So You Want To Be A Real Estate Wholesaler?

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Whenever I attend my local real estate investment club meeting someone using the same pick-up line inevitably approaches me: “I’m going into wholesaling, can I call you when I have a deal?” Most of these people are never seen or heard from again. It seems that most of them attended some guru’s curse on how to make big bucks in real estate even if you have no money. They fall prey to the notion that it’s really easy, just find a deal and flip it to an investor. How hard could it be?

The gurus have these people thinking that there is nothing to it. The reality is that finding deals to wholesale is no easy task. Most of these novices are unprepared to do the work involved. If they do find a deal they have only done half of the work. The other half is having an investor to sell the contract to.

Is It A Deal?

Many of these wanna-be wholesalers have no clue as to what a good deal is. I can’t even begin to count the number of times I’ve been called with a “hot” deal only to find that it is a sure loser. A house selling for 80% of market value is not a deal. The truth is that anyone can find deals like that. If you are going to be a wholesaler you need to find properties that are real deals or you will never be able to make any money.

As a rehabber I use the following formula:

(After Repair Value x 70%) – cost of repairs = Maximum Purchase Price

In the market we have today I look for, and find, better deals than that on my own. For me to pay an assignment fee to a wholesaler he had better be bringing me a smoking-hot deal. In 15 years as a real estate investor I have never bought a contract from a wholesaler. I have nothing against doing so, it’s just that I have never been presented with a deal that was better than I could get on my own.

Do Your Homework

Take the time to learn what a truly good deal is in your market. That means doing a lot of legwork and looking at a lot of properties. Talk to investors and take the time to learn what they are looking for. Seek out that diamond in the rough. If you are looking for deals through real estate agents or by using the MLS, you are wasting your time. You need to find the deals that nobody else knows about.

You also need to build your investor list. That list needs to be pretty large since investors may not always be in buying mode. Some investors may purchase several houses a month, while others may buy one or two in a year. While it is important to stay in touch with your investors, it is also important that you don’t waste their time. If you call someone three or four times to present poor deals it is more likely than not that the investor will stop taking your calls.

Stick With It

Every profession has a learning curve. To learn any business you have to get out there and do it. The reason that so many rookie wholesalers disappear after a short time is that it is much harder than they thought. For many people it is much easier to quit and move on to something else than it is to gain needed experience by doing the work. It can be very discouraging to work day after day without finding a true deal, but imagine how good it will feel once you finally do.

Everything comes to him who hustles while he waits. –
Thomas A. Edison

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  1. Movoto –
    If you’d like the image removed, please let us know.

    appfunds –
    If you purchase a property using the formula Richard supplies in the article, you’re going to be removing much of the risk associated with your purchase, as you’ll have built in equity immediately, and upon completion of the rehab.

  2. Another great post. Your thinking matches mine. I get a fair number of new investors comming to me to mentor them on a deal. I hate to burst their bubble and discourage them but I want to ask “WHY do you even think there might be a deal here?”

  3. Very good points here. I’m a real estate agent and I would agree that if you’re trying to flip deals to other investors, you shouldn’t be looking to agents or the mls. I have certainly found excellent deals for my clients, but they are usually the end user or will hold the property and rent it out. If you’re looking for the deal under 70% of true market value to quickly flip to another investor…that’s going to be a full time job!

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