The actual business
Strip away the marketing and wholesaling is three functions. Lead generation — driving for dollars, direct mail, cold outreach to absentee owners, probate and pre-foreclosure filings — which is most of the work and most of the cost. Underwriting, which means knowing what a property is worth in its current condition, what it would cost to repair, and what a cash buyer in that neighborhood requires as a return. And a buyers list of investors who close reliably. The person who is good at all three has a business; the person who is good at only the first has a lot of contracts nobody wants.
Where the numbers have to be right
The fee lives in the gap between your contract price and what an investor will pay, and that gap only exists if the contract is genuinely below market. That means after-repair value from real comparable sales rather than the highest number on the street, a repair scope priced the way a contractor would price it rather than optimistically, and enough margin left that the end buyer still profits after their own costs. Contracts written at retail do not assign at any price, and a pattern of tying up properties and failing to close destroys the seller relationships the business runs on.
Target contract price ≈ (ARV × 0.70) − rehab − your assignment fee. On a $200,000 ARV needing $30,000 of repairs with a $10,000 fee, that is roughly $100,000.
The legal boundary
This is the part that changes fastest. What you are permitted to market is generally your contractual interest, not the property itself, and blurring that line moves you toward activity many states treat as brokerage requiring a license. A growing number of jurisdictions now require disclosure of your intent to assign, cap how many transactions you can do without licensure, or regulate the practice directly, and penalties are not theoretical. Get a real estate attorney in your state to review your contracts, your marketing language, and your disclosure practice before your first deal.
Why most quit
It is a volume business that looks like a shortcut. Hit rates on cold outreach are low, most deals die, and the money arrives in irregular lumps. The operators who last treat it as marketing plus underwriting plus disciplined follow-up in a CRM, and they measure cost per contract rather than counting leads.
Put it to work
Real estate investing strategies →
Related terms
- Assignment of contract — Selling your position in a purchase contract to another buyer instead of closing on the property yourself.
- Double close — Two back-to-back closings on the same property, usually the same day: you buy from the seller, then immediately sell to your end buyer.
- MAO (maximum allowable offer) — The highest price you can pay and still hit your target profit, most often derived from the 70% rule: ARV times 0.70 minus rehab.
- 70% rule — A flip and BRRRR guideline: pay no more than 70% of the after-repair value minus estimated rehab.
- ARV (after repair value) — The estimated market value of a property once renovations are complete, based on comparable recently sold homes.
- Driving for dollars — Physically driving target neighborhoods to spot properties that look neglected — boarded windows, tarped roofs, piled-up mail, dead lawns, notices taped to the door — then researching ownership and reaching out.