Pros and Cons of Real Estate Wholesaling as a Startup Venture

Are you looking for a startup business that requires minimal upfront costs?  Maybe you’re looking for a side gig that can grow into a significant income without having to pour an excessive amount of time into the venture.  In either case, real estate wholesaling might be an ideal startup prospect for you.  Read further about the pros and cons of real estate wholesaling so you can determine if this is a viable startup for you.

How Real Estate Wholesaling Works (and how to make money)

Simply put, real estate wholesaling entails being a middleman between a seller and a buyer.  Instead of purchasing the property, you’re actually providing a transactional service.  As a wholesaler, you are buying the contract from the seller and then selling the purchasing rights to a viable buyer.  

A wholesaler makes money by purchasing low and selling high.  For instance, you might obtain a purchase contract on a foreclosed home and sell that contract to a buyer for an elevated price.  The average wholesale resell can go anywhere from 5% – 15% (or more), which means you could stand to make a tidy profit as a wholesaler.

Pros of Real Estate Wholesaling as a Startup

The most notable pro to wholesaling is that there is no physical property involved. Wholesalers do not have to bother with buying the physical property and fret with the chore of repairing or restoring the property, as is the case with flipping houses.  As a wholesaler, you only deal with the sell-buy contract.  This is a major coup for real estate wholesaling as a startup.

Additionally, wholesaling houses for beginners is a relatively easy startup to get into.  Aside from the initial capital required to make the purchase of your first contract from a seller, the subsequent expenses are minimal.  Because you are providing a transactional service, being a wholesaler doesn’t require you to invest in an education or get a real estate license.  Furthermore, a wholesaler doesn’t necessarily need to work with an agency in order to find deals.

Essentially, you can become a successful wholesaler with just a home office and an internet connection.  You will have to do research on market trends, as well as pin down potential buyers and sellers in order to land contracts.  However, most of this information is public knowledge.  Furthermore, if you join a real estate discussion forum, you can get a lot of this data by interacting with professionals already in the real estate industry. 

Granted, having knowledge of the real estate wholesale industry will give your startup a better advantage to succeed.  However, it’s not a deal-breaker if you do not have experience in real estate.  The beauty of being a wholesaler is that it is a learnable skill if you are determined and don’t mind doing the grunt work to get ahead. 

Cons of Real Estate Wholesaling

Real estate is a fluctuating industry.  Prices and trends in the marketplace are constantly changing according to the economy.  Therefore, investing in real estate contracts can be replete with variables and unknowns in an ever-changing economic environment, which could prove to be a con in the wholesale real estate scene.

Starting out in wholesaling can also pose some problems if you don’t have contacts in the industry.  As you might surmise, real estate can be a tight niche, and it’s also a people-centric industry.  That said, as a startup, you might find yourself struggling if you don’t have an existing solid support group or network in real estate.

Additionally, finding buyers can be a tricky prospect.  While finding motivated sellers is relatively simple by assessing data such as foreclosure lists and Multiple Listing Services (MLS), capturing buyers is a whole different ball game.  As mentioned, landing buyers for purchase contracts is often about who you know in the industry.  It can also be daunting to network and market your services to motivate buyers to use your services – especially if you are just starting out.

Is Real Estate Wholesaling a Good Startup for You?

If you are motivated enough and aren’t afraid of putting in the hard work, real estate wholesaling can be a grand startup.  While it’s true there might be a learning curve in terms of assessing real estate trends and landing buyers – it is definitely a venture capable of earning an admirable income if you are willing to invest your patience, time, and research. 

Alternatively, if networking, attention to detail, connecting with others in the market, and being flexible with an ever-changing market is something that you find distasteful – real estate wholesaling might not be your best option as a startup.  In either instance, real estate wholesale holds a lot of potential for many people seeking a viable startup with relatively minimal upfront investment.