What is ‘Wholesaling Real Estate’? It is simply the act of providing discount priced real estate deals to ready, willing and able investors, and sometimes ‘retail’ buyers as well.

Read on to find out what you should already know about wholesaling real estate and how you can make sure you are reaping the rewards.

Let's begin by differentiating between an investor and a ‘retail’ buyer. For the sake of defining ‘wholesaling’ you need to know if you are actually a candidate for a wholesale deal. An investor is someone who purchases real estate solely for the purpose of making money. A ‘retail’ buyer purchases, often to get a good deal, but ultimately, to live in the property.

A ‘wholesale’ deal is not always only for investors; in certain situations a retail buyer can purchase it. It all depends on how the ‘wholesaler’ has control of the property. You see, a wholesaler is no different than a company that buys a product in bulk from the manufacturer in order to get a discount, then marks up the price and resells to a retail vendor, such as a grocery store. However, in most wholesale real estate situations the wholesaler doesn’t actually purchase the property. Instead they control it using a real estate purchase and sale contract.

If you are not familiar with the different ways of ‘controlling’ a piece of real estate, that’s fine, just know that there are different ways. As an investor this only matters to you to the extent of how you can purchase it: traditional financing, cash, private funding or hard money. (Of course there are also partial financing options that allow you to take a property ‘subject-to’ the current financing, or if the seller will hold a note (financing) for you.)

So this brings us to the question of why a wholesaler gets paid. I mean, he only found a desperate seller and had them sign a piece of paper, right? Actually, as a true investor you are either putting your money into the deal, or your business experience to run a rehab or manage the property as a rental. The wholesaler is your marketing expert. Just like a wholesaler in the grocery store chain works in bulk, so does the real estate wholesaler. He, or she, goes through hundreds of leads to find the best deals (using specialized marketing tactics), and then markets to find you, the investor. And all this marketing is not free.

Knowing how the system works, you need to know a couple of rules when it comes to working with wholesalers. First of all, they are bringing you a commodity that is very valuable and if others knew about it they would snatch it up in a second! Consider yourself lucky to be given the opportunity for these deals. (Of course not every wholesaler, or wholesale deal is worth its weight in gold; you have to use your own judgment.)

A good wholesaler also does a lot of background work by providing comparable sales, assessed values, repair estimates, pictures, rental breakdowns, tax and insurance info, and even sometimes videos of the property.

The first thing you need to do to keep getting these real estate deals is to do what the wholesaler says. If they say don’t bother the tenants, don’t do it. If they ask you to be discreet about your intentions, be discreet. And if you ever think of trying to cut them out, you should probably just drop out of the game now and save yourself the aggravation.

What you really need to know is that real estate wholesalers are providing you, as an investor, a great service; saving you time and aggravation and keeping your pipeline full so you can keep making money however you choose to do it. Wholesaling is a fulltime business if done right and produces great opportunities for good investors. So even if someone makes a million dollars on a wholesale deal that fits your buying criteria you should not even think of feeling like you should have gotten more. They are only getting paid in proportion their skill level; just like everyone should.