When people think about getting into real estate for the first time or start wondering how to get started, I often hear people suggest becoming a wholesaler as a first point of entry. And I know of one such person who just got into wholesaling with quite good success, but not without a few specific things like a huge marketing background and cash to back up that marketing.
This year our business has really begun to expand in several directions: turnkey deals for external clients (with large equity positions), external property management and those clients (outside of the turnkey deals), and the growth of our internal portfolio (that we are holding long term for ourselves). Those successes have come from a lot of different areas, and a great portion are due to several wholesalers we work with who bring great value and expertise to our team and our operations.
Saying you’re a wholesaler and actually being one is such a big difference. If you are really going to be a wholesaler, you are committing to bringing a combination of deal making, creativity, and clarity on WHAT you are bringing (deal, ability to close, individual deal with that property, ARV/rehab on property). That specific criteria for the property not only goes with the seller who is selling the subject property, but also with the investors you are selling to. Being a great wholesaler is also about understanding the investor clients you are locking down deals for, how best to bring value to those investors, and creating a win for all three parties: your potential seller, your investor, and yourself.
I was thinking over the year so far, and thinking of all the wholesalers, contractors, inspectors, partners, lenders, banks, etc. who played a part in our growth and our success this year, and how I can learn from what they have brought to the table for us. And in this post I wanted to think through three wholesalers I work with and what I’ve learned from them over the last 12 months.
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A Good Deal is Only a Good Deal if It’s a Good Deal for YOU
I’m not quite sure the number of wholesale deals we’ve bought, but it’s in the dozens this year. A lot of times now I get a phone call first about a property before it even hits the buyer lists. I LOVE this. It’s awesome for us because it gives us a shot to buy without having to negotiate with our buyers who are potentially interested. And it’s awesome for the wholesaler because they know if I say yes, we will close.
But it’s been interesting over the year because sometimes I get a phone call on a deal from one of these guys, and they have a “hot property” — to them.
Quickly I work through the information, the deal, the address, the work needed, the ARV, and the rent rates or sales price I could sell for after repairs and expenses. And sometimes it’s NOT a deal for me. My guys are surprised — or maybe even disappointed.
That property was awesome to them as the wholesaler, they worked out what they thought was a fair deal with their sellers (so win-wins for those two), but the value, location, price, etc. didn’t work for me. And in all cases but just a few that I can remember, those properties went on to sell for close to the price that it was asked for to other investors.
Does it mean it wasn’t a good deal to that person/company? Of course not. It just means it wasn’t a good deal for me. The deal always has to be a win/win/win — that goes for us buying just as much as everyone else.
Understand Your Scope of Work, Quality Expectations & Costs
I am thinking of an interaction that just occurred with a wholesaler friend of mine who also is a property management client of ours. He brought us multiple properties for management and asked if we did make readies for the properties we managed. We said yes.
Into that process about a week, we had all the bids laid out for him and a total cost of repairs and timeline for getting his properties ready. Let’s just say the amount for the rehab exceeded his expectations. Two months later I called him up and asked why the property wasn’t ready for us to get rented yet, instead of it sitting there costing him money.
Well, they still weren’t ready yet. I of course joked with him, reminding him if he would have just gone with my guys, it might have cost him a bit more, but the property would have already been awesome, ready, AND it would have been rented. He might have spent a few thousand dollars more, but we would have already completed the project and likely been ahead money-wise because we would have turned the property in just a week or two, instead of going on two-plus months holding it and paying utilities, not to mention the head space to move onto a new project that makes him and us more money.
A lot of wholesalers ball-park the repairs, which is awesome and helpful. Sometimes. Make sure you go into the deal, not with THEIR numbers, but knowing yours. And in turn, make sure the wholesalers understand how you rehab the properties and what kind of all-in numbers you are expecting. This can help you in negotiation for the best deal and also in not wasting your/their time on a property that just won’t meet your buying or rehabbing criteria.
What Great Negotiation Skills Do For You
If you want to be an investor in any area, you better continually work on your negotiation skills. You have to be ready to work hard. Hustle. Find deals. You have to know when to press. You have to know when to retreat. Know when to pull the trigger and when to comfortably, confidently, and immediately say “no.”
Sometimes my wholesalers will call me and just say, “I need to get rid of this deal. I have it locked up for ‘X’ and want to make ‘Y.’ Would ‘Z’ work for you to buy?” This is awesome and a great position for me to be in. It is an honest position for the wholesaler. We can quickly figure if the deal will work or not. We just closed on a deal like this just this week.
Then, of course, there is the opposite — when the wholesaler has a KILLER deal he knows you want, and you end up in the middle of multiple people trying to get that deal. It’s not that fun and definitely not a great position for negotiation.
In these situations, you just have to be comfortable going for it, knowing you put in your best offer — and still NEGOTIATE in that deal. I might say something like, “I might not be the highest bid, but how many deals have I put under contract this year, 100 percent of which closed past inspection period (if we even had one)?” Or, “You can take that other offer and call me in three weeks when that buyer backs out and you have to call me back for a lower price like you did the last time!”
I wish that last one always worked, but it does sometimes. 🙂
Wholesalers are awesome. They bring in deals not on the market (usually, and if they are on the market — run!). They also provide another stream of potential deals you can’t find on the open market. And if bought correctly, they provide the best deals around you can find.
As always, with every deal, just make sure you do your homework!
What kind of experience have you had working with wholesalers? And,if you are a wholesaler, what kind of advice would you give to others who are looking to buy from wholesalers?
Leave your comments below!