What is Wholesale Real Estate in Texas? [Insider’s Guide to Finding Distressed Properties]

What is wholesale real estate?

*Updated 9-6-2024

The wholesale real estate 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. 

Our insider’s view and comprehensive guide will walk you through the essential aspects of wholesaling, from finding distressed properties to understanding the legalities involved, and even highlight key Texas markets (and some hidden gems) where wholesale real estate deals thrive.

Finding Distressed Properties

The search for distressed investment properties is the first crucial step in the wholesale real estate business. These off market properties, 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 their property quickly—you can secure wholesale properties at a discount that leaves room for profit once the deal is assigned to a potential buyer. 

From our experience in doing over 2500 real estate transactions from wholesaling houses to fix and flip renovation projects to generating scopes of work on rental properties for institutional investors,  we do offer a note of encouragement for young eager wholesalers.  The first deal is always the hardest when learning how to wholesale real estate so keep your persistence and energy levels high and positive.

Negotiating with Texas Homeowners That Need To Sell Their Property

The 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 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

Once you’ve done the heavy sales lifting and secured a 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 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. Its highly recommend to establish a robust set of standard operating procedures (SOP) 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.

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 (TREC), a real estate license is not required for wholesaling unless you engage in real estate broker activities, such as marketing properties directly to buyers without assigning contracts.

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.

Avoiding Legal Pitfalls

To avoid legal pitfalls, due diligence like confirming legal title is crucial. 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, is also advisable.

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 a old person. The range of conditions in wholesaler houses is wide and therein lives 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.

Challenges in Wholesale Real Estate

While wholesaling offers many benefits, it also comes with its own set of challenges. Here are the cons of the pursuit in our view:

Finding Motivated Sellers

This is by far the most difficult step in successful wholesaling. Finding motivated sellers is a consistent challenge in the wholesale real estate industry. Utilizing unique marketing strategies like online advertising, social media outreach, 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 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.

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.

Steps to Get Started in Wholesaling

If you’re ready to dive into wholesale real estate, here are what we believe are the key steps to get started in generating your own wholesaling business:

Educate Yourself

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

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.

Develop Targeted Marketing Strategies

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

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.

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 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 closing 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 Success in Wholesale Real Estate

To excel in wholesaling, 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, and new investment strategies to stay ahead of the curve.

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 provide valuable knowledge for both beginners and seasoned wholesalers. Here are our favorites:

• Steve Trang’s podcast “Real Estate Disruptors”
• The mother ship 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 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.

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.

*** 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.