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Posted over 9 years ago

The real truth about wholesaling

I see so many posts about wholesaling how to's and literally thousands of people seting themselves up as wholesalers, no doubt fuelled by the stories of massive profits and low cost promoted not just by wholesalers but gurus and television programmes.

I genuinely feel sorry for a lot of people who start with no real idea of what they are letting themselves in for.

So here is a reality check about wholesaling. I have been wholesaling in Memphis, ( and briefly in Phoenix and Atlanta), for the last 4 years and did over a decade in New Zealand.

FIRSTLY understand that finding, or bird dogging as Americans call it, is NOT wholesaling.

True wholesaling involves BUYING and closing on a property then reselling it. In some cases you may rehab it in other cases you simply bought well enough to onsell as is.

The ability to close is critical to a wholesaler as many times you get deals because the seller knows you will actually buy the property.  Now if you do this well enough and develop a reputation then you can, if your state allows it, move to double closing many deals so you don;t need any money but you are not a wholesaler unless you are buying homes and holding them in my opinion.

We started with around 50K cash so we could only buy 1 house at a time but we were also bird dogging and this gave us additional income until we could move to proper wholesaling.

SECONDLY understand that wholesaling is NOT a get rich quick scheme. YEs some people make a lot of money very quickly but only around 1 in a thousand will do that.

A genuine wholesaler often has to buy homes quickly and cannot foresee every possible problem so margins are often skinny. And when you are holding assets you can be losing money every week sometimes.

We aim to make 5K per deal and as far as I know I am the only wholesaler in my market who is yet to lose money on a deal. But I know it will happen. My skinniest deal we made about $200 and before inventory tightened up I had a couple of great wins with nearly 20K gross margin in them but those are EXCEPTIONS.  I also had 9 months where we did absolutely no sales but still had all our overheads to be paid.

LASTLY ,(for now anyway), is the most important thing I can share with you. Success at wholesaling, after you have enough funds to close on a deal and you understand the need to be business like as you can and will lose money sometimes is 99% a MINDSET issue.

Poor people trying to dig themselves out of their often self inflicted financial problems do not know how to think successfully so they are unable to wholesale in my opinion.

This is a tough business and you have to put up with angry sellers, angry buyers, dishonesty at every turn and the need to be nice to people you actually want to hit upside the head.  Then you have all sorts of problems you can't foresee and the list goes on and on.

So you have to learn how to think to be a successful wholesaler. Part of that is believing in yourself, that you are worthy of being successful. Part of it is depresonalising how you thinks o you can be nice to not nice people because by doing so you will make money and that is what you are here for.

In particular you have to learn that every door you knock on and every phone call you make is one step closer to the next deal. Take rejection personally and you won't last a week in wholesaling.

And the only way to deal with mindset is a process called perturbation. This means putting yourself in situations that are not normal so you are forced to think differently. For example I noticed in new Zealand that as soon as a deal got over 250K I started to worry about the cost and I couldn't think normally to negotiate the deal.

So I started going to every open home in may area on homes that were worth from 1 to 10 million dollars so I was forced to talk to high end realtors and start thinking about what was good and bad with these more expensive homes. After the first few meetings of feeling like a fraud because I couldn't afford these homes I noticed a change in my thinking that the deal size no longer bothered me. In fect before the GFC I went on to mostly deal in million dollar plus flipping because there was less competition.  But I would never have gotten there unless I learned how to think like a bigger player.

LEt me know what you think of this info and would you like any more please :-)


Comments (1)

  1. I like this quote:

    Poor people trying to dig themselves out of their often self inflicted financial problems do not know how to think successfully so they are unable to wholesale in my opinion.

    ...... Basically to me, it says, get organized financially before you begin your real estate endeavors.

    And this quote:

    After the first few meetings of feeling like a fraud because I couldn't afford these homes I noticed a change in my thinking that the deal size no longer bothered me. In fect before the GFC I went on to mostly deal in million dollar plus flipping because there was less competition.

    .... Like that old saying, there is less competition at the top. Ask anyone around my area what they think an ideal investment home would be and they're bound to say 3 bedrooms and 2 bathrooms.