Question about wholesaling

Wholesaling
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Question about wholesaling

N/A N/A
Member since 2008 · 40 posts · 0 votes

I'm very new, and plan to get some books on REI and wholesaling this weekend, but I just wanted to ask:

I assume that an investor is only going to be looking for a really good deal if he/she is going to buy a property through a wholesaler. I presume that the investor has already combed the MLS, newspaper ads, etc., and is already familiar with what's out there. The investor is essentially looking to the wholesaler to come up with something that he/she has not seen or found anywhere else. In other words, why would anybody buy a property through a wholesaler and pay them a commission if the investor could've just as easily found the property themselves by looking on the MLS? So essentially, your job as the wholesaler is to find deals that the investor would otherwise not find out about--is that how it works? Please let me know if I have this all mixed up somehow!

Another question I have is, how widespread is wholesaling? How many investors get their deals this way, and what percentage of the time? IE, is it a rare, every once in a while thing, or do some investors buy primarily through wholesalers, or what?

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Ryan Webber
Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
19y

Think about it, a wholesaler focuses all of their energy on finding deals, but a rehabber focuses most of their energy on what? Fixing houses. Yes when the rehabber is done fixing the house they refocus their efforts on finding another deal, but the wholesaler has momentum on their side. Consistently focused energy is very powerful.

Plus most investors suck at finding deals. Wow was that too rough? Well its true so I'm going to just throw it out there. Most investors (rehabbers, landlords, or even most wholesalers) aren't very good at consistently finding deals. It takes a lot of work to consistently find deals, and most people don't put the effort in to get the needed result.

In reference to the MLS, you will NOT find many deals on the MLS. I found about 2% or 3% of my deals last year through the MLS. The MLS is NOT the way to find deals. Now if you work it consistently and persistently you can find a deal or two every year from the MLS. Consistently and persistently means 2 or 3 times a week for an entire year you search the MLS and make offers. The MLS is a retail outlet. That's it. If an investor buys most of their houses off of the MLS, they aren't buying deals.

In reference to how common is wholesaling, it would depend on your market. If your market has some good wholesalers in it, then there might be quite a few investors that buy many of their deals from wholesalers. The better the deals that a wholesaler offers the more business they will have. It seems simple, but I see so many people offer "wholesale" deals at retail prices and they wonder why no one buys them.

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  • N/A N/A
    Member since 2008 · 30 posts · 0 votes
    19y

    I think its not only finding the good deals but finding the deals if that makes sense. I have heard that investors dont have enough eyes and ears and they too can miss good deals. I mean I just had a friend who is doing her first rehab and she came across another property. She is in no position to take the deal but i am sure there is someone else who would. She found out about it because a friend of hers is in preforeclosure. That deal is not out there yet. Hey I was going to try to help her wholesale it and get a cut since she didnt even know about wholesaleing until I told her! I think there are more deals then investors but starting out you dont feel like that thats why you have to get out there to see.

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  • Ryan Webber
    Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
    19y

    Think about it, a wholesaler focuses all of their energy on finding deals, but a rehabber focuses most of their energy on what? Fixing houses. Yes when the rehabber is done fixing the house they refocus their efforts on finding another deal, but the wholesaler has momentum on their side. Consistently focused energy is very powerful.

    Plus most investors suck at finding deals. Wow was that too rough? Well its true so I'm going to just throw it out there. Most investors (rehabbers, landlords, or even most wholesalers) aren't very good at consistently finding deals. It takes a lot of work to consistently find deals, and most people don't put the effort in to get the needed result.

    In reference to the MLS, you will NOT find many deals on the MLS. I found about 2% or 3% of my deals last year through the MLS. The MLS is NOT the way to find deals. Now if you work it consistently and persistently you can find a deal or two every year from the MLS. Consistently and persistently means 2 or 3 times a week for an entire year you search the MLS and make offers. The MLS is a retail outlet. That's it. If an investor buys most of their houses off of the MLS, they aren't buying deals.

    In reference to how common is wholesaling, it would depend on your market. If your market has some good wholesalers in it, then there might be quite a few investors that buy many of their deals from wholesalers. The better the deals that a wholesaler offers the more business they will have. It seems simple, but I see so many people offer "wholesale" deals at retail prices and they wonder why no one buys them.

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  • Richard Warren
    Real Estate Investor · Las Vegas, NV · Member since 2008 · 1k+ posts · 447 votes
    19y

    You make a great point. As a rehabber the hardest part is finding the deal. It does not matter how good you are at rehab, if you pay too much you will lose money. The old adage of real estate is LOCATION, LOCATION, LOCATION but in rehab it is PRICE, PRICE, PRICE. I manage to find my own deals but very few are on the MLS. If there was a wholesaler in my area who could consistently find good deals I would have it made but most wholesalers here are not very seasoned and wind up paying too much for a property. They find something for 20% less than the market and think they have a good deal and then they are shocked when they can't unload the property.

    8)

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  • Greg Felt
    Real Estate Agent · Memphis, TN · Member since 2008 · 146 posts · 24 votes
    19y

    When you talk to advanced wholesalers, they will tell you that there are more deals than they have time to do. That's because they know how and where to find them. You need to find an advanced wholesaler that is willing to help you learn how to find the deals.
    One way to find deals is to network with the right people that can help you find the deals in your niche. But you need to know what your niche is and to build your team that you are ready to move when the deals are presented to you. You need buyers that are ready for these deals that you find. Wholesaling is all about speed and timing. And if your team is all ready when you find the deals, then you're ready to make $.

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  • Jeff Fairchild
    Real Estate Investor · Vancouver, WA · Member since 2008 · 387 posts · 8 votes
    19y

    Wholesaler,

    Well you told me to talk to a wholesaler who knows how the deals are found. It seems to me that means I should be asking you! haha. So what are the key ways that you find the deals? Do you have any unique methods?

    Thanks,
    Jeff

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  • Greg Felt
    Real Estate Agent · Memphis, TN · Member since 2008 · 146 posts · 24 votes
    19y

    All I can say in this section is to check out the discussion forum called Make Deals, Find Partners, Mentors & BirdDogs, on this website.

    Greg Felt

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  • Account Closed
    Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
    19y

    Do not worry about how many other wholesalers are around of how many investors buy from a wholesaler. Find great deals. When I say great I mean deals that people think are really sweet deals when you tell them about it.

    If you find such deals you will find people to buy them. There are always investors who buy deals that are not as good. Some are still learning. Others are too busy to really hunt for deals. They would rather buy a good deal from you then kill themselves finding a great deal. Some people just do not have the time, do not like the chase or other aspects. Yet they still invest, they might be great at refurbishment or want a buy and hold property.

    Great deals are not going to be an issue to sell once you find them. Just look at the number of investors who buy from the MLS. Those are generally retail priced deals.

    John Corey

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  • Jeff Fairchild
    Real Estate Investor · Vancouver, WA · Member since 2008 · 387 posts · 8 votes
    19y

    wholesaler,

    I searched for "Make Deals, Find Partners, Mentors & BirdDogs" both as a forum title in the main forums area, and in the search. The search seems to not really be working. The search results tell me that i found it but when i click on it it's something else.

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  • Joshua D.Pro Member
    BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votes
    19y
    Originally posted by "jeff88":
    wholesaler,

    I searched for "Make Deals, Find Partners, Mentors & BirdDogs" both as a forum title in the main forums area, and in the search. The search seems to not really be working. The search results tell me that i found it but when i click on it it's something else.

    Jeff -
    I'm not sure what you are looking for specifically, but I think he is just telling you to look around the Dealmaking forum to find deals.

    Podcast Guest on Show #100
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  • Carol Stinson
    Real Estate Investor · Williamstown, NJ · Member since 2009 · 9 posts · 0 votes
    17y

    As a Wholesaler full time myself I can tell you that finding deals is 90% of my time, the other 10% is finding buyers. If you have a good deal the buyers will come, like a bee on honey! I find most of my deals by bird dogging neighborhoods and checking for vacant properties. There is allot of research involved to locate the owner buy it is usually worth the effort.
    I also put at least 400 offers in a month on mls properties. The key to successfull wholesaling is to present a property to a buyer with at least 30% equity after rehab. Believe me having a good wholesaler on your side is an asset most investors look for. [LINK REMOVED]

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  • Robin Vidovich
    Real Estate Investor · Reading, PA · Member since 2008 · 227 posts · 7 votes
    17y

    Many people either don't have the time that wholesalers spend finding deals and they would much rather look at one or two slam dunk deals that work than spend hours looking for those same deals. The buyer's that I work with really don't care about the fee associated with the deal as long as the numbers work. I have one investor who ONLY buys wholesale deals. Deals in certain areas most often time are not found in the MLS system.

    Hope this helps.

    Robin

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  • Troy Michaels
    Real Estate Investor · Atlanta, GA · Member since 2009 · 117 posts · 7 votes
    17y
    Originally posted by Carol Stinson:
    As a Wholesaler full time myself I can tell you that finding deals is 90% of my time, the other 10% is finding buyers. If you have a good deal the buyers will come, like a bee on honey! I find most of my deals by bird dogging neighborhoods and checking for vacant properties. There is allot of research involved to locate the owner buy it is usually worth the effort.
    I also put at least 400 offers in a month on mls properties. The key to successfull wholesaling is to present a property to a buyer with at least 30% equity after rehab. Believe me having a good wholesaler on your side is an asset most investors look for. [LINK REMOVED]


    HOW do you put in 400 offers a month on mls properties when there is earnest money involved, etc.?
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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    17y

    You say "earnest money to be provided via certified funds within 48 hours of contract acceptance."

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  • Troy Michaels
    Real Estate Investor · Atlanta, GA · Member since 2009 · 117 posts · 7 votes
    17y
    Originally posted by Jon Holdman:
    You say "earnest money to be provided via certified funds within 48 hours of contract acceptance."


    thanx, so, the MAIN point is getting lots of offers out there.
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  • Carol Stinson
    Real Estate Investor · Williamstown, NJ · Member since 2009 · 9 posts · 0 votes
    17y
    Originally posted by Troy Michaels:
    Originally posted by Carol Stinson:
    As a Wholesaler full time myself I can tell you that finding deals is 90% of my time, the other 10% is finding buyers. If you have a good deal the buyers will come, like a bee on honey! I find most of my deals by bird dogging neighborhoods and checking for vacant properties. There is allot of research involved to locate the owner buy it is usually worth the effort.
    I also put at least 400 offers in a month on mls properties. The key to successfull wholesaling is to present a property to a buyer with at least 30% equity after rehab. Believe me having a good wholesaler on your side is an asset most investors look for. [LINK REMOVED]


    HOW do you put in 400 offers a month on mls properties when there is earnest money involved, etc.?


    My offers are so low that out of 400 offers 25 may get accepted. The earnest money comes from my buyers.
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  • Tim Silvers
    Las Vegas, NV · Member since 2009 · 197 posts · 32 votes
    17y

    I am new to wholesaling and still educating myself, so please bear with me.

    With respect to a wholesale transaction, I understand that it only makes sense to contract to buy properties which have enough equity for an end buyer. Obviously, properties with negative equity aren't going to work for the wholesale flip business model.

    That being said, how likely would it be to locate such deals in declining markets such as mine (Las Vegas) in which the only apparent opportunities to profit at enough of a discount are dominated by short sales and REOs, as the majority of owners motivated to sell are those who are severely underwater (75% of every mortgage holder in Vegas).

    My assumption is this: When it comes to wholesaling, it's not so much about the specific market and the sellers in it; it's all about the numbers, like what Carol stated about putting out 400 offers. There's always that white elephant or motivated seller out there, clueless as to how to pro-act.

    The question then is: As time is money, does the amount of downtime trying to prospect for those few wholesale flips with enough spread exceed the time spent finding and putting together other types of flips, i.e., short sales and REOs???

    Better yet, is anyone out there wholesaling successfully (or not) in Las Vegas or in similarly-distressed markets (Miami, Detroit, Phoenix, Sacramento)?



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  • Ryan Webber
    Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
    17y

    You can wholesale in any market where there are still buyers, and I'll guarantee you that there are still buyers in Vegas. Now the question is what percentage of current After Repaired Value (ARV) are they buying at.

    Now I would hypothesize that in a market like that short sales and REO's are going to be strong avenues for a wholesaler to find deals, but I still think there's potential in other strategies.

    If you think about it, a wholesaler is going to buy very few houses that the seller bought or refinanced within the last 10 years, and most of them will have been owned for 20+ years. Now I think the fire of those markets probably motivated a higher percentage of people to refinance, but I would guess that there is still of pocket of owners in those markets with untouched equity. You just have to find them.

    Traditionally 1/3 of houses have no mortgage debt against them. The house is free and clear. So maybe most mortgaged homeowners are underwater, but there's still a good chunk of homeowners with plenty of room to negotiate when selling their house.

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  • Jason S.
    Investor · Diamond Bar, CA · Member since 2009 · 446 posts · 233 votes
    17y
    Originally posted by Carol Stinson:
    As a Wholesaler full time myself I can tell you that finding deals is 90% of my time, the other 10% is finding buyers. If you have a good deal the buyers will come, like a bee on honey! I find most of my deals by bird dogging neighborhoods and checking for vacant properties. There is allot of research involved to locate the owner buy it is usually worth the effort.
    I also put at least 400 offers in a month on mls properties. The key to successfull wholesaling is to present a property to a buyer with at least 30% equity after rehab. Believe me having a good wholesaler on your side is an asset most investors look for. [LINK REMOVED]



    There is a lot of truth in this post, and experience.

    1. 400 offers. That is 100 per week - wow. The point is numbers do work - you never know when you might just hit. I am assuming either your Realtor has pre-signed papers, you are a Realtor, or you send the offers in straight without a Realtor but you have a set system of fill in the blank forms. ---> lesson is that to become a wholesaler is a lot of work! Think of it as training to be the investor in the future.

    2. To send in 400 offers, you must really know your area very well - even to ensure they are low-ball - or are you sending in offers and then relying on the due diligence to determine whether to proceed? ---->lesson is to know your areas and once again true ARV

    3. Putting in offers that have at least 70% equity after repair ---> lesson is that you need to be very good at determining what needs to be done and how much it costs to do it.

    Summary is that to those that are just starting out to be wholesalers - it is a lot of work, every day, and you must yourself be an "expert" in ARV & Estimating.

    Let me add one more key point - that 70% ARV she mentioned is AFTER her fee (that i an assumption though). So many wholesalers bring me deals but their fee kills the deal. When the deal is good enough - the money will be there. But do not try to make 2 months of your bills on 1 deal, even though it may have taken 2 months to put it together. Charge what the deal is worth and leave room for everyone.

    I would be interested to know what the successful wholesalers out there charge - Every time one brings me a deal I cannot believe how much they want.

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  • Ryan Webber
    Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
    17y

    That whole mentality is all wrong. How much your fee is does not mean anything. Whether its 2 days of your bills or 2 years worth, it doesn't matter. The issue is whether its a deal at what you are selling it at.

    If I bring you a house that is worth $100,000 fixed up that needs $10,000 worth of work, will you buy it from me for $60,000? Would it matter if I had bought it for $20,000 or $59,900?

    If its a deal, it doesn't matter. Most newbie wholesalers get that turned around, though. They do exactly what JC is referring to. They find a property that is a deal and THEN add their fee on top of that. The idea of wholesaling is to SELL houses at prices that are a good deal not BUY them at those prices.

    I normally won't buy a house unless I can make at least $5,000, but I make sure that I'm confident that whatever I set my sell price at is a deal for another investor.

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  • Robin Vidovich
    Real Estate Investor · Reading, PA · Member since 2008 · 227 posts · 7 votes
    17y

    The whole point of wholeselling is to make money but I agree with Ryan, if the numbers don't work for the end buyer in that it is not a good deal, what I charge as a wholeseller doesn't matter. I do however try to makesure that after I subtract the 30% equity, the 10% holding costs, the rehab fee I am at or below what I need to be at (including my fee so once again:
    ARV - 40% - Rehab costs - my fee (plus a little more for the end buyer) = my offer to the seller. (I offer even lower when dealing with a bank)

    Who cares how much I make on the deal as long as I pass along a great deal to the end buyer.

    Robin

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  • Jason S.
    Investor · Diamond Bar, CA · Member since 2009 · 446 posts · 233 votes
    17y

    To clarify as it seems to be a distraction.

    Wholesalers - it does not matter how much you charge as long as it makes sense. When I said do not try and make 2 months income on a deal just because it took 2 months to put together I was referring to the wholesalers that price things based on their time and effort and how much they needto pay their bills and not soley on the merits of the deal. Sometimes you make $1 an hour and sometimes $10,000 an hour - that is fine as long as the deal can support it.

    I apologize that my original post was not written well enough.

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  • Robin Vidovich
    Real Estate Investor · Reading, PA · Member since 2008 · 227 posts · 7 votes
    17y

    JCC
    Thank you for the clarification. Indeed you are correct!

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  • Keith Ransom
    Wholesaler · Atlanta, GA · Member since 2009 · 44 posts · 2 votes
    17y

    I like to build good relationships with investors, so when I find a deal I don't kill it by adding an high fee for the property. I usually only charge $1000-$2000 if there is enough room for the investor to get his equity requirement satisfied. That way I will have the investor more apt to look at my deals I send his way because he knows I won't try to take to much profit out of the deal.

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  • Ryan Webber
    Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
    17y

    Again, how much you charge is not the issue. How good the deal is after you add in whatever you charge IS the issue. If you are making $25,000 on a deal but its still a good deal for the investor then you will sell it.

    Building good relationships with your investors is what wholesaling is all about. The best way to do that is to offer really good deals. Whether you are making $500 or $50,000 doesn't matter. The numbers that you are selling it at is what matters.

    As a wholesaler with a marketing budget, you won't make any money with a $1,000-2,000 margin on your properties. If you are doing one or two every once in awhile and you are not utilizing marketing then that may work, but if you are looking to get deals through marketing then $1,000-2,000 a deal is a good break even point to shoot for. Break even meaning that your net profit starts ABOVE that amount. I personally factor my break even at $1,500 a deal. That covers my marketing to buy and sell the property and other overhead that is required to stay in business.

    If you need to make more money per deal as a wholesaler the key is to buy the properties for lower prices so you can factor in a higher profit. The common mistake, again, is that a wholesaler buys the house at numbers that are a deal and then tries to add their profit on top of the numbers that make it a deal. Buy them cheaper and then you can make more money and still sell them at deal prices.

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