Florida has been a magnet for new residents for decades, luring retirees and younger residents with year-round warm weather or its robust job market. It is now the third most populous state in the nation, after California and Texas.
The influx of new Florida residents picked up speed in 2020, when work from home gave people more geographical flexibility. Since then, inbound migration to Florida has continued to grow even faster. Between July of 2021 and July of 2022, nearly 444,500 people moved to Florida, which is 185,000 more people than the prior one-year period. Currently, Florida ranks first in the nation for net migration from other states.
Along with the boom of new residents, real estate investors have been flocking to the state to capitalize on the high demand for real estate. In 2022, the average home value increased by 17.27%. Analysts had predicted that home prices in Florida would eventually go down after such steep increases, but as of September 2023, home values grew by 2.3% year over year.
This demand has made wholesale real estate in Florida a lucrative prospect. While the state has certain regulations that wholesalers need to understand, Florida can offer exciting investment opportunities for wholesalers throughout the state.
Is wholesaling real estate legal in Florida?
Wholesaling real estate in Florida is legal as long as wholesalers operate within the state laws and guidelines. There are three different strategies that wholesalers can use to legally operate in Florida.
Contract assignment
The most common disposition strategy for wholesalers is a contract assignment. In this scenario, the investor signs a contract with a motivated seller and then sells the contract to a cash buyer. The sale of the contract must occur before the agreed upon closing date. With a contract assignment, the wholesaler never personally purchases the property. Instead, they negotiate an option to purchase the property and the wholesaler turns it over to the buyer.
Buy-sell agreement
In a buy-sell agreement, the wholesaler buys a property and holds it for a period of time before reselling it. This is a common deal structure in situations where the buyer needs some time to secure the funds to buy the property.
Double closing deals
In a double close, the wholesaler actually buys the property at closing, then sells it to a cash buyer immediately at a second closing. The main advantage of a double closing is that the wholesaler is able to keep their assignment fee confidential. Double closings appeal to the seller because it frees the seller from having to wait for the wholesaler to find a buyer. Additionally, both the seller and the buyer are able to maintain their anonymity.
Unlicensed wholesalers can conduct any of the above transaction types in Florida. Wholesalers have more freedom when doing a buy-sell agreement or double closing because they are operating as a traditional buyer and seller in both situations, even though the transactions are part of a wholesaling strategy.
Getting started wholesaling real estate in Florida
Wholesaling real estate in Florida generally consists of two essential components: a distressed property owner and a cash buyer. Wholesalers who are just getting started should start pursuing both as soon as possible.
Finding cash buyers before you have a property under contract may seem like the wrong order, but the last thing you want to do as a new wholesaler is to enter an agreement with the homeowner and then struggle to find a cash buyer. If you’re unable to find a buyer, the deal can easily fall apart and you won’t make any money after going through the trouble of finding a property.
While you’re doing this, keep your eyes open for distressed properties in your area. Your firsthand observations will only reveal properties with physical distress factors. In order to identify properties with financial distress factors, consider a real estate software subscription that will give you information about properties with financial distress factors, such as pre-foreclosures, properties in probate, or abandoned properties.
With BatchLeads, you can quickly identify a variety of financial distress factors and use the driving for dollars feature to find physical distress factors.
Another important step when you’re getting started is creating a limited liability company, or LLC, for your wholesaling business. LLCs are relatively simple and straightforward to form. You can create a Florida-based LLC online for a $125 filing fee.
Conducting your wholesaling business through an LLC will protect your personal assets in the event of a lawsuit or business bankruptcy. Once you’ve conducted multiple deals through your LLC, you can use your LLC’s credit history to apply for financing.
Finally, you’ll want to be prepared to approach homeowners. Practicing your pitch to homeowners will allow you to communicate with homeowners calmly and effectively. Bear in mind that you’ll be approaching homeowners out of the blue to sell their home, so it’s up to the wholesaler to persuade the homeowner that this is actually an opportunity that can help them sell their distressed property. Similarly, once you have a property under contract, develop your pitch to potential buyers.
Where to find cash buyers in Florida
In order to find cash buyers, new wholesalers should network as much as possible. One of the best places to start is by joining a real estate investing club, which can be found in most markets. If there isn’t already an organization like this in your area, you should consider starting one.
You could also join online real estate groups to start learning more about the industry and networking with your peers. Not only will these in-person and virtual groups put you in proximity to cash buyers, they’re also a great way to learn from your peers.
Many investors find cash buyers by partnering with a real estate agent. There are over 238,000 real estate agents in Florida, and some of them may know cash buyers with whom they can connect you. Of course, you’ll probably need to give them a financial incentive to do so, but partnering with an agent can still be worth the expense.
Finally, wholesalers can find cash buyers by utilizing real estate investing software. Some products allow you to search specifically for cash buyers and identify which of those buyers have purchased multiple properties. The latter will help differentiate between someone who paid cash for their primary residence and someone who’s a serious investor. With the cash buyers quick filter in BatchLeads, you can build a cash buyers list in seconds.
Do you need a license to wholesale real estate in Florida?
Wholesalers don’t need a license to operate in Florida, but there are some restrictions that unlicensed wholesalers need to be aware of.
Like many other states, wholesalers in Florida cannot represent a buyer or seller in any real estate transactions if they do not have a real estate license. Fortunately, wholesalers don’t need a real estate license as long as they use assignment contracts or personally buy the property in a double closing or buy-sell agreement.
The other guideline that Florida wholesalers need to be mindful of pertains to marketing. Unlicensed wholesalers in Florida cannot legally market their property, but they can market the assignment contract.
Unlicensed wholesalers can sidestep these marketing restrictions by doing double closings or buy-sell agreements. In each of those scenarios, the wholesaler is personally buying and selling the property, so it’s not subject to the same regulations as a contract assignment.
Although a wholesaler can do deals without a real estate license, there are some advantages to having a license. The first benefit is that it allows you to freely market properties that are under contract. The other advantage is that if a home could sell for more in a traditional sale, the wholesaler can represent the buyer in that type of sale if the homeowner is amenable to the idea.
Florida wholesale real estate legal tips
In Florida, unlicensed wholesalers can market their contract assignment, but not the property itself. Given this restriction, unlicensed wholesalers must depend on their network of private contacts and known buyers to make deals. While this may sound like a major hurdle, this is the typical buyer pool for most wholesalers. Even licensed wholesalers look to their professional networks first when looking for potential investors.
Wholesalers in Florida can ensure that they’re staying on the right side of the law by adhering to contract assignments, buy-sell agreements, and double closings because:
- Contract assignment deals are a legal strategy of securing a sales contract and offering it to a buyer privately.
- Buy-sell agreements work because you hold the property for an assigned period of time before reselling it as the owner.
- Double closings work for similar reasons, passing the property through your hands, so you’re selling it to the end owner.
Key Takeaways
Florida is rich in opportunities for real estate wholesalers. With a rapidly growing population of over 22 million, the demand for housing in Florida has never been higher. While major markets such as Tampa, Orlando, and Miami are booming, lesser-known markets have also seen massive appreciation in recent years.
Unlicensed wholesalers in Florida need to heed regulations around property marketing, but that still allows wholesalers plenty of room to operate and flourish. Wholesalers who are willing to follow state regulations, learn about the market, and keep reaching out to homeowners and buyers can thrive in the Sunshine State.
