Which Is More Lucrative: Wholesaling or Flipping? (From Someone Who Tried Both)
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Let me provide a little perspective before I dive into this thesis. Formerly, I was a firm believer in fix and flipping.
The remarkable transformations flippers did were enticing. And along with all the beautiful rehabs, flippers were making sizable profits.
I was hooked, like many other newcomers to the industry. So, I got started.
Starting Out in Real Estate Investing
Believing all the money was in fix and flipping, I was dying to find an entry point into the world of real estate investing. But not having much money myself, I chose the low-hanging fruit of wholesaling.
Beginning as a Wholesaler
I dove into wholesaling with the mindset of it being temporary. I wanted to be a flashy fix and flipper with the nice cars and stacks of cash, so I could make it rain in the club. (Just joking. I’m very reserved. Lol.)
Like most things, it took some time to build momentum. This is not told by most of the gurus, so I became discouraged and had to deal with self-doubt.
After months that felt like years, momentum did happen. I grew to be a successful wholesaler. I had the marketing down to a science, I was building relationships, and things were moving. I was considered successful by most wholesaling metrics.
Taking that deep dive into flipping was naturally the next step, right?
I was seeing what I got a property under contract for, how much I sold it for, and then how much the flipper sold it for. It felt like I was earning pennies on the dollar compared to what flippers were making off my deals.
So, I dove in…
Transitioning Into Flipping
Without going into the numbers of the flips I’ve done, I was not impressed by the margins. After the title fees, rehab cost, buyer concessions, attorney fees, holding costs, and on and on and on—these deals were not as profitable.
Considering the amount of risk and the time spent on each project, the returns were too low, the money was slow to come, and it was just tons of work. I came to the conclusion that it was much more beneficial for me to continue wholesaling and using the proceeds to build a portfolio.
After all, creating passive income was the goal.
Why Wholesaling Is the Winning Strategy
After analyzing a few of the flips and wholesale deals I had done, the decision was made: I’m all in on wholesaling!
This is not the attractive thing to say, but I determined that wholesaling was much more lucrative. I love the returns I saw on my wholesale deals versus flipping. On average, our close amount is just over $10,000 per deal (with some outliers where we made less and others where we hit home runs of $20K to $40K).
With the time and energy it took to finish the work and close the deal on a flip, we could have completed numerous wholesale deals. Plus, there have been wholesale deals where I’ve made more assigning or double closing the transaction than the flipper made. This was not because it was a bad deal, but I was in, out, and on to the next deal.
In conclusion, many people talk about the disadvantages of wholesaling versus flipping. But I will stand on a mountain and shout it to everyone: Give me the wholesale cash, so I can buy more rentals!
Which strategy do you prefer: wholesaling or flipping? Why?
Let’s talk in the comment section below!