How do I find a wholesaler?

Question

I am relatively new to real estate. We bought our first rental house not quite a year ago. It works out OK, but we paid market for it. I am trying to be smarter now, and look for a deal, but I have no clue where the deals are, and would happily pay someone to find me one.

So, in general,

- How do I look for a wholesaler? What are the pitfalls to watch for?

- What kind of agreement do I need with him/her?

- How much, percentage, or dollar figure, should I expect to pay?

We are in search for a single family, or duplex, in Kansas City area area, $150-200K price range.

Thank you!

Christian Bors · Answer

@Sergei Genchev  A good wholesaler is difficult to find.  I would recommend you attend your local REI group.  Also, you should call the bandit signs in your area.

Most so called "wholesalers" have actually never done a deal.  People think its the simplest and cheapest way to get involved in real estate, however its actually very difficult.  The biggest pitfall to watch for is if the deal is really a deal.  Most of the time, it is not.  Wholesalers will also exaggerate the ARV and rehab costs, so make sure you do your due diligence.

The agreement is simple.  Once they have a property under contract, they can do a double close or assign the contract to you.

As far as percentage or a specific dollar amount, that is irrelevant.  Run your numbers and do the deal if it makes sense for you.  Who cares if the wholesaler will make 10, 20, or 50k on a deal if you are going to turn a profit.  As long as the deal makes sense for you, don't worry how much they will make.

MJ S. · Answer

@Sergei Genchev There are a number of good wholesalers in the Kansas City area. @Sam Bhullar is absolutely correct that many wholesalers have never done a deal, or have done very few, but there are a number of active wholesalers in the Kansas City area that generate multiple deals per month.

Attending the REIAs are a great way to make connections. However, just because you meet a "wholesaler" at a REIA meeting, don't assume that they know what they are doing. Know your ARVs, or have someone on your team that can accurately determine comps in the area. Of course, it probably goes without saying that it's important to know your costs on scope of work, as well. It wouldn't be outside the realm of possibility that a wholesaler is way off on ARV or renovation costs (either due to lack of knowledge, or lack of ethics) so be diligent about verifying.

As you develop relationships with other investors in the area, you'll discover who has the best deals for the type of properties you're seeking. And don't just focus on wholesalers. There are some rock star investors in this area that are finding too many deals to handle on their own, and they will often wholesale their additional properties when they have too many to handle.

Sergei Genchev · Answer

@Christian Bors - Thank you for the clarifications. What you say  does make sense.

@Sam Bhullar. I really appreciate your offer, but, until I know the ropes, I prefer dealing with someone local, face to face. Maybe a house or two later.  Thanks again.

I do have a real estate agent. Does having one prevent me from working with wholesalers? I assume that I might need to pay him 3% as a buyer, but other than that, does it work?

Thank you!

Michael Spencer · Answer

Here to help👋 if still needed lol

Mindy Jensen · Answer

Moderator Note: This is NOT the place to advertise your services as a wholesaler. Self promotional ads will be removed.

Christian Bors · Answer

@Sergei Genchev  If you signed an exclusive right to buy contract with your real estate agent, then you would be obligated to pay the agent his 3% even if you bought a property from a wholesaler.  I would never sign such an agreement.  If your agent wants you to sign the agreement, simply put in a clause stating he will only get paid if he brings you the deal.  If there is no agreement in place, it does not matter if you work with a wholesaler, buy a property from a listing agent or find a private seller.

Eric P. · Answer

@Sergei Genchev You'll need to work out an agreement with your agent. For example, your agent might agree to work for 3% of a wholesale deal but be clear what services you're getting (neighborhood review, review of comps, contract help, negotiating help, etc). Also for low $$ wholesale purchases, an agent might require a minimum fee of say $2,000-$3,000 (since 3% of a $20k wholesale purchase isn't worthwhile to an agent)

Christian Bors · Answer

@Sam Bhullar  You disagree with what?  A good wholesaler is hard to find?  Most wholesalers have never done a deal?  People think its simple?  I never said all wholesalers were bad, some are very good.  However, the majority are not.  I am simply pointing out the pitfalls.

Cheers,

CB

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