Real Estate Wholesaling

Which Is More Lucrative: Wholesaling or Flipping? (From Someone Who Tried Both)

Expertise: Personal Development, Real Estate Wholesaling, Real Estate Investing Basics
100 Articles Written
Two paths with different heights of coins.

Like everyone else, I was captivated by the glitz and glamour of flipping. Now I believe fix and flipping is overrated, and wholesaling is more lucrative in the long run.

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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.

Young handsome man wearing glasses over isolated background Smiling showing both hands open palms, presenting and advertising comparison and balance

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.

Related: Why the Strategy You Choose Won’t Make or Break Your Investing Career (But Your Inaction Will)

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.

Silhouette of male on the mountain. Leadership Concept

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).

Related: The Type of Property That Every Investor Should Be Adding to Their Portfolio

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!

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Which strategy do you prefer: wholesaling or flipping? Why?

Let’s talk in the comment section below!

Marcus Maloney is a value investor and portfolio holder of residential and commercial units. He has completed over $3.3 million in wholesale transactions. Currently, Marcus is a licensed agent who ...
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    Jake Silcott Real Estate Investor from Denver, Colorado
    Replied 12 months ago
    I’ve tried both. Had much more success flipping. Wholesaling seems almost impossible in a super hot market. The “deals” al the “wholesalers” “deals” in Denver are not deals and have barely enough room to make 5% after all is said and done. I’ve done better searching for my own deals to flip. Denver is just crazy though. It feels like it’s the next San Francisco. So...what do I know.
    Maddison Todrzak New to Real Estate from Northern Colorado
    Replied 6 months ago
    Hi Jake! I am brand new to Bigger Pockets, and am looking to connect. I'd be interested to hear about your experiences with flipping in Colorado. I'm in NoCo and even the market up here seems insane to even begin flipping as a 'beginner' level investor like myself - I'd be interested to hear how you've faired with those investments here.
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied 12 months ago
    Jake, In higher priced markets it is difficult to find deals, especially if you're not marketing direct to seller yourself. When you're in a market with high demand which drives up the price its harder for wholesalers to find solid deals to offer flippers. Denver is a crazy market as most west coast (WC) states. I'm in Phx but since the market has heated up so much here, we've been virtual wholesaling in midwest markets where there are still great margins on deals. You may want to consider that as an option.
    Tom Phelan Real Estate Investor from Key West, FL
    Replied 12 months ago
    Marcus, Good points made. I am curios, with the properties you do hold, do you use a systematic 1031 Exchange strategy to move up the ladder to larger and more expensive properties, ergo increasing your: a) appreciation b) depreciation c) cash flow And, to forever eliminate having to pay long term capital gains taxes and taxes on recaptured depreciation?
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied 12 months ago
    Tom, Great question. Normally we hold for the passive income but in the event we do sell we use 1031 and in some instance we sell with seller financing to still keep the cash flow but eliminate the repair and maintenance cost. Either strategy is good but 1031 is the way to go to increase the portfolio.
    Michael P. Lindekugel Real Estate Broker from Seattle, WA
    Replied 12 months ago
    how do you wholesale without equity stripping (crime in WA State)? why would a seller choose not to sell for FMV in the open market?
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied 12 months ago
    Michael, Wholesaling is simply an agreement between the wholesaler and the seller. There are plenty of circumstances where a seller is willing to sell below market value. Here are just a few: Inherited.....Seller inherited the house and it has a mortgage this can changes their financial dynamics. With the way society is most people are living from paycheck to paycheck so the burden of having another house to maintain (taxes, mortgage, insurance, upkeep) could place them in a difficult situation. So to alleviate that difficultly they sell the house quickly to an investor below FMV. Repair Cost......This goes back to the financial burden of carrying another house. They don't have money to fix the house up to prepare to sell for FMV. PreForeclosure Tax Defaults Absentee Out of State Landlords going through a costly eviction. There are numerous reasons however its roughly on 1% of homeowners that are willing to sell well below FMV, but they are out there.
    Michael P. Lindekugel Real Estate Broker from Seattle, WA
    Replied 12 months ago
    i understand what wholesaling is. i have worked on transactions with all of those scenarios on commercial, investment, residential, complex estates and trusts. i can swing a dead cat and hit a dozen cash buyers that will pay the As-Is FMV and close in a week. i still dont understand why a seller would sell for less than the As-Is FMV to the open market?
    Account Closed Specialist from Paradise Valley, AZ
    Replied 11 months ago
    Lots of reasons a seller will skip selling on the MLS. Perhaps they had a realtor in who told them they had to fix a roof or clean the place up or do landscaping for curb appeal. The homeowner simply didn't have the money to do those things, or didn't have the mental space to worry about it, or didn't want Opens or inconvenient surprise showings, or strangers going through their drawers and medicine cabinets and on and on. Maybe it's a divorce and one of the parties is forcing the other to sell quickly at whatever cost. Maybe the seller has two mortgages and needs to close quickly. Maybe it's a winter home in Scottsdale and the parents passed away and the kids live in Seattle and they don't want to move to Scottsdale. They want their money now! You assume people are rational. That is a mistake. They want what they want and they want it Now! ;-) Besides, about one third of the houses listed on the MLS don't sell. Why is that statistic never mentioned?
    Cornelius Charles Investor from Oxnard, California
    Replied 11 months ago
    Hey Michael. Even with my limited experience, I have a real world example. Our first flip, the seller knew that he could get more on the MLS, but his primary concern was working with someone who would give his friend who had been living in the house for years (and was a hoarder) time to clean up his belongings and find a new place to live. That was more important to him than money. He used to be an investor himself, so he knew that we were going to make a healthy profit on the house but did not care about that.
    Brock Lile from Castle Rock, WA
    Replied 12 months ago
    From what I understand, and IANAL, the big hangup here in Washington is going after foreclosures. Those are a big no no as the sellers are considered destressed and can retroactively sue you for multiples after the deal has already been closed.
    Michael P. Lindekugel Real Estate Broker from Seattle, WA
    Replied 12 months ago
    the distressed home conveyance law enacted in 2008 is mostly about promises to convey the property back to the homeowner or promises the homeowner an interest in or portion of the proceeds from a resale of the property. there could be an equity skimming component associated with the transaction. equity skimming as been prosecuted as elder abuse as well.
    Christopher Eugene
    Replied 12 months ago
    Hey Marcus, Great article! You mention in the comments above you are wholesaling in the Midwest. Do you make a decision to close base on the numbers virtually? Where in the Midwest would you suggest to market? Which technique of marketing are you using while Virtual Wholesaling? Thank you!
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied 12 months ago
    Chris, I have a team that walk the properties and upload pics and videos for me to review. If the acq price and the rehab numbers are solid we pull the trigger. We us multiple methods for marketing ie...direct mail, cold calling, text messaging. Although with some of the newer policies in place with the FCC we are looking at another method to use instead of cold calling. We are currently marketing in Chicago.
    Bryce Deeney
    Replied 12 months ago
    To be honest, dealing with wholesalers (not all, but most) is frustrating as an investor; mainly because simply adding the middle-man makes an incredible deal an 'okay' deal the majority of the time. I understand that wholesaling is a lot of work; afterall, you are the one out there trying to find those 20% off housing situations, then passing it off at 10% "off" to the investor. The problem is, most wholesale deals I analyze in the markets I'm comfortable with are trying to sell these to fix-and-flip investors with super thin margins. They are also requesting quick closes, all-cash offers, and have a lot of contingencies (i.e. "Tenant would like to stay as it's the owners daughter/brother/sister/mother/BFFF"). I understand working with wholesalers is beneficial as it widens the pool of potential deals out there, but simply working off the MLS and negotiating 10% off the price is much easier than getting a 10% discount from a wholesaler IMO. Obviously the best path is to do direct marketing individually to get the full 20% off price; afterall, the BUY is where you get the best deal. I've yet to find a wholesaler willing to offer an AMAZING deal in the Arizona market.
    Naor Biringer Flipper/Rehabber from Dallas TX
    Replied 12 months ago
    Hey Bryce, I hear ya ! I invest in Dallas-FW area, when I just started I made connection with several wholesalers in the area. They "analyze" the rehab cost and tell you its a good deal which is big BS ! As Marcus mentioned in his well written article, flippers have so much more expenses other than the rehab itself, which drops the profit margin to less than what the wholesaler profited. I just bought my 4th property and all 4 properties I find off the MLS. Me too, I've yet to find an AMAZING wholesale deal in the dallas-FW area
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied 12 months ago
    Bryce and Naor, I can agree with you AZ and DFW are very challenging markets as many across the country. You are right there are many wholesalers that are offering very thin margins. This was one of the reasons I started wholesaling virtually from AZ because the deals in AZ were too thin for me to make sense of and offer them to my list. If wholesalers are only offer 10% reduction that's not a deal I would agree scour the mls and negotiate the deals down. I've seen deals in AZ where the wholesaler states the rehab is 30k but from the pics I could see that it would be nearly twice that. This all comes from the uneducated wholesaler believing 5k off is a deal. Thanks fro your input guys
    Michael Greene
    Replied 12 months ago
    I am new to the wholesale business. Why is it harder to find deals in a rising market? My contention is that as a wholesaler, I am providing solutions to distressed homeowners Distressed homeowners are going to be around all markets. The most important question in all of my deals whether I know the answer or NOT is Why is that person selling. I've found that my best deals are with people who have problems that I can solve and in exchange they will sacrifice equity. I love wholesaling because the only risk that I want to take is NOT being able to find a buyer. Otherwise, my financial risk is limited and upside is as much as I want it to be because I negotiate how much I will make on a per deal basis with my distressed homeowner.
    Michael P. Lindekugel Real Estate Broker from Seattle, WA
    Replied 12 months ago
    what problems are solving for the financially distressed homeowner that cant be solved selling for As-Is FMV to an open market such an MLS?
    Nathan Reinhardt
    Replied 11 months ago
    Convenience. Similar to open door, zillow, etc. People sell real estate for less than fmv including on the mls all the time.
    Karen Bigley
    Replied 3 months ago
    Hi Marcus! I am interested in Virtual Wholesaling and I see that you have also mentioned that. I am new, as of today, with Bigger Pockets. (I have had a Real Estate Sales background for over 15 years and retired last year.) Real Estate is still in my blood and am looking to make additional income and would like to dive into learning how to wholesale. I remember when I first started in RE, I chose one of the best top producers who was willing to mentor me. I am looking to do the same with Wholesaling (and of course, share my knowledge with anyone as well!) Do you use or recommend a particular cost effective program to obtain the lists of pre-foreclosures, vacancies, etc.? I have heard of REI Automator..looks good but pricey. I see a lot of Wholesaling Teaching Programs out there too, and not sure if it necessary to invest in those programs or not. Anyway, just wanted to see if you had input on the program for obtaining the list of properties/sellers and buyers for Wholesaling Properties. THank you!!! Karen B