How to Absolutely Kill Your Real Estate Wholesaling Business

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Most real estate investors and entrepreneurs quickly discover that the real estate investing industry, while big on a national level, can actually be quite small on the local level. Most regions and cities have local REIA’s (Real Estate Investor Associations) where local investors come together to swap deals and gain education. However, even those investors who skip their local REIA’s find that it’s quite common to bump into many of the same investors that are active in a particular area.

In my market, I’m constantly bumping into many of the same investors …. through bandit signs, Craigslist ads, email blasts, referrals, networking, etc. Even in a city of 6 million people, I know many of the local investors who are buying and selling investment properties in my market. As a wholesaler, this kind of networking is the name of the game. Building a list of buyers and making connections is the lifeblood of any wholesale business.

Credibility is Essential

As any wholesaler will tell you, building a list of buyers is probably the most important component to being successful (in addition to having inventory to sell). However, having property to sell and having a list of buyers to sell to is no guarantee that your business will do well. I would argue that having credibility with your buyers list is just as important as the list itself.

One of the quickest ways to develop a bad reputation and to lose legitimate buyers is through an inability to perform as a wholesaler. What do I mean by that? To put it simply, if you market a property, you should have the ability to sell the property …. if you put a property under contract, you should be able to honor that contract … if you set a closing date, you should be able to close on that date.

I’ve found that many self-proclaimed wholesalers are nothing more than marketing hustlers with a computer and a free MailChimp account. A true wholesaler is someone who finds and controls a property and has the ability to assign interest or sell that property to somebody else. I’ve found that many (not all) individuals who re-market other wholesale deals rarely perform and almost always lose credibility in the process.

Related: Is Wholesaling A Strategy For the Beginner Or the Experienced Investor?

Do Not Do This!!

Case in point: I put a property under contract with a wholesaler last week. I had received an email blast with the details of the property and decided it was something I was interested in. I scheduled a time to view the property and decided to move forward at his advertised price. The wholesaler sent over contract that I signed and sent back and we began lining up funding and rehab crews. Two days after the contract had been signed, I receive an email from the wholesaler informing me that the property went under contract to somebody else for $2,000 higher than the contract I had signed. I immediately picked up the phone to find out what had happened only to be informed that this deal “wasn’t his deal” and his “associate” sold it to somebody else without telling him.

Do you think I have any interest in doing business with this wholesaler again? Absolutely not. This is perhaps a text book example of how to lose credibility and develop a bad reputation in a local market. Do I think this wholesaler is a bad guy or did this maliciously? No, he actually seemed like a nice enough guy. The problem is he was not actually wholesaling a property … but rather marketing something he didn’t control.

I can’t stress enough the importance of controlling the property as well as the sales process as a wholesaler. If you are going to market a property to your list, you darn well better have the ability to sell that property and communicate the true situation with your prospective buyers. It doesn’t take long at all to develop a reputation in your local market … whether good or bad. For the sake of your business, be careful, be honest, be ethical and always strive to take care of your buyers. In the end, this is what will dictate whether or not you are successful.

How are you killing your wholesaling game? Tell me your story in the comments..

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About Author

Ken Corsini G+ is the founder of Georgia Residential Partners, LLC - a real estate investing firm based in Atlanta, Ga focused on creating turn-key investments for investors all over the country. He's been investing in real estate since 2005 with hundreds of real estate transactions.

25 Comments

  1. Nice article. Very frustrating to deal with the people who don’t control the property but claim they do. Every time one of these traveling “Flip to Freedom” shows comes through town, we end up with a new crop of those non-performing marketers referenced in the article. The bandit signs pop up, the calls come in about being on their list, and they attend one REIA meeting…

  2. This will kill a Newbie’s ENTHUSIASM for building a wholesaling business, like you guys are a bunch of con men (not you Ken).
    Great article, wish there was a complaint bureau besides the BBB and the AG to go to to get of unscrupulous folks.
    Oh you can go to YELP.com, forgot.

    Always love your articles Ken. :)

  3. The absolute WORST is the guy who gives you false numbers. We looked at 2 a couple weeks ago and the guy was like “oh these are GREAT, easy money.. both 15-20k rehabs. We get there are these houses are TRASHED. One had CLEARLY been in a fire and soaked by the firemen’s hose, the other had EXTENSIVE termite damage, needed the entire exterior redone, and nothing inside was remotely updated. We figured 40 on one house and 60 on the other. Your 30-40k rehab estimate is actually 100. We kindly told him he was high, and we won’t be interested. And I’ll never talk to him again. Because he is a waste of time. Having a contract that isn’t yours to execute is bad, but if the numbers are right, you can still do it. But having a wholesaler have completely skew the ARV or rehab numbers is worse. Trying to make a non deal look like a deal and waste people’s time makes you a tool and no one wants to work with that. If you have accurate numbers, you will sell some houses.

    • Jeff, how often do you purchase properties from wholesalers and do you buy from the same person(s)? Thanks for your post! I found it so helpful!

      • Iena we have never purchased one from a wholesaler because we have yet to find one with a good deal! We have purchased 4 homes and wholesaled 5 ourselves. We’re still pretty new. But I feel we’ve acquired enough experience to know what we’re talking about now lol.

    • Ken Corsini

      Jeff- Great point. Wholesalers are NOTORIOUS for advertising ridiculously low rehab numbers and inflated ARV’s. The good wholesalers typically give you good numbers to work with.

  4. I have several homes under contract in st Louis. I have had many calls from so called wholesalers who ask if they can bring me a buyer. I think this is the cheap lazy way to sell a property. Why don’t these so called wholesalers just market to the homeowners themselves?
    I am guessing they are new or don’t have the money to spend on mailers. I would be very wary of someone putting a house under contract if they don’t show me proof that they can close on it. It seems that wholesaling someone else’s deal doesn’t work very much because of the fee added on.

    • Gordon, your reply is so helpful! What type of marketing do you do to consistently get properties under contract? I’m having a hard time getting consistent leads. Thanks for your feedback!

      • My recent marketing was sent to absentee owners in lower home value areas of st Louis and Kansas city. I sent a post card designed by mark evans dm. It is the best card that I have ever seen. A few of us paid money for the card and 3 days of hands on working with sellers and buyers. I used to have trouble also with getting consistent leads. I am happy that I will not have to worry about that anymore.

        • Thank you for that valuable response!! I will check him out. I’m currently in LA so you can imagine how crowded the market is here in California. I’ve considered wholesaling out of state like Nashville since I have connections there. But I haven’t taken action on it yet.

  5. Thank you Ken for this article. I’m a new wholesaler with a background in marketing. I have seen the daisy chains and the same property marketed by many different wholesalers. Usually the numbers don’t add up, the properties aren’t theirs and it’s hard to tell what they really have. Now I just delete the emails. I don’t want to be this type of wholesaler. What do you suggest for somebody starting out? I have a mentor and it’s been great but I’d like to have more consistent deals coming through. I just started in November and only have finished 2 deals. Any advice would be much appreciated!

    • Ken Corsini

      Lena – welcome to the world of wholesaling. Your market is very different than mine, but I have a friend who is crushing it in San Diego … and his business completely revolves around postcards and excellent followup. Yes, you’ve got to spend some money to get the leads rolling in, but if you can close the deals, the margins in Southern California should be pretty sweet. Best of luck!

      • Thank you Ken! I’ve heard the yellow letters and post cards work best. But it’s also what everyone else is doing. But you’re right the fortune is in the follow-up! I’m looking at other markets and outside of CA since LA/OC is so saturated. Thanks again for a great article and follow-up on my question.

  6. Great article Ken!
    This is a huge problem in Cleveland! “Wholesalers” misrepresenting properties that they don’t even have under contract. I receive email blasts from all the local guys and the same property will be sent to me from 7 different wholesalers with 7 different prices. Or they actually sent you a great deal and when you ask them for access they can’t get ahold of the owner for keys. They waste everyones time loose credibility instantly with true cash investors by doing this. I could go on and on!! Thanks for writing this!!

  7. Thanks for all the information you have all provided. I am new to real estate investing as well and I think Gordon is right about them being beginners. As newbies we are looking for the most inexpensive way to get our foot in the door and reach the most amount of people at the same time. The “gurus” are constantly blasting my email about the newest way to “kill it” in wholesaling for a small fee.
    Luckily I research anything that sounds too good to be true and this new “middle man” wholesaling seems to be exactly what you guys are talking about. Not saying this doesn’t work, but be cautious. This tactic seems to benefit the person selling the program more than the newbie and annoys the seasoned investors that us newbies so desperately want to make lasting relationships with.

  8. I agree with your article. I work in a high volume area, Baltimore, MD and I have heard of this happening to other investors. Not me as of yet….

    In the beginning of my wholesaling career I would hold on to properties too long waiting for that big payoff. That system became discouraging and made me want to quit. Ultimately, I linked with other investors to get a better understanding of how to get “in and out” of a deal quickly to maximize my business. I’m Great now!

    Thanks for sharing your info.
    Raye

  9. It is important to make a distinction between someone co-wholesaling a place and just sending out a deal you saw at a markup.
    The 2nd is a total waste of time and will generally not be deals after the markups anyway.

    Sometimes I have seen someone working with another investor for a split fee if the buyer comes from their list. In these cases they have said it isn’t their deal, that they are passing along the info they were given (usually they review for the sniff test but don’t verify it all) and they can get more info and access if there is interest.
    The big difference is they tell you what they are doing. No deceptive BS.

    Collaboration is fine, repackaging garbage is distasteful.

    • Shaun, I love that comment. There is a huge REI Education (Guru) push for co-wholesaling (where the 1 wholesaler gets the property and the other gets the Investor Buyer).

      Getting to be a real “fog” as to who has an equitable interest in what.

  10. Great article! Sounds like that wholesaler you dealt with needs some Bigger Pocket time. I know in my state marketing and trying to get paid on a property you don’t own or have an interest in is illegal.

  11. Reading this article kind of helped me realize that my paranoia wasn’t unfounded. I see wholesaling signs here in Orlando. I receive emails about deals. I have rehabbed properties before all of this wholesaling began. I have been out of the business for many years after taking a financial beating, but I am interested in stepping back in. I see a property advertised on a bandit sign and I am wondering if they are just trying to build a buyers list or is this property actually good deal for sale. The next question I asked myself is do the numbers add up. Is the suggested property cost, rehab cost and after repair value legit or was all of the profit sucked out before I got the property. The whole idea of who actually controls the property is the key to making the deal. I was involved in the bulk sale properties and coming across daisy chains was too common. Rather than go through these wholesalers I decided to find properties on my own this way I can crunch the numbers and know whether it is a good deal or not. If I do decide to pass a property on as a wholesale deal or something you should hold and rent out you better believe it is just that.

  12. This has been a very informative article, I’m a newbie and I understand that I will need to get more in place to build my credibility in my market. I do understand that this is a marathon run, nothing is to happen overnight. I do seek out to build my buyers list and will continue to do so. Until I meet more people/investors/wholesalers in my market, I think I will just stick to having full control of what I have in my pipeline. Me personally, i know I need more understanding of the actual rehab costs so that I can better determine the ARV on a property. Rough start so far but nothing worth having is ever easy.

    Any more advice or strategies that you all can share would be greatly appreciated.

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