Glossary
Wholesaling (real estate wholesale)
Wholesaling is putting a house under contract and selling that contract to another investor for a fee, without buying the house yourself.
The wholesaler finds the deal and locks it up. The end buyer, often a flipper or landlord, closes on the house. The wholesaler earns an assignment fee or the spread in a double close.
How the numbers work
Work backward from what your buyer can pay. Run The Deal uses the buyer's MAO: 70% of ARV, minus rehab, minus any profit buffer. Subtract your fee to get the most you should offer the seller.
- ARV
- $250,000
- Buyer's 70% of ARV
- $175,000
- Rehab estimate
- minus $45,000
- Buyer's MAO
- $130,000
- Your assignment fee
- minus $10,000
The 70% factor and the fee are Run The Deal defaults you can change.
Licensing and legal rules
States are tightening wholesaling rules. Virginia HB 917, effective July 1, 2024, treats dealing in real estate contracts on two or more occasions in 12 months for compensation as brokerage that needs a license. North Carolina HB 797 would define residential wholesaling as brokerage; verify whether it has been enacted. Run The Deal flags these rules, but it is not legal advice. Check with your attorney before you wholesale.
Common mistakes
- An ARV that is too high, which leaves your buyer no room.
- A rehab estimate that is too low. Use the rehab cost estimator.
- Not disclosing in writing that you intend to assign the contract.
See how the 70% rule sets your buyer's price.
Questions
Is wholesaling legal?
It depends on your state and how you do it. Some states now require a license after a set number of deals. Check with your attorney.
How much do wholesalers make?
The fee is whatever the end buyer agrees to pay over the contract price. Run The Deal uses $10,000 as a starting assumption and flags fees under $5,000.
Keep going
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