How to Get into Wholesale Real Estate in Houston, TX

Wholesaling is one of the most profitable ways to break into the real estate investing industry without an immense capital contribution.

The real estate wholesaler enters into a contract on a property before selling it to a new owner. The wholesaler serves as a mediator, selling the home on behalf of the current property owner and keeping a percentage of the contract deal.

If you plan to get into the real estate market without contributing much capital, real estate wholesaling in Texas is an excellent opportunity. Keep reading to learn how wholesaling works in Texas.

What Is Wholesale Real Estate?

Real estate wholesaling is an investment strategy that involves:

• Purchasing an undervalued property that needs significant renovations and improvements before a seller puts it on the real estate market in Texas
• Negotiating a contract with the current owner or seller by offering money to close a real estate purchase fast​
• Finding an end buyer willing to purchase a contract (new property owner). Some potential buyers are also real estate investors looking for attractive properties they can flip and make a profit out of them

When the real estate wholesaler finds a buyer, they will likely sell the home at a wholesale price or less than the current market value. Any buyer willing to purchase a contract will see this as a huge advantage as the properties aren’t publicly listed and there is no big competition.

When you sell, the price should be low enough to attract potential buyers and still help the real estate wholesalers make a profit after the renovating costs.

How to Get into Wholesaling Real Estate in Texas

For beginners, the real estate wholesaling business can be challenging. The process requires understanding the ins and outs of real estate in Houston, Texas, familiarizing oneself with the local law, and having connections.

While it is low in risk compared to other strategies of entering real estate investing, having no connections or being unprepared can lead you to purchase real property without a significant interest or potential value. So, before you prepare a contract and sign your first deal, it pays to know a few things.

Real Estate License

The first question to cross a real estate wholesaler’s mind is whether or not to get a license. While it is helpful to have a real estate license in Texas, it is not imperative.

A license can give you MLS access to listings before they reach the public. For a real estate wholesaler who is constantly looking for estates below market value, this is a big plus, but not necessary.

You can also find deals by searching public records in your area and networking at local real estate investment groups.

Wholesaling Networks

Regardless of whether you have a real estate license, another valuable consideration to think about is networking. As a potential real estate wholesaler in Texas, your goal is to establish connections with realtors, industry professionals, and investors.

Title companies, lawyers, lenders, movers, and other agents are excellent sources from which you can gain information on wholesaling deals and contracts, properties going up for sale, and attractive estates that need renovation. They can help point you in the right direction to find buyers willing to purchase a contract and make a name for yourself while adhering to local law.

The Houston REIA is the largest Real Estate Investment Association in Texas. If you want to grow your connections in the real estate world, The Houston REIA provides access to partners, sellers, buyers, money, wholesale deals, and everything else you need to achieve success. Remember, it is in your best interest to be around people who have experience wholesaling and assigning contracts.

Local Real Estate Market Knowledge

Networking locally and being a part of real estate investor meetings can help you meet the right people and build the right connections.

However, you also need a comprehensive understanding of the local wholesaling market to achieve success.

It is essential to know what properties are attractive, which locations are desirable, what the average prices are, how to negotiate deals, and who the potential buyer is. Investors who purchase real property want to know all the details before signing a contract. So, the more you know, the better.

How to Wholesale Real Estate Step by Step

Below is a list of steps you need to get into the wholesaling business, along with some significant pointers to help you maximize your success rate.

Step 1: Find Motivation and Get in the Right Mindset

One of the first things a beginner real estate wholesaler should do is get in the right mindset to operate the real estate business successfully.

Follow these tips to motivate yourself:

• Set your mind to help people with distressed properties or outdated homes.
• Get ready to invest time and effort to seek out attractive properties, acquire new contract deals, and meet cash investors. With every new contract, you will learn new things and become better at the job.
• The wholesaling business requires you to be communicative, outgoing, and persuasive with sellers and buyers. If you want to sell and make money, you should focus on turning every wholesaling opportunity into a signed contract.

Step 2: Make a Business Plan

It is essential to build your business right from the beginning to operate smoothly. Here are a few things to consider.

• Select a business structure, be it a corporation, limited liability company (LLC), partnership, or sole proprietorship.
• Source the necessary startup capital.
• File an annual report.
• Create a website.
• Find an appropriate logo for marketing your business.

Step 3: Marketing Legally

Before you start your real estate business, you should determine your marketing strategy. How will you promote your properties? Where will you find buyers willing to purchase a contract?

You can always use social media as a marketing tool, but if you want to be even more professional, networking locally and attending real estate investors’ meetings are much better options. Every time you talk to a potential investor or buyer, consider it an opportunity to improve your skills. Instead of waiting for an investor or buyer to come to you, join a local meeting and establish the connection.

You will meet new faces, build connections, and promote your contract deals to the right people. These meetings are great if you want to learn how to talk to sellers, prospective buyers who want to purchase a home, and new investors. It is also an opportunity to discover how to earn higher interest and make more money out of a sale.

Step 4: Master the Wholesaling Process

Once you set your business, it is time to learn how to wholesale real estate like a pro. It is not easy to sell, meet with a seller, negotiate interest, or assign a contract. However, the more you know, the easier it will be.

Here is what you need to do.

Find Potential Properties

The first step is to find off-market properties to sell options. How you find new properties and locations depends on what an investor is looking for at the moment.

Talk to the potential buyer or investor who wants to purchase a new property and see whether you can learn more about what they are looking for.

Based on the answers, find potential entities and see whether the current owner wants to sell the property. If the seller is ready to make a deal, prepare the contract.

Determine Profitable Deals and Avoid Risky Ones

If you want to succeed in the real estate industry, you need to know how to separate profitable deals from risky ones.

Keep in mind that you need to market the information to investors to sell the real property.

Here is what you need to consider:

• How much money would the homeowner ask for the house?
• How much will you have to invest in repairing the property?
• Total utilities, taxes, and fees for buying the house
• The FMV (fair market value) and ARV (after repair value) of the estate

Familiarize Yourself with Offer Contracts

Wholesalers need to understand how to prepare a contract with a local Texas attorney. You will need these documents when you acquire the property from the current owner and transfer the estate to another person.

An offer contract should include the following details:

• A statement verifying your right to sell the property
• A statement proving your right to assign ownership
• A statement confirming your right to promote and show the property to potential buyers

When ready, present the contract to the homeowner and ensure everything is in order. Next, promote your real estate property and present the contract to new investors, ready to conclude a deal.

Step 5: Close the Deal

If the potential buyer is ready to accept your contract offer, you can arrange a transaction and close the wholesale deal.

Sign all closing documents, verify the investor’s property ownership, and receive your award (the interest or selling fee).

Wholesaling vs. Flipping Houses

When researching for real estate investing options, you will come across wholesale and house flipping.

While they may seem similar at first, as both involve an exchange of sorts, there are key differences that may impact your investing options. Both options result in a profit, but the timelines are completely different.

The Benefits and Risks of Wholesale Real Estate

While no investment strategy is risk-free, wholesaling comes with relatively low risk.

• Wholesalers in Texas can enter a deal and prepare a contract, but they don’t have to own the property.
• The process usually moves quickly, allowing the wholesaler to earn more money in a shorter period.
• The wholesaler can always negotiate for a higher interest.
• Wholesale real estate is suitable for investors of all levels.
• No need for large capital to enter the industry.
• You will need to find buyers to make a profit, which can sometimes be tricky.
• If you struggle to sell the property, you might end up selling it for a low price.
• Your interest and income will depend on your property choice.

The Benefits and Risks of House Flipping

House flipping might carry higher risks, but if you are good at what you do, it also means higher rewards.

Investors who prefer to flip a property enjoy the luxury of control. You are the one who makes all the decisions and is in charge of the timeline.

• If you are savvy and familiar with the real estate tricks, you can make a larger profit.
• You can make all renovations yourself.
• It is not the best option for inexperienced investors.
• You might end up with a bad contract and a property that needs more renovating than your budget allows.
• If you fail to anticipate certain repairs, you might sell the home for a lower price.

Wholesaling Real Estate Texas: Local Laws

Wholesaling real estate is legal in Texas as long as you adhere to the local laws and regulations.

Real Estate Brokerage

While you can wholesale apartments, townhomes, condos, and commercial facilities, there is a difference between having a real estate brokerage license and not owning one.

A wholesaler without a license can find residential houses or commercial facilities to offer to interested buyers. You may assign a contract, arrange a sale, and collect interest for your effort.

The Texas Real Estate Licensing Act defines a broker as a person who performs certain acts in exchange for other valuable consideration. If you have a real estate brokerage license, you can promote houses and commercial facilities to attract buyers. When the property sells, you will get a percentage.

Occupations Code

Wholesalers in Texas can get in trouble if they promote a property instead of selling only an option or assigning a contract for the house.

Under the Texas occupations code, someone performing the following acts could face serious legal actions: selling, exchanging, or purchasing a property while acting as a real estate agent or broker without a license issued.

Before you start a wholesaling deal and talk to a potential buyer, it is essential to seek legal advice and discuss the occupations code. Consulting with an attorney prior to signing any contract deal will protect you from getting into legal issues and breaking the law.

Wholesaling Law in Texas

In addition to a real estate brokerage license, here are some essential things you need to know before you arrange your first deal.

Assignments

As a wholesaler, your job is to find a person selling an attractive property and put it under contract.

If there is a potential buyer, you have the right to assign the contract to them and collect the assignment fee.

Double Close

You can find a person selling a property and a person willing to purchase real property in one day and double close the transaction.

Equitable Interest

Wholesalers have an equitable interest in real property, and it is that equitable interest they are promoting and selling.

They are selling the purchase contract and not the property, so the disclosure must state that the person is selling only an option or assigning an interest. Having an equitable interest in a real property gives the holder the right to obtain a legal title.

When entering a deal, a person assigning an interest to purchase real property should fully disclose to the end buyer that the person is selling only a contract and that the person doesn’t have legal title. Before you sign the contracts, it is essential to discuss the legal title with the seller and define the terms. If necessary, get legal advice.

Wholesaling Texas Real Estate: A Final Word

Wholesale houses, apartments, condos, and commercial facilities give investors tons of opportunities to make a profit.

However, don’t forget about the connections and the relationships you need to establish. Each property and person serves as a learning opportunity to become better at selling and closing contract deals.

The most successful wholesalers are part of large networks that help them find deals, locate buyers to sell to, and assign contracts while adhering to Texas real estate law. They are well versed in multiple strategies and can deploy any of them when the timing is right.

The Houston Real Estate Investment Association holds monthly training sessions, covering the full spectrum of investment strategies. Register for our next free session HERE.