Real Estate Glossary

Real Estate Wholesaling (Wholesale)

Quick Answer

Real estate wholesaling is a strategy where an investor contracts a property at a below-market price, then assigns that contract to a cash buyer for an assignment fee — typically $5,000-$25,000 — without ever owning the property. It requires finding motivated sellers and building a buyers list.

What is Real Estate Wholesaling?

Real estate wholesaling is an investment strategy where the wholesaler acts as a deal-finder and middleman rather than a property owner. The process begins with finding a distressed or motivated seller willing to accept a below-market offer. The wholesaler signs a purchase contract — but instead of closing on the property personally, they assign (transfer) the contract to a cash buyer (typically a fix-and-flip investor) for an assignment fee, which represents the difference between the contracted price and what the cash buyer is willing to pay. Wholesalers never take title to the property, which means no need for a mortgage, renovation budget, or holding costs — making it the most capital-efficient entry point into real estate investing. The key skills are: (1) finding deeply discounted deals (direct mail, cold calling, driving for dollars), (2) accurately calculating ARV and MAO so both the seller price and buyer price make economic sense, and (3) maintaining a buyers list of active cash purchasers who can close quickly. Profit per deal typically ranges from $5,000 to $25,000+, with volume being the primary driver of income. Licensing requirements for wholesaling vary by state.

Wholesale Formula

Wholesale Profit = Buyer's Price − Contracted Purchase Price − Assignment Costs

Wholesale Example

Scenario

Wholesaler contracts a distressed home at $95,000 (seller's price). ARV = $180,000, repairs = $35,000. MAO for buyer = (180K × 70%) − 35K = $91,000.

Numbers

Wholesaler contracts at $95,000. Finds a cash buyer willing to pay $108,000 (still within buyer's acceptable margin).

Result

Assignment fee = $108,000 − $95,000 = $13,000 profit to wholesaler.

Frequently Asked Questions

Do you need a real estate license to wholesale?+

Requirements vary by state. Most states allow wholesaling of properties you have under contract without a license, since you are selling equitable interest, not real property. However, some states (like Illinois and Oklahoma) have enacted regulations requiring wholesalers to hold a license. Always consult a real estate attorney in your state.

How much money do you need to start wholesaling?+

Wholesaling is the lowest-capital entry into real estate investing. You typically need enough for earnest money ($500–$2,000), marketing costs (direct mail, skip tracing), and basic business setup. Many wholesalers start with under $5,000 in working capital.

What is an assignment fee?+

An assignment fee is the profit a wholesaler earns by transferring their purchase contract to a cash buyer. It is the spread between the price the wholesaler contracted with the seller and the price the cash buyer pays. Assignment fees typically range from $3,000 to $25,000+ depending on deal size and market.

What is a double close in wholesaling?+

A double close (or simultaneous close) is an alternative to assignment where the wholesaler briefly takes title to the property before immediately selling it to the end buyer — two closings happen on the same day. It hides the assignment fee from both parties and is used when contracts prohibit assignment or when buyers object to seeing the markup.

Related Terms

Arv Mao Comps