Sean Brennan, Your concerns are much of the basis for my advice for new investors to begin with a good basic understanding of RE rather than attempt to be so niche oriented or concentrate in one area, like wholesale transactions.
I've been around a long time from the early 70's. What others have mentioned are true, well and good. What I call "life events", will always ensure a basic inventory within the constraints of population of an area. In an area of 10,000, so many will die, divorce, loose a job or be required to move. If your market has a population of say 500,000, obviously there will be more life events that influences that market.
Economic cycles effect RE markets, availability of money and financing, material costs, labor costs to some extent play on the opportunities that you may have.
RE is like any other service or manufactirung business process, the population to be served drives supply and demand. Don't forget regulatory changes, like EPA, title hold periods, ordinaces and standards.
The aspect not mentioned yet is competition in the market.
Any business that has a lower cost of entry and profit potential will have, usually, a high level of competition.
The reason wholesale deals, just obtaining a contract and assigning to another real buyer is so popular is that there is a very low cost of entry. Some knowledge and a thousand dollars and you can be in business. I'm sure, that in my area there must be at least 500 people willing to buy a house, add lipstick and sell it. A running joke here is that everyone is related to a Realtor.
They also say 90% of the business is done by 10% of the Realtors (same applies to the players). You might think that just comes from working harder longer, but not so much as smarter.
I'm afraid this is getting way to long, but it will tie together....
You must set up your business that is appropriate for your skills, financing capacity, the population served, the market for your product and be able to compete against the alternative opportunities your customer base may have.
The question is not "is wholesaling a good sustainable business" but can it be sustaining in light of those aspects just mentioned?
How can you command a market share that will prove to be most profitable under your operating constraints in your given market?
When "investors" begin looking at thier business from a business point of view instead of a RE specialty they will be more successful. If you owned a bakery, would you just make doughnuts? I wouldn't, I'd try to build a bakery business that included a wide varity of products thereby increasing my customer base, it increases the profit potential from several product lines.
You're asking will selling doughnuts always be sustainable? Yes, there will always be people eating doughnuts. When the economy allows, demand may increase, sales will be up, you eat well. If other doughnut shops open in your area, the cost of grease goes up, a factory may close, disposable income drops, you may be out of business. If you had expanded, had a wide range of products, deversified so that economic influences like the cost of grease had little effect on your entire inventory, offered wedding cakes, sweet rolls and long johns you may still be in business.
There is a balance between specialization and diversification, that's where you need to be. If you only serve landlords, you're relying on thier ability to continue buying, thier ability to rent at a profitable rate, hoping rental demand will always be up and that regulatory influences will not interfere with thier operations or yours.
Will wholesaling flips always be sustainable? Depends on your view of sustainable, if that means a constant, reliable inventory with willing and able buyers that has a constant growth long term....perhaps, but I doubt it will be as or more profitable in and of itself due to market demands and competition. You probably won't make a decent living consistantly for ten years with constant growth unless you have limited competition. How likely is that?
I seriously doubt, if the truth be told, that you will find one investor here that only does wholesale deals and has had much over a middle income living wage on a monthly average for a ten year period. Most are probably in the boom and it won't last. J. Scott does WH deals, rehabs and flips, he is also an RE agent, he can and will do retail deals I'm sure, I doubt he would turn down a listing from a contractor on new construction and with his poker money, he may even do some financing, I don't know about that.
Asking if WHing will be sustainable long term is like asking, will my doughnut shop be a good long term business? Too many variables, I think the deck is stacked against you with such specialization long term.
My quarter's worth, I suggest having a broader knowledge so that you have the flexibility to operate with any opportunity, even at that, RE is mostly a feast and famine business, the more you can do the better you will eat!
