Is it a good idea to invest ........

5 Replies

Is it a good idea to invest 20000 dollars for 10% equity with a real estate wholesaler in the Dallas Texas area? What is the market outlook for the Dallas market? Is it a good market? What other questions should I ask him?

The answer to that question depends on a few things.  First off, what is your skill set.  If you skills in real estate are limited, then yes, this is a great way to make money passively, assuming that you wholesaler is both skilled and honest.  You want to investigate his track record and understand what he wants to do with that money. The first red flag is that 20k is a small amount and the uses are pretty limited in a big market like Dallas.  

If your skill set is fairly well developed, and you understand creative finance, then making 10% is a terrible return.  with that being said, you might still want to get involved in private lending because it is 100% passive. Someone else, someone with experience and skill does all of the work for you and then gives you money.  That is a pretty sweet deal if your skill or your time is limited. 

You need to be a bit careful here.  Your money needs to be secured by a note against the property, that note had better be prepared by a lawyer in the state where the target property is and it had better be recorded. If any of those conditions are not met, then you are likely to get ripped off.  The good news is that if this guy is not protecting your money properly, there are always professional real estate investors who will work with you.  You just need to ask. Most of us will pay 10% on your money. It is just a matter of talking to someone and building trust in them.

That depends on so many things:

How good is the wholesaler, how long has he been doing it, what kind of income will your investment return to you, do you have an equity stake in any properties or any other assets securing your investment, why does the wholesaler need the money and what is his/your exit plan. There are at least a dozen other considerations.

That said, unless you are active in that market, very familiar with the business owner and expect to have your initial investment returned in 12-18 months I wouldn’t touch it. I am a Realtor and investor and I am hearing more and more from various associations and groups that I’m a part of that we will see a market correction within the next 24 months. I think that is true and I have serious concerns with the ability of the average wholesaler or flipper to weather the initial correction even if it is not a major one.

Just my thoughts, hope that helps!

@Josh Caldwell

Thank you so much for taking the time to reply! The guy is trustworthy realtor with Keller Williams and has been wholesaling in Memphis TN for a while! He is now expanding into other markets such as Dallas and is also going to invest his own money! He is confident that I should get at least 4-7k on the first deal within the next couple of months after that the equity will go down but the returns will go up. How good is the Dallas market for wholesaling? What other questions do you suggest I ask him.

@Matt J.

Thank you so much for taking the time to reply! The guy is trustworthy realtor with Keller Williams and has been wholesaling in Memphis TN for a while! He is now expanding into other markets such as Dallas and is also going to invest his own money! He is confident that I should get at least 4-7k on the first deal within the next couple of months after that the equity will go down but the returns will go up. How good is the Dallas market for wholesaling? What other questions do you suggest I ask him.

@Ali Ahmed Ok your guy sounds pretty good. From my limited exposure to the Dallas market, what I hear is that deals are hard to find. I wonder why on Earth he is leaving his home market for a tougher more competitive market.  That doesn't make a lot of sense to me. There are always deal to wholesale no matter where you live, the problem is that to get those deals you need a combination of a good network and marketing.  IF your guy already has that in TN, why would he pack up and relocate his efforts? That just doesn't make sense.