The Concept of Wholesaling

[Tyler Jahnke]

Hello BP!

I'm fairly new to real estate investing and I'm still trying to completely wrap my mind around WHOLESALING. From what I've picked up, can you confirm I'm understanding:

In a nutshell: Wholesalers market themselves well to pick up heavily discounted property, which then they turn around quickly (for a profit markup) to another investor/buyer (potentially looking to renovate/flip it themselves)?

Are they really just a "middle-man" between a seller and investor?

Do they just exist for the investor who doesn't have time or expertise to look for a cheap property themselves?

Why else don't investors just find the cheap properties themselves without having to pay the wholesaler?

Thanks! You guys are awesome!

-Tyler

[Ben Meisel]

Hi @Tyler Jahnke - 

The wholesaler typically doesn't actually buy the property.  They make an offer to the seller and get the property under contract.  The contract is written in such a way that they can "assign" the contract to someone else to be the actual buyer.  After the property is in contract, the wholesaler quickly goes out and attempts to find a buyer who they can assign the contract to.  If the wholesaler has agreed the "buy" the property from the seller for $100k, they might be looking for an actual buyer to buy the property at $105k.  That $5k difference is what the wholesaler pockets when the deal goes through.  The original contract should also be written in such a way that gives the wholesaler outs in case they can't find a buyer.

States vary on the actual logistics, but this is the basic concept.  And typically, a realtor is not necessary.