4 Common Myths About Wholesaling—Debunked
I want to talk specifically to my fellow wholesalers. This post is for you, and I’m confident it will help save you tens of thousands of dollars when you’re in the infancy stage of your business.
Want more articles like this?
Create an account today to get BiggerPocket's best blog articles delivered to your inboxSign up for free
As a wholesaler, it’s imperative to develop a solid business model. Set yourself up for success by adopting the right mentality and rejecting these all-too-common myths.
Here are several key things to keep in mind.
Myth #1: Wholesaling Is ONLY for No Money Investors
This is so far from the truth. Although there is a very low barrier to entry, there is a high barrier to sustainability.
How many people have you seen get started as a wholesaler who did not find any level of success? Many people I talk to haven't closed a single deal. But a common mistaken belief is wholesaling is an investment strategy for beginners and therefore very easy to do.
I’m a little ashamed to say this, but I used to be embarrassed to let people know I was wholesaler. There’s a misconception we are the weasels of the real estate industry. This makes me chuckle now, because so many flippers and rental investors wish they could do what I do: find deals.
Myth #2: Wholesaling Is a Side Hustle
This mindset will not serve you well as a beginner wholesaler. Many start out thinking, “I’m going to make this a side hustle to help me reach my goal of being a ‘real’ real estate investor.” Good luck with that!
If you’re going to treat wholesaling as a side chick, she will definitely play you all the way to the bank. Wholesaling will give you tons of bumps, bruises, and even a black eye or two, but those who are dedicated and married to the strategy will see a high level of success. There are many investors wholesaling hundreds of transactions a year.
What I am saying is: what you put into it is what you will get out of it. Put in part-time effort, and you will get part-time results.
Myth #3: Wholesaling Is Inferior to Flipping
After many years of supplying flippers deals, I am starting to see a trend of flippers converting to wholesalers. I asked a friend of mine who used buy deals from me why he started wholesaling. His answer was simple, “Little risk with good upside.”
I thought to myself: Oh, now you get it.
Other flippers are trying to convert to wholesaling to find their own deals. I can literally hear the echoes of the flippers saying, “Wholesalers take all the profit.”
They are converting because they believe it’s easy to secure deals. They soon realize the many challenges we face in finding those deals.
There are some, though, that do make a successful transition. And once they close a few $30,000, $40,000, or even $100,000 deals and see the profit potential, its a no-brainer to them. I say, “Welcome to my world.”
Myth #4: Solely Focus on ‘Easy Button Buyers’
This is the mistake every wholesaler makes—especially in the very beginning. The “easy button buyer” mistake is when you finally find a buyer that is willing to close on one of your deals, so you repeatedly send them future deals without offering them to other buyers.
We are trained to make this mistake—everyone talks about finding a buyer who is willing to mentor you in the beginning. Well, say this mentor happens to be a cash buyer. They tell you exactly what they are looking for in a specific area, and you find that for them. And after you do it once and make $5,000, the best thing to do is rinse and repeat, right? That is what we’re taught, after all.
This is what I suggest: After closing that first deal, you know what a deal looks like. You now understand (or should understand) the numbers. You’re familiar with the area at this point, so use that to your advantage.
We make the mistake of going back to the initial buyer, offering them the deal, and asking, “What would you buy this for?”
That’s reverse wholesaling. What happens is you cut yourself short. Remember, one of the key rules in business is supply and demand. You have the supply, and in many markets, there is high demand. Your initial buyer may offer you another $5,000 assignment fee, but if you opened the deal up to other investors, you could possibly get $8,000.
This mistake is common. I’ve made it, and tons of others have made it. You are doing yourself a disservice by not positioning the opportunity to all potential buyers.
These are just a few fallacies many beginner wholesalers believe that can derail their business. Don’t let it happen to you!
Are there other myths you’d add to this list?
Let’s discuss in the comment section below.