How do wholesalers get paid depends entirely on what they wholesale. If you move physical goods, you get paid through the markup: you buy inventory in bulk at a discount and resell it to retailers for more than you paid. If you wholesale real estate, you never own the property at all. You put a house under contract with a seller, assign that contract to an end-buyer, and collect an assignment fee at closing, averaging roughly $13,000 nationwide. Both models live or die on the spread between what you pay and what the next buyer will pay you.
The Markup Model for Product Wholesalers
A goods wholesaler negotiates a bulk price with a manufacturer, warehouses the inventory, and resells it to retailers at a higher price. Buy a product for $50, sell it to a retailer for $75, and the $25 spread is gross profit. That 50% markup isn’t take-home money. It has to cover warehousing, shipping, insurance, handling, and the cost of capital sitting in unsold stock. Gross margins across wholesale distribution generally land in the mid-teens as a percentage of revenue once those costs come out.
Two other levers pad the payday. The first is the early payment discount, written in supplier invoices as “2/10, net 30” and variants like “3/15 net 60” or “5/10 net 30.” Pay in ten days instead of thirty and knock 2% off the invoice. It sounds trivial per invoice, but across a year of purchasing, it compounds into real margin.
The second is the volume rebate: a retroactive payment issued after you hit a purchasing threshold. A distributor who crosses $1,000,000 in annual orders with a manufacturer might get a 3% rebate on everything bought that year. Rebates keep wholesalers profitable when competition forces thin markups, and they push distributors to concentrate their orders with a single supplier.
The Assignment Fee Model for Real Estate Wholesalers
Real estate wholesaling flips the model. You don’t buy inventory. You get a property under contract with the seller, then transfer your right to buy it, called equitable interest, to an end-buyer for a fee. The end-buyer closes on the property. You collect a check for stepping aside.
The paperwork that makes this work is the assignment agreement. It names three parties: the seller, you as the assignor, and the end-buyer as the assignee. The assignment fee has to be spelled out in the document so the closing agent knows exactly what to pay you. You should also drop an invoice and your tax information into escrow so the closing agent can issue the right tax forms afterward.
Assignment fees swing widely. The national average is about $13,000. Newer wholesalers commonly land deals in the $5,000 to $10,000 range. Experienced operators in higher-value markets regularly clear $20,000 or more per deal. As a rule of thumb, the fee runs 10% to 25% of the spread between the contract price and the property’s after-repair value.
How the Money Actually Reaches You
Once the assignment agreement is signed, you send it to the escrow or title company handling the closing. The end-buyer wires the full purchase price plus your assignment fee into escrow, where the funds sit until every condition of the original purchase contract is met.
At closing, the settlement agent produces a document itemizing every dollar moving. For financed deals, that’s a Closing Disclosure under the CFPB’s TRID rule, which replaced the older HUD-1 for most residential mortgage closings.1Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosure FAQs For all-cash deals, common in wholesaling, some title companies still use a HUD-1 or a simpler settlement statement. Either way, your assignment fee shows up as its own line item.
Payment usually comes by wire transfer after the deed is recorded. You never funded the purchase. That’s the whole appeal: you get paid without capital at risk in the property itself.
Getting Paid Through a Double Closing
Some wholesalers skip the assignment route and use a double closing instead. Two back-to-back transactions, often the same day. In the A-to-B closing, you buy the property from the seller. In the B-to-C closing, you immediately resell it to the end-buyer at a higher price. Your profit is the difference between the two prices, minus costs.
Because you rarely have cash sitting around to fund the A-to-B purchase, you use transactional funding: a short-term loan that exists to cover the buy for a few hours. Transactional lenders charge roughly 1% to 2% of the purchase price plus closing costs. You also pay two sets of title insurance premiums, recording fees, and settlement charges, which can bite hard into the margin.
Wholesalers accept those costs for two reasons. Double closing keeps the size of your spread private, since the seller and end-buyer never see each other’s numbers. And it lets you get paid on deals where the original purchase contract prohibits assignment outright.
What the IRS Takes Out of Your Payday
Wholesaling profits are ordinary business income, not capital gains. Federal tax law excludes property held primarily for sale to customers in the ordinary course of business from the definition of a capital asset.2Office of the Law Revision Counsel. 26 U.S. Code 1221 – Capital Asset Defined The IRS calls wholesalers dealers rather than investors, and dealer income is taxed at your ordinary income rate with no access to lower long-term capital gains rates.
Most wholesalers work as sole proprietors or independent contractors, so the profit is also hit with self-employment tax at 15.3%: 12.4% for Social Security and 2.9% for Medicare.3Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The Social Security portion caps out at $184,500 in net earnings for 2026.4Social Security Administration. What Is the Current Maximum Amount of Taxable Earnings for Social Security You can deduct half of your self-employment tax when computing adjusted gross income, which softens things, but the combined federal bill still surprises new wholesalers who thought of the assignment fee as clean profit.
The closing agent generally reports the transaction on Form 1099-S.5Internal Revenue Service. Instructions for Form 1099-S (04/2025) For pure assignments where you never take title, the settlement agent may instead collect your tax information and issue a 1099-MISC for the fee.6Fidelity National Financial. Contract Assignments Wildly Popular Every dollar is taxable, and quarterly estimated payments are the standard way to avoid underpayment penalties.
Two Ways to Lose the Payday
Crossing the Licensing Line
Assigning a purchase contract, where you transfer equitable interest to another buyer, is generally legal without a real estate license. Advertising the property itself as if you own it and are offering it for sale can be treated as unlicensed brokerage. Several states have taken enforcement action against wholesalers who marketed properties they didn’t own.
The practical rule: your ads, emails, and conversations should market the contract, not the house. “I have a property for sale at 123 Main Street” invites scrutiny. “I have an assignable contract on a property” keeps you on the safer side of the line in most states. A growing number of states also have wholesaling-specific disclosure statutes. Arizona, for one, requires wholesale buyers to disclose their status in writing to the seller before entering a binding agreement, and failure to disclose lets the seller cancel any time before closing and keep the earnest money. Check the rules in every state you work in, because they range from silence to written disclosure to full licensing requirements.
Losing Your Earnest Money
The earnest money you put down to lock in the seller’s contract is the money you can actually lose. Deposits typically run from a few hundred to a few thousand dollars per deal. If your end-buyer falls through and you can’t close, the seller keeps it.
The standard protection is an inspection contingency written into the original purchase contract. Most give the buyer 10 to 21 days from contract acceptance to inspect and cancel for any reason with a full refund. Experienced wholesalers treat that window as their deadline to find an end-buyer. If no one materializes, they exercise the contingency and walk away whole.
Once the window closes, you’re committed. Failing to close means losing the deposit and, depending on contract terms, possibly facing further remedies from the seller. The rule most wholesalers learn expensively: don’t put down more earnest money than you can afford to lose, and don’t let the inspection period run out before you have a buyer signed on.