Deals thru wholesalers

13 Replies

Is it smart to build a buy and hold business buying thru wholesalers vs learning the whole acquisition side and competing with wholesalers?  Just a little context, I own a traditional business (non-real estate related) and am looking for the most passive way to own buy and hold real estate.  I appreciate any thoughts on this.  Thanks

If you are truly looking for the most passive way to buy and hold RE, then you should be looking at turnkey properties (properties that require no work up front to put into service). These properties will have no value-add opportunity. When buying from a wholesaler, you will frequently be dealing with distressed properties (or properties that need at least some work up front before renting). If you want some value-add opportunity (i.e., not passive on the front end), then buying from a wholesaler is a good way to avoid all the work associated with marketing and acquisition. What's "smart" for you, is the path that enables you to achieve your specific goals.

@Brian Haugh That's a great question man! Congrats on owning a business and being the boss of your own life that is an amazing thing! You seem like a savvy and very intelligent guy due to being a business owner so I feel like you know what you need to do you just need reassurance. I'm more than sure that you have realized that running a business is not passive and as easy as people think. Real estate is no different my friend! Yes wholesalers do a great job marketing and getting deal flow but they aren't usually correct with their numbers and from my experience over promise and under deliver. This can seriously screw you over because if you buy a property wrong it is very hard to overcome that. The other negative or positive thing depending on how you look at it is they only deal with hard money loans or cash. Which means you are basing your acquisitions on your own capital or you are paying a ridiculous amount in interest through a HML. Unless you are the millionaire next door you will find your personal capital gone really quickly by doing this. Now if you are very busy and don't want to put in the work then yes go ahead and go with wholesalers, but please do not make the fatal mistake of thinking REI is a passive thing because it is not. It is a job like any other, you have to put in the time, effort and learn through your own failures or from others failures. If you find an honest wholesaler who doesn't inflate the numbers and actually gives you the 100% truth then by all means build that relationship! My 2 cents is you need to get your hands dirty and do things yourself because if you don't learn and know what you are getting into, the sad reality is people will take advantage of your ignorance. I wish you the best of luck brother. Really trust your gut and treat this like a business because it is!

Finding your own deals will certainly be more lucrative per property, but it’s quite the opposite of passive. You need to find a distressed property/motivated seller, find their contact info, get them to talk to you, get them to agree to sell and actually go through with it all while verifying everything they’re telling you regarding payoff/Title/liens etc.

In a situation such as yours, real estate being more of an income diversification or retirement vehicle, turn-key or minimum value-add would be the way to go.

Wholesalers typically work with homeowners in some sort of distress, meaning the houses need work.

I live and work in the San Antonio market and know it very well. If you want chat about it and your personal and financial goals pertaining to real estate I’d be more than happy to discuss.

Lawrence Rutkowski, Real Estate Agent

Buying off-market will rarely be passive.  Much more title issues and usually you're going to be dealing with properties that need work.  It really depends on how much work you want to put in.  

Turnkey rentals in good blue collar markets with strong rent/value ratios and solid management is the best single family way to go in my opinion. 

Tim Macy, Real Estate Agent in TX (#657759)
210-965-4000

I would also say, cash flow is king, but most people I've seen have made their fortunes with equity.  I would look at markets that are a good balance between cash flow and future growth.  At this point in the market, keep in mind areas that will be a little bit more sheltered form a crash.  I have a feeling a lot of these rapidly increasing markets will fall faster than the steady ones. 

Tim Macy, Real Estate Agent in TX (#657759)
210-965-4000

@Brian Haugh   THE most passive way to buy and hold real estate is going the traditional route of working with a Realtor and getting the best deal you can, hiring a property manager to manage the property and know that, it's never 100% hands off.   In some markets, you can still get a discount and buy below market.  In hot markets, not really. 

However, buying through a good wholesaler can be a great way to find undervalued assets where you can yield higher returns.  Wholesalers (myself included in full disclosure) spend a lot of time and money finding and negotiating great deals.  I know what my buyers (both landlords and rehabbers) are looking for and what to send their way.  I personally wouldn't send a complete gut job to a guy with your criteria because I know that's not what you're looking for.  I would send you (if I were in your market) properties that just need some cosmetic work.  The discounts wouldn't be as high as one needed 2 baths, kitchen, flooring, etc. but it would still be a discount. 

It doesn't hurt to build relationships with the wholesalers in  your area.  You may only pick up 2-3 deals a year that way, but it is a very viable option.  I have many people on my buyers list who buy nothing but cosmetic repair type, buy & holds and they are able to save a ton of time and money buying from me rather than learning the trade and spending a bunch of money marketing on their own.   

@Kris Wong, thanks for the reply, any suggestions how to find solid turn key companies in Chicagoland/Northern Indiana?  

@Justin Hayman - primarily just in AZ myself, but I work with and mentor people from across U.S. so whenever they get a deal, I help them wholesale it too.  Most recently some have been in AL, TN, OH and WA state. 

Originally posted by @Brian Haugh :

Is it smart to build a buy and hold business buying thru wholesalers vs learning the whole acquisition side and competing with wholesalers?  Just a little context, I own a traditional business (non-real estate related) and am looking for the most passive way to own buy and hold real estate.  I appreciate any thoughts on this.  Thanks

 In my opinion Private Equity Investing would be the most passive.  Even buying turn-key properties will mean you are responsible for the loan, insurance and overseeing the property manager.  Taking on those tasks isn't a bad thing, I actually enjoy being very hands on with my rental properties.  I would suggest looking at all your possibilities before you settle on a strategy.  

Originally posted by @Brian Haugh :

Is it smart to build a buy and hold business buying thru wholesalers vs learning the whole acquisition side and competing with wholesalers?  Just a little context, I own a traditional business (non-real estate related) and am looking for the most passive way to own buy and hold real estate.  I appreciate any thoughts on this.  Thanks

 I would look into hiring a buyer's agent. Wholesalers are typically uneducated folks that have no real idea how the biz works. Just a bunch of goof balls tossing craigslist ads all around.

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633

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