Tales of Wholesaling Gone Wrong: What NOT to Do as a Newbie
First, let me say this: I am a wholesaler and I do not plan on changing that anytime soon. However, I do buy rentals and properties to flip. That makes me a buyer as well. At one time I was a newbie who did not what I was doing. Fast forward to now… and I still make mistakes. I try to learn from them and keep on trucking. As you read this, if you've made any of these mistakes, let's change your business model on how you do things. Wholesaling is a business, just like rehabbing and landlording. Keeping that in mind, you should always try to avoid wasting people's time.
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A Recent Deal Flop
Recently I was contacted on a social media regarding someone who had a few properties in Charlotte. And of course I was very interested. I had to go through a third party. The third party said, “My mentor has these properties in Charlotte, but before she opens up dialogue with you, you have to provide proof of funds.” I replied with, “Ok, no problem.”
The person with the actual deals then verified my proof of fund with the hard money lender. That's cool; I have no problem with that. Then the wholesaler contacted me, asking a whole bunch of irrelevant questions — for example, "What price point are you seeking," "New construction or it does not matter," etc. I'm thinking to myself, "You said you had 3 deals available; just tell me the addresses. I provided proof of funds already."
Then, a day later, I get the "smoking hot deals." The wholesaler referred to them as "turnkey." The properties were 2 bed/1 bath houses that the wholesaler was selling for $70k. I looked at the addresses and said, "These houses sell for $15k-20k and are worth $25k, tops." The wholesaler responded with, "I know." I'm thinking to myself, if you knew this, why would you waste my time? And to think this person has a coaching program!
If you are going to pay someone for mentoring, I personally think you should ask for recent deals they’ve done, HUDs checks or active projects. I would not have been so bothered if the person would have just given me the addresses up front and not made themselves seem so self-important over a basic, overpriced wholesale deal. Of course, these days people just call overpriced wholesale deals “turnkey” because they have a tenant in them.
Separating Real From Fake
I call all the numbers from the "I buy houses" signs in my city, as well as the numbers from the fixer upper signs. Recently, I saw a fixer upper sign for a property for sale. The price and the ARV made a lot of sense. I called the number. The person I talked to advised me they could not give me the address because of course their properties sell within 24 hours. Don't they all say that? He then stated that I had to come into his office for 30 minutes. I immediately hung up.
It seems like the people who make you jump through hoops to be on their list never have good, decent deals or you never hear from them again. What could we talk about for 30 minutes that would allow me to get on their list? I later found out that the company who does this are REAL wholesalers. So I did call them back and apologized and explained that I was wary because of all the liars out there who waste people's time. Now, if you are a new wholesaler, be careful of separating the real from the pretend buyers by simply asking for a non-refundable earnest money deposit from your buyer. It's really that simple.
The rise of the internet has also created an inundation of messages stating, “I have a bulk package of X amount of houses that I’m selling for $X Millions.” I’ve had to explain to a few people who approached me with these bulk packages that I Nasar do not have access to millions of dollars to take down this package. I am simply looking to buy 1-2 flips per month at this time. I do not want to tell you I have buyers with millions of dollars either. We are all looking for just a few houses a month. I’ve talked to someone who has this kind of money to close these bulk packages. He said that normally the bulk package does not exist; it’s total garbage and of course the person advertising it can’t get in touch directly with the person who has access to the bulk package. So newbies: don’t get caught up in chasing these things. They very rarely close. You are better off regularly closing smaller deals and becoming successful that way.
In conclusion, don’t start off a business relationship on lies. People will respect you if you are willing to be more honest with them. Also, when talking to new potential buyers, don’t sound like you are reading from a script. Just be you and tell them what you are doing or trying to do. You do not have to tell me how you are closing 10 deals a month. When I hear things like that, I know there’s a high probability that I will never hear from this person again.
Also if for instance someone tells you they buy in Charlotte, NC ONLY, don’t send them your emails advertising deals in Tampa, Florida. I recently did a podcast interview for BiggerPockets. That morning I got multiple text messages, emails, etc. about how they loved my honesty and that my failures kept them from giving up. One guy even offered to lend me money. I say that not to brag, but to let you know that people are tired of “fake.” They appreciate realness.
Wholesalers: What stories do you have about deals that have turned out to be no good or “fake?” What bothers you most about the wholesaling world?
Leave your comments below!