Wholesaling is the selling of merchandise to anyone other than a retail customer. The merchandise may be sold to a retailer, a wholesaler, or to an enterprise that will use it for business, rather than individual, purposes.*
With a few tweaks, we can cater this definition to describe real estate wholesaling.
Real Estate Wholesaling
The selling of real estate (or the right to purchase real estate) to anyone other than the retail home buyer. The properties may be sold to another real estate investor, rehabber or landlord that will use it to provide business profit rather than individual use.
Whenever I hear someone ask about how they should get started in real estate investing, the response is typically to become a wholesaler. The classic “guru” pitch for perspective real estate investors is that you can get started in real estate quickly, easily and make huge checks from wholesaling houses for just a few hours worth of effort and no money. Just like every other guru pitch, this sounds good in theory but is very different in reality.
I cringe every time I hear that advice. Sure, there are people that get started with wholesaling and have success, but the vast majority do not. So I was very happy when I listened to BP Podcast 037: Full Time Income, Part Time Lifestyle Real Estate Investing with Aaron Mazzrillo. Aaron, who has done quite a few wholesale deals, also recommends that new investors do not start out with wholesaling.
Below are a few examples that I have seen of people who try to start wholesaling and fail.
Signs of a Newbie Wholesaler
- They attend a local REIA (Real Estate Investors Association) and pass out a “buyer’s application” to investors. This is part of building their buyer’s …read more