Do Good Wholesalers Exist?

Homeowner · Channelview, TX · Member since 2015 · 97 posts · 11 votes

I think this is less a real question, and more me venting, but do good wholesalers actually exist? I have money burning a whole in my pocket, and I can't find a single wholesaler who has deals anywhere close the right price. I have seen countless properties get picked up by wholesalers from the MLS, only to get put back on a week or two later because no one wants their trash deals.

The formula is simple: (ARV * 0.7) - Repairs. Not (Inflated ARV * 0.85) - Underestimated Repairs.

Does anyone have advice on how to find a GOOD wholesaler?

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

Originally posted by @Mary M.:

I am not a wholesaler nor do I buy from them..... however, i wanted to point out that real estate is cyclical.... and many (most?) of the folks teaching how do do this or that in RE only have known post 2008 world where deals were everywhere and certain equations were reality. The thing is, 2008 and after were one offs. Things have gone back to normal and there wont be those kinds of killer deals anymore. Or very very rarely.

My suggestion: talk to those that were doing what you want to do pre 2008. Find out how they were able to make money. Because chasing after what was is only going to keep money in your pocket. Good luck!

YUP 70% ARV minus repairs is so 10 years ago.. its just not really possible to scale with those metrics if you are in a market with any type of competition.. that's why he is not finding any they don't really exist unless you spend the money to direct market yourself and go out on the lead appointments your self and close them yourself.

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James Dargan
Philadelphia, PA · Member since 2017 · 5 posts · 2 votes
6y
Hey Thomas!
I am new to the wholesaling venture. Can you explain the formula to me in a little more detail if possible so that I can be a good wholesaler?
Thanks- The rebooted investor!
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Thomas Garza
OP
Homeowner · Channelview, TX · Member since 2015 · 97 posts · 11 votes
6y
@James Dargan, I'm not terribly certain if you are being facetious or not, but I will answer the question with the assumption that you aren't.
When a flipper is looking for a property, they are generally trying to find properties that meet the 70% rule. That rule says that you take the after repair value (ARV) of a house, subtract 30% (ARV * 0.70), and then subtract the amount of money it will cost to remodel the house (repair costs). As a wholesaler, you have to find houses that beat these numbers, so that you can make a profit while still offering a good product to your clients.
The problem is, most wholesalers drastically overestimate the ARV and underestimate the amount it will cost to do the remodel.
Does that make sense?
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James Dargan
Philadelphia, PA · Member since 2017 · 5 posts · 2 votes
6y
What would you say good profit is cash on cash regardless of the formula. I remember reading a Ross blah blah book about real estate some years ago and he mention that a $10k profit is a $10k profit.
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Thomas Garza
OP
Homeowner · Channelview, TX · Member since 2015 · 97 posts · 11 votes
6y
@James Dargan
I don't think it is beneficial for a wholesaler to be concerned about what a "good profit" is for a flipper, nor should a flipper be concerned about what a "good profit" is for a wholesaler. The whole system is built around the 70% rule. Hard money lenders will lend you 70%. If a wholesaler brings me a 80% deal then I am forced to cover the 10% that the hard money lender refuses to cover, which drastically reduces my cash on cash return.
As an example, if a wholesaler brings me a 70% deal on a 200k house, the cash I have to put into the deal includes only my lender fees (points, origination, survey, ...) which might come out to 12k. When I sale the house, I might net 30k on the house in a 3 month time frame making it possible for me to repeat the process 3 more times in a given year. My cash on cash is 1000%.
Compare this to the same house that is brought to me as an 80% deal. My investment my includes the 12k lender fees, plus 20k to cover the amount that the lender refuses to cover. Now I sale the property for the same amount and net 10k since I spent 20k more upfront, and I repeat this 3 more times. Now my cash on cash is 125%.
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Odie Ayaga
Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
6y
@Thomas Garza they do but they're very rare. I've found about 3 or 4 over my entire real estate career. The good ones tend to move into other areas of real estate but they're there
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Thomas Garza
OP
Homeowner · Channelview, TX · Member since 2015 · 97 posts · 11 votes
6y
@Odie Ayaga, I hope I find one too sooner rather than later!
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Odie Ayaga
Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
6y
If you don't have any in your area you can try to take one under your wing and teach them how to do it right and come to you first on deals
1 Reply
Mary M.
Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
6y
I am not a wholesaler nor do I buy from them..... however, i wanted to point out that real estate is cyclical.... and many (most?) of the folks teaching how do do this or that in RE only have known post 2008 world where deals were everywhere and certain equations were reality. The thing is, 2008 and after were one offs. Things have gone back to normal and there wont be those kinds of killer deals anymore. Or very very rarely.
My suggestion: talk to those that were doing what you want to do pre 2008. Find out how they were able to make money. Becuase chasing after what was is only going to keep money in your pocket. Good luck!
2 Reply
James Dargan
Philadelphia, PA · Member since 2017 · 5 posts · 2 votes
6y
So Thomas,
for a 100K ARV the offer would need to be $50k with a $20k rehab.This would mean that the buyer is all in for $70k with a net profit of around $30K?
2 Reply
Latasha T.
Rental Property Investor · Indianapolis, IN · Member since 2019 · 6 posts · 4 votes
6y
@Thomas Garza yes we do exist! I have several properties in the downtown Indianapolis area I’m looking to get rid of.
1 Reply
Juan Martinez
Rental Property Investor · El Paso, TX · Member since 2019 · 8 posts · 1 vote
6y
@James Dargan from those $30k you have to subtract closing fees at purchase, monthly interest payments, and agent fees for selling.
0 Reply
Alora Glaze
Indianapolis · Member since 2019 · 288 posts · 179 votes
6y
We work extensively with wholesellers in the area, and while it isn't always our favorite thing to do - numbers do not lie. I think it is important to network within that community and work with those (whom you can trust anyway) who may have an assignment and additional details from the seller to sort out the good deals from the bad ones. Fortunately, we have the ability to do scopes before placing an offer to ensure their estimate for repairs is accurate. Knowing what the rehab will take with a single glance takes a lot of skill - finding the right team or colleague to assist might be your best option in upping your chances for more profitable purchases from that side of the marketplace.

Good luck!
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Richard Bonisa
Investor · Indianapolis · Member since 2019 · 108 posts · 69 votes
6y
There are a few good ones. I used to be part of a good one. But that has fallen off and am no longer in that part of the business. Andy Rumple is great! Simple wholesaling good too. Always mixed reviews on anyone. Their job is normally to move properties, not make you successful.
This is where cities like Indianapolis can be great. Normally some rehab is necessary, project management, contractors, of course property management is key. BUT you have to get connected with the right people. It's about knowing the right individuals, really are some good players and some bad too.
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Quentin Brown
Member since 2019 · 39 posts · 1 vote
6y
I'm just starting out and have every intention on being a reputable wholesaler/flipper. I'm doing this as a side job with my wife and we both work full time. I honestly just love the idea of hunting and finding properties. The thing I'm working on here now in Atlanta is building my buyers list before I go make some broken promises to some family cuz I couldn't hold up my end of finding them a buyer.
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Andrew SyriosPro Member
Moderator
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
6y
Yeah, but they're fairly rare. And usually, they go to their go-to buyers first and foremost. Even with the good wholesalers, I still only get one from them here or there. Getting all the way down to 70% with a wholesaler (who needs their cut too) is going to be very rare. Especially if they've sent it out to everyone. Generally, an investor will buy for more like 80 or 85 or even 90% of ARV. So why would they leave the equity to the end-buyer when they can keep it themselves?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Mary M.:
I am not a wholesaler nor do I buy from them..... however, i wanted to point out that real estate is cyclical.... and many (most?) of the folks teaching how do do this or that in RE only have known post 2008 world where deals were everywhere and certain equations were reality. The thing is, 2008 and after were one offs. Things have gone back to normal and there wont be those kinds of killer deals anymore. Or very very rarely.
My suggestion: talk to those that were doing what you want to do pre 2008. Find out how they were able to make money. Because chasing after what was is only going to keep money in your pocket. Good luck!
YUP 70% ARV minus repairs is so 10 years ago.. its just not really possible to scale with those metrics if you are in a market with any type of competition.. that's why he is not finding any they don't really exist unless you spend the money to direct market yourself and go out on the lead appointments your self and close them yourself.

Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
6 Reply
Simon Stahl
Rental Property Investor · Oakland, CA · Member since 2016 · 268 posts · 106 votes
6y
I think we are just an a really hot market right now and 70% deals are very hard to find these days. Why would they sell them so cheap if they can get more? It almost feels like even market price properties are being sold within days.
0 Reply
Dustin Mathenia
Flipper/Rehabber · Dallas, TX · Member since 2017 · 174 posts · 157 votes
6y
@Thomas Garza
I feel you! I think ..at least where I live people will buy at 80% so why would they not list it for that price. It sucks but it's just the market we are in right now deals are hard to find, that's why I started looking for my own and I will for sure wholesell if I get one I dont want to flip because it's a seller's market.
0 Reply
Bill O'Donnell
Rental Property Investor · Newburgh, NY · Member since 2018 · 160 posts · 117 votes
6y
@James Dargan
Anyone who targets those 10k jobs will go bust the first time they find a surprise, miss a schedule, or have any of the million problems that can and do occur.
70% or real close.
I can't find wholesaler to bring them to me, but they are still out there if you direct mail, knock on doors etc
0 Reply
Ric Ernst
Los Angeles, CA · Member since 2019 · 148 posts · 127 votes
6y
@Thomas Garza wholesalers, just like any of us, are looking to maximize their margins...can't blame them. If a market is rife with investors, someone is bound to pay more than most would. That said, if you have a good relationship with a wholesaler and are a serious buyer, chances are good they'll give you first crack at deals that meet your criteria before they spend their resources marketing to everyone else.
0 Reply
Adriel Hsu
Investor · Beaumont, TX · Member since 2016 · 171 posts · 277 votes
6y
@Thomas Garza
The market determines the price and right now rehabbers and buy and hold investors are paying more.
Everyone has different rehab costs, your $30k rehab will cost $20k to someone else.
You have $12k in hard money lending fees, they have a private lender or their own funds.
In Houston right now, re-fi appraisals are coming in higher than comps, so buy and hold investors can pay more.
I wholesale in Houston and people are paying more in neighborhoods they want. I think a neighborhood is the hood, someone else sees it as a cash cow and pays more.
It’s supply and demand.
Your best off doing your own marketing if you aren’t able to get on the VIP list for wholesalers.
0 Reply
Kody Bernier
Charlotte, NC · Member since 2017 · 10 posts · 6 votes
6y
@James Dargan that would be ideal for the investor. But as a wholesaler they would need to find a deal at $40k (add in a $10k wholesaler fee). Sell it to the investor for $50k. Put rehab of $20k in. ARV is now $70k.
0 Reply
Kerry Noble JrPro Member
Investor · Indianapolis, IN · Member since 2018 · 2k+ posts · 1k+ votes
6y
we definitely do! i stopped giving repair estimates this year.......youre going to bring your contractor anyway to check it out and youre going to negate our estimate.......We used to have a contractor give us an estimate and we would pass it along with the purchase
0 Reply
Kerry Noble JrPro Member
Investor · Indianapolis, IN · Member since 2018 · 2k+ posts · 1k+ votes
6y
what zip?

Originally posted by @Latasha T.:
@Thomas Garza yes we do exist! I have several properties in the downtown Indianapolis area I’m looking to get rid of.

0 Reply
John K.
Wholesaler/Investor · Dallas, TX · Member since 2018 · 260 posts · 222 votes
6y
@Thomas Garza
Good wholesalers do exist, in every market.
I believe the frustration you are experiencing is that you are only seeing those that have nothing better to do than to ask for email addresses. These tend to be the individuals that try to wholesale MLS/Zillow deals, which stand little to no chance of succeeding. The numbers tend to be outrageously wrong, as there are probably a dozen other "wholesalers" in the chain, thus they have to manufacture the ARV, to cover the spread.
The irony here is that a wholesaler that has their network built, has no need to constantly ask for email addresses, if ever. Our buyers are already in line, and we only need one buyer, per property. We have no need for 1000 "buyers", unless of course, we had a 1000 properties. Therefore, we don't need to blow up social media outlets, for email addresses.
As far as the 70% rule, not sure why this is a problem. Just because a market is hot, like Dallas, does not automatically mean that every house in the city has kept up with repairs and upgrades to warrant the higher prices that are being achieved by those houses, that have kept up. This sounds like realtor talk, to justify just about every house being priced at 80-90%, regardless of the repairs/upgrades needed. One must ask, where the motivation lies. One outfit gets paid commissions, the other gets paid a fee...hmmm?
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