesaler assigns to a flipper at $91,000 and earns a $6,000 assignment fee without ever owning the property.

Frequently asked questions

Is wholesaling legal?

Assigning a purchase contract you legitimately hold is legal in most of the U.S., but the regulatory trend is tightening. Several states now require a real estate license to wholesale or restrict marketing a property (as opposed to marketing your contract), and disclosure requirements vary. Before starting, research your state’s current rules and consider consulting a real estate attorney, penalties for unlicensed brokering can be severe.

How much money do wholesalers actually make?

Typical assignment fees run $5,000 to $15,000 per deal, but gross fees are not profit: consistent deal flow requires marketing spend (direct mail, ads, dialers) that commonly costs thousands per closed deal, and most new wholesalers close few or zero deals in their first months. It is a low-capital but high-effort sales business where success correlates with marketing persistence and accurate deal analysis, not a passive income stream.

Related terms

• 70% Rule
• After-Repair Value (ARV)
• Comps (Comparable Sales)
• Due Diligence