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Warning Newbies: Stop Wholesaling Now!

by Marcus Maloney on April 4, 2014 · 33 comments

  
Newbies: Stop Wholesaling!

Many newbies believe that the best way to crack the real estate industry is to start in wholesaling. This is your warning, newbies: stop wholesaling now. This is the biggest load of crap that the gurus ever told you.

If you have ever had the inkling to to start investing, the first thing you hear is:

“No Money No Problem”

“No Credit No Problem”

“Earn $5,000 in 30 days or less”

If this all sounds familiar raise your hand. Yup, believe me, my hand is raised also. We’ve all heard this car salesman pitch and we were believers; whether you wanted to start with wholesaling or not, you may have been skeptical but you thought: “Wow this is my shot.” 

The Reason You Should Stop Wholesaling:

Have you heard the old saying it: “It takes money to make money”? Sure you have, and in wholesaling this mantra is still true. You have to have some capital to get started. In wholesaling, and any part of business, marketing is essential. If no one is aware that you exist how will you get leads? Leads are the name of the game. You will need to have some dollars for marketing. Even if your approach is driving for dollars; have anyone look at the increase in gas prices, you can’t do too much driving if you don’t have fuel. Another approach that is constantly preached is bandit signs. Well, the plastic companies that make the bandit signs have overhead and yup you guessed it; that overhead cost is added to the price the consumer will pay. You will need to have a computer, build a good website, and get business cards…. There are always start up cost for any business, and you want it to be a business. So free is a bunch of malarkey.

Related: Newbie Alert – Don’t Buy Into the Wholesaling Hype

“No Credit No Problem.” So False.

No one will listen if you have no credibility in this industry. If you have read my last post about finding a realtor, one thing I touched on is visiting the REIA, and how you will have to build rapport before investors will freely give you information. This sounds like credibility to me. I know its not credit in the traditional sense of borrowing money, but the last time I looked up credit in the dictionary (not exactly a dictionary but the dictionary app) it clearly defines credit as:

Trustworthiness; credibility: a witness of credit, confidence in a purchaser’s ability and intention to pay, displayed by entrusting the  buyer with goods or services without immediate payment.

Question: does that sound like “FREE” — Heck NO!

The most difficult thing to build and most important thing in business is branding — what is your brand known for?  This lets the consumer know who you are, how much experience you have, and how you can help — you have to have some sort of credibility before anyone takes you seriously. Almost every time I speak to a seller and begin rapport building with them our second conversation begins something like this “well I looked you up on the web and …..” Uh ,hello, that is credibility even if there is no testimonial, they are checking your credentials to see if you have a web presence and if not the seller will not take you seriously.

Related: Thinking About Real Estate Investing? Skip Wholesaling

Which Leads Me to my Next Point..

If you believe wholesaling is the launching pad for a successful investing career, think again. I know you have heard stories of how people got started and instantaneously they were making 6 figures in 6-9 months without needing any money. Believe that if you want to. I am definitely not here to be pessimistic by no means. If you follow me at all, you know that I am very optimistic and believe that nothing is impossible. However, if you know absolutely nothing (and I mean nothing) about Real Estate you will probably fall flat on your face and not be able to recover. I encourage you to start bird-dogging first; I know its not sexy, and sometime you can get frustrated by seeing half or a third of what you could be making go to another investor, but it’s ok! You are just starting out. Remember you are getting paid half in cash and the other half in credibility.

I am a strong advocate for being a bird dog because it gets you everything you need for a great start to a long, sustainable career in real estate. 

How so?

You will learn a tremendous amount of information about the industry: market indicators, how to run comps, how to build rapport with investors, how to build rapport with sellers, you will build your team– Escrow Officers, Real Estate Agents, Buyers, and you’ll become knowledgeable about a basic real estate transaction. Bird-dogging puts you in front of the right people all of the time; it provides you with an opportunity and this is all you need – 1 SHOT.

op·por·tu·ni·ty: The option to unite yourself with a favorable outcome (tweet-able)!!

Wholesaling does provide for a higher risk tolerance, as stated prior;  but wholesaling can crush your confidence as a newbie and you may not recover and give up. I am a strong advocate for bird-dogging when starting out because there is a less measure of risk and you will be able to build rapport and confidence with other investors in the area. This will provide you a solid foundation when you are ready to launch out into the deep and become independent. There is no problem in finding deals for others, this is a great way to gain the credibility you need when you are ready to do a ton of deals. Keep in mind half of something is much better than all of nothing.

If you are unsure of how to start bird-dogging, my next article will outline the details on how many others are starting this way, including myself.

Take my advice newbies, and stope wholesaling now.

“Enjoying the Journey”

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{ 33 comments… read them below or add one }

A.C. Cooley April 4, 2014 at 6:28 am

I think you might want to rename the title of this article. If you are telling someone to “stop” doing something then obviously they are already “doing” it. No one is already successfully wholesaling is going to stop to be a bird dog. Maybe “Stop Considering Wholesaling Now” is better.

Now someone can say hey you know what he meant. Don’t take it too literal. Well someone can argue not to take the “No Money, No Credit” phrase too literal. I don’t know of any REPUTABLE coach or mentor that teaches about wholesaling who does not talk about marketing. Any intelligent person knows that marketing will have a cost in any business. The “No Money No Credit” means you don’t to invest your own money or use your own credit to buy a house. They are some sort cost of doing business with almost anything. Even with “Driving for Dollars” anyone should know if you start a business that relies using your car know you will have to pay for gas.

I agree wholesaling is not easy but definitely a realistic way to make money. If anyone truly believes you can get anything out of life without hard work and spending some money then they need to stop dreaming not just stop wholesaling.

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Marcus April 4, 2014 at 7:55 am

AC,

Thank you for the response, many newbies get caught up in the hype and start wholesaling that are not successful, so this article is giving them a different approach. You are absolutely correct there is cost of doing business and marketing is one, but let’s be honest is everyone as forthcoming in regards to those associated cost as they are about profit potential; absolutely NOT. Education is key and this article is meant to inform.

Credit is simple credibility, no matter how you put it. A credit score is based on your credibility and timeliness in paying debt. Someone offered you an opportunity based on your history and if you spoil the relationship thus your credibility (credit with them, your name with them) is bad. So to distinguish between the two can not be refuted. As stated in the article it’s better to build up your credibility before launching out independently.

I love wholesaling but many people start out with the wrong impression and don’t get it right, then immediately give up. Let’s inspire Newbies to help other wholesalers until they have a solid footing in the industry. Teamwork will assist in getting more deals done and strengthen the “Credibility” of investors as a whole.

“Enjoying the Journey”

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Tim Davids April 4, 2014 at 7:13 am

Good advice. After listening to about 60 bp podcasts and reading up I came to the same conclusion.

Looking forward to the bird dog article

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Marcus April 4, 2014 at 11:37 am

Tim,

Take your time and know that it will not happen over night. You have to be persistent, you have to hit the ground running until you run into the right person that is willing to evaluate some of the deals you come across.

“Enjoying the Journey”

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Adrian Tilley April 4, 2014 at 9:08 am

So what’s the main difference you see between bird-dogging and wholesaling? To me they seem very similar, except you get paid way less for bird-dogging. Am I misinformed?

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Marcus April 4, 2014 at 11:41 am

Adrian,

I see bird-dogging as a way to build your team, its a more reserved approach for those that may not have the risk tolerance to spending hunderes or maybe thousands of dollars to get started.

You build your team, gain credibility, plus learn from someone experienced. In my opinion the compensation is justified as such: half monetary, the other half in education.

“Enjoying the Journey”

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Jon April 4, 2014 at 10:38 am

Actually, it should say, “Stop pretending to be wholesaling.”

jon

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Marcus April 4, 2014 at 11:43 am

True Jon so very true, but they are pretending because they have no clue of what it actually takes to become a successful wholesaler. They believe send a few mailers or drive around for a few months and then BOOM I’M RICH.

“Enjoying the Journey”

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Jerry April 4, 2014 at 10:41 am

Marcus, I don’t think you needed to tell newbies to stop wholesaling. 99% of them will quit anyway. Of course, the fact that 99% don’t make it is not something the gurus/course sellers boldly advertise.

Bird-dogging isn’t the answer either. Then you’re the middle-man for the middle-man, and get paid accordingly. That doesn’t motivate, inspire & empower in my opinion. Might as well get the contract if you’re going to go find the deal, and then split the profits 50/50 with a wholesaler if you co-wholesale/use their buyers list.

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Marcus April 4, 2014 at 12:01 pm

Jerry, many wanna be wholesalers stop before they even get started you are right. the truth is not told about the adversity they will go through but that is not the gurus objective so I don’t fault them. It kills me how people face a little adversity and quite. To me it was never their purpose or dream to be an investor.

I steer Newbies in the bird-dogging direction because I know wholesaling is a totally different animal and they are not mentally, or financially prepared. Sustainability is the name of the game, they will be out of the industry as fast as they thought they got in if they can’t handle the pressure in the beginning.

As I told Adrian, I see it as half monetary and half education. My aim is to make sure Newbies get a good introduction of all the concepts before launching out. No. I’m not saying become stuck just learning, but its better to learn while actually doing deals versus destroying your credibility in the process of trying to do “A” deal. I have done it and seen so many others when starting out think they have a deal blast it out to their buyers list, and some of the investor literally cuss you out for sending garbage. Thats a hit on your credibility now the next time you have a solid deal they may not even look at your email. That hasnt happen to me Im just saying.

Do deals get paid in $ and education whats wrong with that. You are building your team because now you know what title company to use, what investors are looking for what, how to accurately comp and area. Its beneficial. One thing I must add, find an investor that is able to process with you the possible deals you find. They know you will make them money in the long run, and you know you will have a solid education for a successful run at being an investor.

“Enjoying the Journey”

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Brian Gibbons April 4, 2014 at 1:14 pm

Bird Dogging is a good idea.

So is sub2 and lease option assignments on thin equity deals.

There are pit falls in all strategies, and you need systems and and a rolodex of folks that assist you.

Wholesaling crushes newbies. Thin deals are easier.

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Jerry April 4, 2014 at 5:33 pm

Marcus, I just read your article and I am a newbie. You are telling newbies to start out bird dogging and stop wholesaling. It was my understanding that a bird dog find GOOD deals and bring them to a wholesaler for a fee. So, my question to you would be how do you come about these deals? Wouldn’t you have to generate these deals by going out and finding them, do some type of due diligence to ensure that it is a deal before you present it to a wholesaler. You also talked about building a team, can a bird dog really build any type of team? I consider myself as a wholesaler and I have surrounded myself with knowledgeable people who are will to help me down this learning path I must travel and not one has given me the advice that you have recommended. This article is a contradiction on everything that Bigger Pockets stand for. Newbies want to hear the truth but not be told to give up.

Just one Newbie’s feeling on the subject. …. Have a good one

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Marcus April 4, 2014 at 8:34 pm

Jerry,

I respect your opinion but I am willing to stand by my article, do you have the resources to put in multiple offers on properties on the MLS, can you leverage another wholesalers lead and generate a commission off of that. I make sure Newbies have multiple streams of leads to work on instead of waiting for 1 deal. All I’m saying is that bird-dogging can put you in arenas that newbie wholesalers do not have access to. If you are working and providing deals for wholesalers and you are not being provided with a quality education you may need to evaluate your colleagues. You should never give up something with gaining a little in return.

Wholesaling is very lucrative but bird-dogging is an excellent way IN MY OPINION for a Newbie to get there feet wet. A bird dog do have to know how to evaluate deals, but can they close them. What about seller financing this is a challenging proposal to present to a seller, but if you can leverage a Escrow Agent that have experience in closing seller finance deals, it’s good to have the escrow officer contact the seller or vice versa to help you close the deal. leverage other peoples resources is exactly what wholesaling 101 is about using other peoples money. This is not a contradiction but a stark contrast to the norm. If you are a great wholesaler excellent, but many Newbies are not.

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Walter VanRooyen April 5, 2014 at 11:54 pm

Not a fan of the title, and the angle, seems so discouraging. I understand the reasoning, but I think the author could have used a different method. On another note, I do appreciate the tip to start off by bird-dogging. Will look into this.

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Marcus Maloney April 6, 2014 at 8:17 am

Walter,

This article is to give you an alternative to starting out, not to be discouraging but reaffirming that there are many approaches to starting. The article accomplished what I wanted it to do have newbies explore this approach.

“Enjoying the Journey”

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Lorna April 6, 2014 at 11:05 am

Marcus I understand what you are saying, but strongly believe that when you put your mine to do wholesaling you will make it. It might not be easy but fight is the key to apportunity and as a newbie I advise all newbies trust in God and believe and he’s at your right hand.

Fear thou not for I am with thee be not dismayed for I am thy God I will help you and I will uphold you with the right of thy righteousness. Believe ,fight on and it will happen. Marcus you right in some of the things you are saying, but a newbie should not stop wholesaling, because no know when that person will be in the right place at the right time.

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Marcus Maloney April 6, 2014 at 3:36 pm

Lorna, you are absolutely right if you strongly believe and continue with positive affirmation you will accomplish what you set out to do. Faith is clearly a GREAT source of strength and motivation.

“Enjoying the Journey”

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Will April 6, 2014 at 11:07 am

Thanks Marcus,

it’s true you need some money for marketing, I have heard Guru’s saying you don’t need it, but if you are using listsource, or other marketing tools, it does take money to get those leads.

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Brian Gibbons April 6, 2014 at 11:56 am

There are many wholesalers trying to make money with yellow letters, printing them yourselves, using listsouce or melissa data for leads, click to mail etc.

And getting poor results.

Frequency is a big issue, the number of times you hit a list.

Bird Dogging is one way.

Another way is Pretty Houses with no equity, buying on terms and assigning for $5K.

Maybe there could be an article, “How can I make money on every lead?”

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Wes April 6, 2014 at 2:45 pm

My question is how a seller feels when you’ve built rapport with them and gained their trust that you are able to buy their house and pay them each month, only to turn around and assign it to someone else that they don’t know at all.

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Marcus Maloney April 6, 2014 at 3:04 pm

You are right Will, it does take some money, listsource and other tools are great, but by no means is it free.

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Joe N. April 6, 2014 at 11:11 am

Funny how you try to discourage newbies from wholesaling, yet you yourself said “you love wholesaling”…and it’s true you will do better if you have some money for marketing, but you don’t need a penny to get started. Craigslist is FREE, and my last deal I closed for a $5,000 assignment fee, SO, that costs NOTHING, not a penny to get that deal. Do those deals happen all the time? No, but once a newbie closes his first deal, they can invest 15-20% of the profit into a marketing budget, then they can really start cranking it out.
I think this article was a joke, because I had a real estate broker try to convince me to not start wholesaling over a year ago, and $21,000 later, I’m glad I DIDN’T listen to him.
In MY opinion, wholesaling is a GREAT way to start if you are a newbie with little to no money at all. You just have to keep at it

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Wes April 6, 2014 at 2:48 pm

I agree with you Joe N. I can’t tell you how many industry “experts” have said that I shouldn’t do something, only to turn around and do it and have success. Too many people trying to offer advice not to do something.

Btw, paying a company like Listsource is not the only way to get a marketing list. There is absolutely a100% FREE way to obtain a list of thousands of leads…just have to have the knowledge of where to look.

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Marcus Maloney April 6, 2014 at 3:27 pm

Joe,

Once again I am not trying to discourage anyone from wholesaling. I clearly stated that I am an advocate and love wholesaling but there are alternatives. Then when he/she is ready to make the leap they’ll get a good start and become a great wholesaler. There are many that jump out and try to start but are clearly not informed of all the processes. This is the reason why I encourage learning through the process of bird-dogging FIRST.

That’s great you were able to find those deals, I love to hear encouraging stories of success if you are not yet maybe you should post some of those encouraging stories through a blog on BP. Believe me I will be the first to subscribe and anticipate more, I know others would love to hear it as well.

“Enjoying the Journey”

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Sante April 6, 2014 at 11:44 am

Thank you for the article Marcus. I agree with you. It accomplished what it was intended to accomplish! “Getting newbies to explore the idea of bird dogging” first.

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Marcus Maloney April 6, 2014 at 3:29 pm

Thank you Sante, I will be doing an article on bird-dogging next, I hope I get a similar response as I did with this article.

“Enjoying the Journey”

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Shaun April 7, 2014 at 11:28 pm

Hey Marcus,

I also will be looking at your article on Birddogging. I’ll somewhat reserve judgment until then, but on the surface I agree with most of the not getting it folks.

“You will learn a tremendous amount of information about the industry: market indicators, how to run comps, how to build rapport with investors, how to build rapport with sellers, you will build your team– Escrow Officers, Real Estate Agents, Buyers, and you’ll become knowledgeable about a basic real estate transaction. Bird-dogging puts you in front of the right people all of the time; it provides you with an opportunity and this is all you need ”

Not sure how this is any different than a wholesaler, other than being to lazy to do that last 5% of the work of getting a contract on the place.
Seems like just a lazy wholesaler that will get a lousy fee accordingly.

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Adriel April 8, 2014 at 8:38 am

Shaun,

I think you meant well with your blog post, but I do think that in a way, it damages the ambition of a newbie wholesaler. I think instead of telling them to “stop what they are doing”, I think you could have spoke up ways to be more savvy. For example, I get the perspective you gave regarding credibility, but here’s another way a newbie wholesaler can still plug themselves in. When starting out, DO NOT come across as a buyer as if you have the funds to purchase the property or you are some big functioning investment company. If you come across as if you are going to purchase the property, these home sellers WILL perform due diligence and “google” you. Instead come across as if you are an intermediary where as you work along side an investment group or you just simply have a funding partner. If need be, specify to the seller that it is your responsibility to handle the ground work and gather preliminary information while your funding partner reviews and makes an informed decision if he/she would like to close on the property. If you come across like this in the beginning, you protect yourself from being blacklisted because you are not making anyone promises or guarantees. Also, just network. find an experienced wholesaler you can just talk to when you need to who understands all he components to putting together a good wholesale deal. Just keep learning and applying what you learn.

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Walter VanRooyen April 8, 2014 at 11:48 pm

Love this tip!

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Adriel April 8, 2014 at 8:39 am

Sorry my response was for Marcus.

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Marcus Maloney April 8, 2014 at 10:43 am

Adriel,

Great response, I like “come across as if you are an intermediary”, this will assist in building credibility. Your comment brought out some great points. I hope some Newbies will read the comments as well because there is a wealth of information here. Thanks Adriel point well taken

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Marcus April 9, 2014 at 11:30 am

Walter,

Thx, keep pushing forward. Progress is a daily activity.

Reply

Lisa Phillips April 17, 2014 at 11:13 am

Nice article! I agree with your assessment, no one seems to talk about the real costs involved in time and effort.

Reply

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