Wholesale Real Estate in Texas [Insider’s Guide to Wholesaling Distressed Properties]

What does a Texas wholesaler do?

*Updated 10-28-2024

Wholesale real estate is an investing strategy that has gained significant traction in the housing market, especially in Texas. But what is wholesale real estate in Texas? At Bright Bid Homes, we have a unique perspective to offer as we are active real estate wholesalers in the state of Texas. 

As licensed Texas realtors with over 40 combined years in Texas real estate, our Bright Bid Homes team offers an insider’s view of wholesaling, from finding distressed properties to understanding the legalities involved, and even highlight key Texas markets (and some hidden gems) where the wholesaling process thrives.

Finding Distressed Properties For Sale

The search for distressed investment properties is the first crucial step in the wholesale real estate business. These off-market properties (mostly single-family homes), often sold below market value due to the homeowner’s financial or personal problems, are the bread and butter of real estate wholesalers. By identifying motivated home sellers—homeowners eager to offload the property quickly—you can secure wholesale properties at a discount that leaves room for profit once the deal is assigned to a potential buyer. Performing due diligence is essential when these properties to ensure they are a viable investment.

From our experience in doing over 2700 real estate transactions from wholesaling houses to fix and flip renovation projects to generating scopes of work on rental properties for institutional investors – we offer a note of encouragement for young, eager wholesalers.  Breaking into Texas wholesaling is challenging but highly rewarding. Our team has seen new wholesalers close deals within six months of starting, with a notable jump in confidence and negotiation skills by the third transaction. Maintaining positivity and reviewing each lesson learned can expedite your progress.

Negotiating with Texas Homeowners That Need To Sell Their Property

Deal-making with property owners requires strong sales skills, tact and in-depth knowledge of the real estate market. The goal is to secure a purchase agreement – or purchase contract – at a fair and reasonable price after factoring repair value and any costs associated with a hard money lender, ensuring that the deal remains attractive to both the seller and the end buyer. As a real estate wholesaler, mastering the art of negotiation can significantly impact your ability to close profitable deals.

Contract Assignment in Wholesaling

Once you’ve done the heavy sales lifting and secured a sale of the property under contract (yay!), the next step is assigning the contract to an end home buyer, often an investor.

The assignment of contract allows you to transfer your rights in the real property to the buyer and investor, and thereby earning you an assignment fee. This assignment fee is how much money you make and it is typically the difference between the purchase price agreed upon with the homeowner and the higher price from the new buyer agrees to pay. 

From our experience, one important to make and emphasize to new wholesalers, it is imperative to make a real estate wholesale transaction work, you must leave “meat on the bone” for everybody.  It must be a good deal for you, the home seller, and the new buyer.  Profitability and fairness for everybody in the transaction is paramount to build a long-term sustainable business to wholesale houses.  It is difficult to find both home sellers and find cash buyers.  We have seen too often how newbies wholesaling houses burn their customers and any chance of repeat business evaporates. It’s highly recommended to establish a robust set of standard operating procedures (SOPs) like a wholesale contract template for your company specifically for buyers of wholesale investment properties that strictly comply with all wholesaling laws and regulations per the TREC contract. Ensure that all parties provide written consent in accordance with Texas law.

Real Estate Wholesaling Laws: Legal Aspects in Texas

Understanding the legal framework surrounding wholesale real estate in Texas is essential to ensure your business operates within state laws. Here are the primary items that all aspiring Texas wholesalers should know:

Texas Real Estate Licensing Requirements

In Texas, the question often arises: Is wholesaling real estate legal in Texas? Do you need a license to be a wholesaler in Texas? Do I need a license to wholesale real estate? According to the Texas Real Estate Commission’s official wholesaling guidelines, a real estate license is not required for basic wholesaling. However, per TREC’s 2024 regulations, engaging in certain activities like marketing properties directly to buyers without contract assignment may require licensing

However, it’s crucial to understand the Texas Occupations Code and the Real Estate License Act to ensure compliance with state regulations.

Key Legal Documents

Key legal documents in wholesale real estate in Texas include the wholesale real estate contract often called a purchase sale agreement (PSA), assignment contract, and often a double closing agreement. It’s important to understand these documents and ensure they comply with Texas Property Code to avoid potential legal issues.

Additionally, an earnest money contract may be used to secure the transaction, and obtaining written consent from all parties is essential.

Avoiding Legal Pitfalls

To minimize legal risks, always consult with a qualified real estate attorney for legal title verification and contract review, especially when dealing with complex or out-of-state buyers. A single overlooked detail can lead to costly delays or legal complications.

Ensure all transactions are transparent, follow Texas wholesaling laws, and seek legal advice from a real estate attorney when necessary. Familiarizing yourself with Senate Bill 2212, which regulates certain aspects of wholesaling in Texas and real estate brokerage, is also advisable.

Senate Bill 2212, which went into effect September 1, 2021, specifically requires wholesalers to provide written disclosures about their nature of equitable interest in the property and their role in the transaction. According to the bill’s Section 1101.0045, failure to provide these disclosures can result in significant penalties.

Under Chapter 5 of the Texas Property Code, specifically sections 5.085 through 5.087, wholesalers must ensure proper documentation of all transactions and maintain transparency in contract assignments. The code provides specific requirements for disclosures, contract terms, and buyer protections.

Benefits of Wholesaling Real Estate in Texas

Wholesaling real estate in Texas offers several benefits, making it an attractive investment strategy. Here are the reason why:

Low Initial Investment and Capital Outlay

One of the biggest advantages of wholesaling is the low initial investment required. Since you’re not purchasing the property outright, you can start with minimal capital, focusing on securing the property under contract (we recommend using a TREC contract) and then finding cash buyers.

No Repairs. No Renovation. No Remodeling Needed

Unlike flipping houses, wholesaling doesn’t require you to invest in renovations which can drain your finances and any minimal salary you have. Your role is to connect motivated home sellers with real estate investors looking for off-market deals, saving time and money for all sides. The homes are usually in a state of disrepair from problems like water damage to a fire damaged property to even a house that smells like an old person. The range of conditions in wholesaler houses is wide and therein lies great opportunity.

Quick Turnaround

The cash conversion cycle of wholesaling is unbeatable. Wholesale deals typically close faster than traditional real estate transactions. Once a property is under contract and a buyer is found, the deal can close in a matter of weeks, allowing you to move on to your next opportunity quickly.

Wholesaler Challenges: How Hungry Are You To Succeed?

While wholesaling properties offers many benefits and can be very lucrative, it also comes with its own set of challenges. Here are the cons of making wholesaling as your primary business income source in our view:

Finding Motivated Sellers

A core challenge in wholesaling is locating motivated sellers who are ready for a quick transaction. This is by far the most difficult step in profitable wholesaling. Successful strategies often include targeted online ads on platforms like Facebook Marketplace, direct mail tailored to homeowners in high turnover neighborhoods, and collaboration with local Texas real estate agents who frequently encounter distressed properties.

Utilizing unique marketing strategies like door knocking, bandit signs and building a local real estate network can help identify potential deals. Often, these home sellers have tried every tactic available to them beyond just a traditional listing from selling their house on Craigslist or just praying to St. Joseph to sell their house.

Building A Big Cash Buyers List

Building a robust buyer’s list is essential for success. This cash buyer list should include real estate professionals, institutional investors like private equity and hedge funds, fix n flip contractors, and cash buyers interested in purchasing properties quickly. The larger your buyer list, the easier it will be to assign contracts and close deals at higher margins.

Developing a strong network and maintaining updated contact information is key.

Navigating Housing Market Cycles

Market fluctuations can impact the availability of distressed properties and the interest of buyers. Staying informed about local market trends in cities like Austin, Dallas, and San Antonio will help you navigate these changes effectively.

Performing due diligence on each market’s conditions is essential to mitigate risks.

According to the latest Texas A&M Real Estate Research Center market analysis, wholesale opportunities are particularly strong in emerging markets like New Braunfels and Round Rock, where property values have increased by 15% year-over-year while distressed property availability remains high

Step-by-Step Guide To Get Started in Wholesaling

If you’re ready to dive into the wholesaling business, here is the best way and key steps to get started in building your own wholesale real estate company:

Educate Yourself

The first step is education. Understanding what buying and selling investment properites in Texas entails, the legalities involved, and the best practices is crucial. Consider taking courses, reading books, and learning from successful wholesalers.

Familiarize yourself with the Texas Real Estate License Act and Texas law to ensure compliance.

Build a Network

Building a network of real estate investors, agents, and other industry professionals will support your wholesaling business. Networking events like your local REIA, real estate investing clubs, and online forums like Bigger Pockets or Reddit are great places to start.

Developing a strong network can open doors to investment opportunities and prospective buyers.

Develop Targeted Marketing Strategies

Developing effective marketing strategies is essential to finding motivated sellers and buyers. Consider using online advertising, social media, direct mail, and email marketing to reach potential clients.

Utilizing real estate platforms can also expand your reach.

Key Markets for Wholesaling in Texas

Texas offers several key markets ideal for wholesaling, each with its own unique opportunities. Here are the major markets like DFW and some smaller cities that we suggest to analyze for yourself as we see high potential.

Don’t overlook areas like El Paso and other smaller markets, as they can offer unique opportunities in both residential and commercial real estate.

Success Stories: Case Studies

Learning from the experiences of others can provide valuable insights.

A Successful Wholesale Deal in Dallas, Texas

One successful wholesale deal we made in Dallas, TX secured a distressed property with foundation issues and major repairs needed.  But, the rental property was located in a rapidly appreciating DFW neighborhood. By identifying the problem the homeowner had that they simply needed money quickly and wanted the convenience of not having to remodel the house themselves, a deal was made and the house came under contract. 

Our team was able to easily find cash buyers from our network of homebuyers and got the TREC contract assignment completed along with a fast cash double close in just two weeks from the date of the signed contract.  The assignment fee was in total of $17,000 and the cash buyer was able to make a significant capital investment in the house to upgrade the dated look and flip it onto the MLS (Multi Listing Service) retail market and got a big bump and gross profit of $44,000.  This success story made it a truly win-win-win scenarios for all parities involved – homeowner, cash buyer, and wholesaler.

Lessons Learned from a Challenging Deal in Fort Worth

An example of a challenging deal we faced in Fort Worth TX when a deal fell through due to title issues. This experience underscored the importance of working with a reliable and reputable title company and conducting thorough due diligence.  The original buyer backed out of the deal and it took agreement with the home seller to extend the purchase agreement contract to find a second buyer. The home seller was not even aware of the title issues that prevented the first transaction from happening. But again, resilience and persistence were the common theme in our team and the determination to both close the deal and help homeowners solve their real estate problems got us past the finish line to a closed home sale.

Insider Tips for Wholesaling Properties Successfully

To excel in wholesaling in residential real estate, consider these tips.

Stay Organized

Staying organized is crucial when juggling multiple deals. Use tools like CRM software to manage contacts, contracts, and deadlines.

Continually Educate Yourself

The real estate industry is constantly evolving. Continually educate yourself on market trends, legal updates, national, new investment strategies, and know your competition to stay ahead of the curve.

We think the last item about knowing your competition is the make or break piece of knowledge. Who are you competing against? National companies like New Western or Myers? Or is it a new one man shop that is hungry to prove himself or herself? We call this the “lone wolf” phenomena and its powerful. Often, you can partner with these new kids on the block by sharing knowledge and your buyer’s list and turn a competitor into a partner!

Leverage Technology

Leverage technology to streamline your wholesaling business. From using real estate specific CRMs and apps for deal analysis to social media for marketing, technology can enhance your efficiency and dramatically expand your reach and amplify your sales funnel. 

One trend that we are not in favor of is the current rise of “virtual wholesaling” which we are not believers in.  We are big proponents of physically walking houses (as compared to Facetime) and shaking the hands of the homeowners and getting to know them personally so we can get better perspective on how to solve their challenges.

We simply think that virtual wholesalers cannot provide the level and quality of customer service that a homeowner with such a major financial decision to make needs to have.  We are believers in person to person interaction.  Texan to Texan!

Resources and Tools for Wholesalers

Here are some recommended resources to help you succeed:

Recommended Websites, Books and Courses

Be a voracious reader of books, podcasts and courses offered by industry experts to gain valuable knowledge for both beginners and seasoned wholesalers. Here are our favorites:

• Steve Trang’s podcast “Real Estate Disruptors”
• The mothership of real estate investing Bigger Pockets is a must follow for all real estate wholesalers and investors.
• Online forums like Reddit are highly useful to gain knowledge and build your real estate skills from user generated content with specific questions.

Useful Software and Apps

Tools like Backflip’s app and deal analyzer and Propwire for property analysis, DocuSign for electronic signatures, and MailChimp for email marketing can streamline your operations.

Consider using real estate platforms and investment real estate software to perform due diligence and manage your deals efficiently.

The Future of Wholesaling in Texas

The future of wholesaling in Texas looks promising as the entire state of Texas is in a high growth phase with top business leaders like Elon Musk moving their corporate headquarters and thousands of staff to Texas for companies like SpaceX, X (formerly Twitter), and more.

However, staying informed about changes in real estate laws and whole saling market trends will be crucial for ongoing and sustained success.

Texas real estate wholesaling offers a unique and potentially lucrative real estate investment strategy with low initial capital outlay. But success requires persistence, education, and a solid understanding of the wholesaling legal landscape. By following the steps outlined in this guide, you can build a successful wholesaling business and tap into the lucrative Texas real estate market.

* *About the author:

Hilary Schultz—a licensed Texas Realtor and real estate professional — is a leading authority on DFW metroplex real estate. Hilary is a member of the executive board of her local Texas PTA and active member of the Texas community.  Along with her husband Patrick, they have combined 40 years of experience with over 2700 real estate transactions completed. Read our online reviews to see our passion to help the Texas community and provide homeowners with valuable insights, guidance, and a personalized experience through the home selling process. Let us serve you and help to navigate the housing market on your real estate journey.

*** Disclaimer:

This article contains information that could impact financial and legal decisions. It is important to note that this information is provided as a general guide and is not tailored to your specific situation. For matters concerning your financial well-being or legal obligations, please consult with a qualified professional who can provide personalized advice based on your unique needs and circumstances. The author and publisher disclaim any liability for actions taken based on the information provided in this blog post.