Los Angeles Wholesaling

11 Replies

Hey BP people! First I love this forum, everyone is always so generous with info and advice when I post and it is really helping me to get a handle on REI.

I wanted to see if any experienced wholesalers in Los Angeles wouldn't mind chiming in with advice on how to be successful in this market wholesaling. It seems that finding motivated sellers is a challenge and as much I hate to listen to those who say you cannot wholesale in LA anymore I want to believe otherwise.

Any thoughts are welcome!

thanks - Mark

Mark,

I'm not a wholesaler, but I am a flipper and a mentor. Part of my advice is to build a solid buyer's list (people like me who would take the good ones off of your hands for a nice profit). A lot of wholesalers get greedy (hey, it's what the market will bear, right?) and don't look at the long term. Make a respectable profit from each but don't gouge the flippers or else they won't do business with you in the long run. You want to build a list of REPEAT customers so that everyone wins. Think of it as the CostCo method...make a respectable profit from a lot of deals instead of trying to make a killing off of one.

Also, learn Craig's List...you can do a lot of buying and selling from there.

Third, download the Ultimate Beginner's Guide to REI (http://www.biggerpockets.com/real-estate-investing) and read it over and over.

Fourth, find a good REI (I would suggest any of the FIBI's or the Club in Action in Burbank) and network like crazy. My catchprhase is "Your network is your net worth" and it is the truest statement that I know in Real Estate...especially in the LA area.

Drop me a line if you want to talk...I'm always open to helping others.

Mark

These days finding a buyer is very challenging. It always has been but today there are less distressed sales, so the pie has shrunk. It takes more work to get the same amount of deals as last year. 

Can it be done? Sure can, just closed an LA deal last month. 

Wholesaling in Southern California is different. You make the seller more because you cost them less than using agents would. You essentially sell the house at top dollar to a lower margin rehabber that you just tied up at the same price or higher than the average rehabber would buy a deal at. So you really aren't buying at a huge discount anymore on most deals, the ones that keep your lights on. You are beating other rehabbers to even get the deal but just know better higher margin buyers who need that volume. 

I know lots of wholesalers, none are getting paid without a deal. 

Originally posted by @Tim G.:

These days finding a buyer is very challenging. It always has been but today there are less distressed sales, so the pie has shrunk. It takes more work to get the same amount of deals as last year. 

This is exactly what we're seeing in a number of large markets.  Inventory is down and prices have shot up in the last 2 years so this is not "easy money" right now.  Marketing - consistently over time - is super important.  Realize that probably 10,000 "wholesalers" have taken a shot a LA in the past year and then disappeared once they found out how hard it is to create any awareness of their business.  So, we can tell you encouraging things, and I do think this is a great business and you CAN do it, but you need to understand the environment.  It's tough anywhere, but especially tough in LA.  Get ready to fight people with more experience and more money.  Develop a guerrilla marketing mentality.  You can start by no longer calling yourself a "wholesaler". No one outside of our world knows what that is, and it LIMITS the way you define yourself. We train investors to be SOLUTION PROVIDERS for sellers with a bad house or in a bad situation. On the exit, we might wholesale, might rehab with hard money, might list the property (ourselves or via an agent partner), might help them find someone to lease the place, etc. I personally think wholesaling as a single strategy for REI is dead in 2014. The leads cost too much. If all you can do is wholesale and 1 in 20 callers/webleads is a wholesale opportunity.... that "deal" could cost you $6,000, $8,000, etc. in marketing (cost per deal) in a place like LA where we can sell web leads for $300, $400 each (cost per lead). As margins get compressed due to low inventory and higher acquisition costs, you have to think of ways to offer (1) more services that generate revenue to you and (2) higher margin opportunities (such as the buy/rehab/flip rather than the low margin "wholesale" flipping of the paper)...

“It’s not the will to win that matters – everyone has that. It’s the will to prepare to win that matters.” ~ Paul “Bear” Bryant

Thank you @Dev Horn  , @Tim Gordon  ! I've been doing a lot of research, getting educated (by some of the "gurus") joined groups, etc and have started marketing. 

I know how expensive marketing can get (my career has been television) and I want to make the best decisions a newbie can make so that I don't see burn down sooner than income.

Can you recommend anywhere that I can look to see what is working in the LA market right now? I'm not in a position to buy and hold or rehab just yet which is why I want to start off slow, try to close some wholesale deals even if for minimal profit. Right now this is supplemental so I don't need big paydays. For me this all about entry into business at first.

Thanks again!

@Mark Marinaccio  

I am around the same boat as you do Mark, but I look for flips and possible investment. To answer your question about the market right now, It seems to me that there is NOT a specific area where you can find "hidden gems". I believe that there are factors you should consider before start farming is what price point you are comfortable to whole sale? what are your buyers looking into (networking is extremely important).

I am also a realtor in Pasadena so I have the network full of realtors. The market seems having multiple price reduction with listings, less offers, not as competitive as before, and more and more inventory on the market yet no buyer. The investors are pulling less and less margin and many are holding back.

I am not here to discourage you but only to emphasize that consistent marketing/farming will eventually get you deals. It might take weeks or months but there will be return. And when you are starting off, you should try to establish trust and relationship with your buyers first. Therefore, I would consider charging less fee for first couple of deals for your long term gains.

Below link is an article that we share in our office where most agent would agree on and it should be beneficial.

http://www.cnbc.com/id/102021503

Hey Mark!  I'm a fix n flipper in LA, but have lots of experience working with wholesalers.  The only advice i have is do ur own work.  do your own marketing, lock up deals, and then find a buyer.  i get very frustrated with people marketing other peoples deals or offering deals they havent even locked up yet.  plus, youll make more money this way.

I know few real wholesalers in la that are very successful, but they work at it full time and spend a good chunk of $$ marketing

@Tim Gordon  , is to attend two real specific estate clubs in the LA area. The Invest Club for Women, which is a misnomer because men are as welcome to attend, offers a wholesaling class they call the 60 Day Challenge. It's very intensive, you'll learn a lot, and I know many who have taken it. Few, unfortunately, earn a dime when they're done but there's enough demand that it's now up to around $2200 to take the course.

You'll meet many of the recent graduates at the Irvine chapter of this club (which can be a bit of a pitch fest) and see for yourself the overpriced deals they offer -- mostly between themselves in long unsuccessful wholesaler chains. In my view, there is a better option.

The second is not really a regular REI club but more of a monthly workshop held here. Jerry Torres and his wife are local brokers and flippers who train others to find and partner on deals. They don't charge for this and it's not BS. Rather than offering high-priced guru material, the education is free, there's no sales pitch, and they are completely honest about it.

They'll show you how they find properties. (Full disclosure: we've loaned on a few but have never been to their workshop.) They take much of the risk, you both split the work, and then there is a very fair profit split. Be prepared to work your butt off, but this is an option that has some integrity behind it, in my opinion, and not offered by any self-proclaimed gurus with catch phrases, gimmicks, or over-priced classes.

You say that you don't have the money to flip, yet, but I would argue that you don't know how to flip without money, yet. I've never put a penny into any house that I've ever bought and yet I've continued to flip houses over the last 18 months.

It takes a strategy and an understanding of leveraging OPM (pronounced opium, but is Other People's Money). Trust me, it is addictive...lol.

There are some local FIBI's you can go to (no pitching allowed, only education). I have gone to a couple and the networking is great. I also like CIA (Club In Action) in Burbank. If nothing else, go to their free CashFlow game and have a drink with others in the business.

Networking is truly the answer to this...when you network you open yourself up to many ideas that you hadn't thought of before...things that you didn't know that you didn't know.

Mark

Jeff S Na 

The agent fee is in regards to the seller. Not the buyer and the percentage it costs them. 

6% commissions plus paying closing fee's adds up on a $400,000 home. 

If my wholesale fee is at or below $20k I'm saving them money versus listing and selling with an agent. 

I don't know how to flip, won't tell anyone how to flip cause I don't flip. I just offered advice to a wholesaler in my market on how to succeed as that is what I do day in day out to support myself as a full time wholesaler. In the market he is inquiring about. 

My deals sell, in every type of business there are companies that run on different margins. It usually offends rehabbers here when I suggest there are buyers that pay more but that is business and yes it does happen. Saying it is a bad business model is a cop out. Some of these folks have entire crews on staff and handle 10-30 flips a month. They make up margin in volume. Different strokes for different folks, or the buy and hold buyer who will pay more since they don't intend to flip. 

Half of my business is helping new wholesalers and we've made good money, ironically most of the time its on deals other folks shoot down. 


My advice, @Mark Marinaccio  , is to attend two real specific estate clubs in the LA area. The Invest Club for Women, which is a misnomer because men are as welcome to attend, offers a wholesaling class they call the 60 Day Challenge. It's very intensive, you'll learn a lot, and I know many who have taken it. Few, unfortunately, earn a dime when they're done but there's enough demand that it's now up to around $2200 to take the course.

You'll meet many of the recent graduates at the Irvine chapter of this club (which can be a bit of a pitch fest) and see for yourself the overpriced deals they offer -- mostly between themselves in long unsuccessful wholesaler chains. In my view, there is a better option.

I'll vouch for the challenge too, it was my first foray into REI back in Sept of 2011.

Just like all people in REI courses only a slim few make it out and do what their intentions were. But, the group is full of many people who after the challenge learned what it really is they wanted to do. Whether its be an agent, lender, landlord, passive investor etc...

The pitching of deals there I think is more for practice for the newer folks, I don't think theres many real buyers there. Its a fantastic club for new investors, very welcoming, educational and full of energy! 

Having a great broker can make your life much easier. Allowing them to utilize their network of buyers and gives you a shot at new listings before they hit the MLS.

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