How is wholesaling considered real estate investing?

54 Replies

This may be mind boggling but I do not quite understand how wholesaling is considered real estate investing. Please explain. 

AY

I'm with you, @Albert Yamoah  its a job, not investing.  You might invest into your wholesaling business.  But that's no different than investing into a shoe store.

That said, it does involve real estate.  And, doing the job of being a wholesaler does mean you're going to learn a lot about real estate, if you want to be successful in that job.  So, like any other job, it is a way to make money that you can invest into income producing properties.

Lots of other real estate jobs are jobs and not investing.  Fix and flipping, developing, property management, brokering, etc. 

On the other hand, its really just semantics.  "Real Estate Investing" is a label that gets applied to a lot of different topics.

Jon Holdman, Flying Phoenix LLC

Typically RE investors start there career as wholesalers to learn the business and help provide funding for flip or buy and hold properties later.  As a wholesaler you learn how to do repair assessments, marketing, comps and the best property areas in your community. Unless you have a lot of experience in RE I recommend trying wholesaling before you jump in with both feet. 

Just my 2 cents :)   

I find it odd that wholesaling gets such a bad rap.  I think it is a bold and savvy way to build up cashflow if you have the guts to do it.

I guess the answer to this question lies in what your definition of what a Real Estate Investor is.  There are so many different ways to be involved in Real Estate, and in Investing, why do we need to have specific boundaries on what exactly is and isn't allowed to be considered 'involved in investing'?

Just because somebody wholesales, doesn't mean they don't do other types of investing either at the same time or at other times.  Typically Investors will wholesale at times when they need to grab a bit of extra cashflow so that they can continue to buy and hold or rehab or whatever.  As Jon said, wholesaling is a great way of learning about Real Estate, and the learning part of investing is as valid as the investing part itself.

I really don't give a toss about whether Wholesaling is specifically termed as Investing, or if it is given the name of Job, or Career, or Shoe Shiner, it is really just one of the many ways to play with Real Estate.  It is all part of dealing with Real Estate and making money, so it is all investing in my books.  Besides, regardless of whether you own a property for 2 minutes, or 2 years, you still need to put money into it at some stage in order to do so.  Isn't that investing?  Isn't time investing another form of investment?

Anytime you expend money in hopes of realizing some kind of return in the future, you are investing. Just like the stock markets, there are the long term (buy and holds) and the short term (traders), both referred to as investors. Both perform "jobs" by analyzing and pulling the trigger. Wholesalers invest money in marketing to a specific target in hopes of finding a deal that would generate a return in the short/intermediate term by "trading" the contract. That's how I see it at least.

I view it as more of a job than investing, but that's just my perspective. I know it's how many people w/ limited funds break into REI.

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I am a buy and hold investor at heart, I really only care about continuous checks months after month - and am constantly searching for more.  That being said a couple years ago, when wholesaling was introduced to me, I tried to learn how to do it to make a couple bucks. 

Needless to say, I did not like the amount of time it would take to make a lot of money at it.  So I do admire the ones who have mastered it.  I did 4 deals total, and think I made like $3,500.00 total.  If nothing else, I did actually buy 2 of the houses myself that I tried wholesaling. 

I agree with Bill, its investing in a business.  Some people look down upon it, but it is not an easy job, you really have to be a hustler, and smart. 

Albert, folks here are real estate operators, but that doesn't sound as impressive as saying "I'm an investor" by any accepted business definition, they aren't, some wild justifications, too.

How does paying say $500 for some mail campaign, investing in a business, make you a real estate investor? You're investing in a business, your business, while all that is is making a contribution to your business that requires your active participation which isn't investing either but it's not investing, putting money into real estate.

Nothing wrong with being a real estate operator or dealer. Your tax return will tell you if you're an investor or not by the type of income you receive. Earned income is not from investing, it is earned by a job or from a business you actively run.

It just sounds good, it's an ego thing especially for those who lack funds to actually invest. Didn't mean for the truth to hurt, but that's what "investor" and "operator" is. :)  

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

Some investors may say that wholesaling is an essential portion of what they do as real estate investors. I'd say it's more profitable in some markets than others, it is good for learning the ropes, though.

Typically RE investors start there career as wholesalers to learn the business

Of all the people I know who invest in income-producing real estate not one has ever wholesaled even one deal.  Every one of them does have a job and that job produced cash they used for investing in real estate.  Wholesaling is just a job.  If you're good at it and diligent in actually doing it you can make money.

Jon Holdman, Flying Phoenix LLC

Sorry, this is going to sound harsh, but I think this whole defining of whether any particular type of involvement in Real Estate is worthy of being called investment is a bit immature and frankly rude. 

Really if somebody is focusing solely on wholesaling and making good money from it, I don't think they are going to care what 'title' anybody gives it.  Likewise, if somebody is buy and hold only and making good money from it, they aren't going to care what their job title is, nor what the job title of a wholesaler is. 

At the end of the day, the only people who will really care about defining a title for different types of involvement in Real Estate, and want to make a point of not allowing others to define their role as they wish, mustn't be satisfied enough in what they are doing themselves and have a need to focus on what others are doing instead.

Why put time and energy into criticising which business model others choose?  Just focus on what you love to do and are most successful at, and agree that each person has their own role in helping the Real Estate market continue to move along.  Even wholesalers have a role and are very useful to many Investors who don't have the time or energy to find those deals themselves, there is no harm in that is there?  If you don't like to wholesale yourself, don't do it, but I don't see it necessary to put down those who do it.

So the vets @Bill Gulley  just took me to school on my "wild" validations.  I honestly saw it as such, definitely not an ego thing in my case.  I can care less what I'm called.  But a very good point was made on how the income shows up on the tax returns; one I can't argue.  

By the way, no offense on the "vets", just referring to the number of posts and popularity.  I see you guys on all the threads I read.  Thanks for your input.

Didn't mean to pop balloons, but a word to the wise for those starting out; Circles of buyers I know absolutely understand straw man deals, sometimes it depends on who you're talking to, a cash buyer isn't going to be impressed by a birddog or operator calling themselves an "investor", it really shows a lack of knowledge and your attempt of holding yourself out on the same level as the guy who has money who actually invests can be rather insulting. They won't be impressed and they may talk about that guy behind their back, I've heard it. Better just to say "I deal in real estate" that can mean a variety of positions without seeming to overstate your position. Many folks with money like to think of things in terms of the pecking order, trying to put yourself in their world isn't acceptable. Just reality, you'll get to their level much quicker if you allow them to think they are in the position of determining the deal, because they are. Don't compete with their self image, just good psychology.

I know folks worth 100 million+, I don't try to belittle them putting myself on their stage, I tease them about being so much wealthier than I am. The respect you will get comes from your knowledge to make them wealthier, not from  trying to impress them. Be humbled and you'll get closer to their favor. In other words, everyone needs to suck up a little bit when you're outclassed.  You are not an investor in the eyes of a real investor.

Want to tell your peers at some party that you're an investor, when you are a broke wholesaler, have fun.   :)  

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

Good point @Linda Quinton  , even though wholesaling is not technically investing money in real estate itself, it can produce a lot of money.  Bottom line is what the end goal is and that is attaining the all mighty dollar.  I don't care what my method is to reaching it, as long as it makes me money, I am ok with it.  I own a couple businesses, aside from buying income producing properties, and I gauge them all on how efficiently they make me money (and how much time I exert in them).  Basically, who cares what anyone says, if it makes you money and you are good at it, do it.  I do agree with @Bill Gulley  when he says people will cast judgment who are seasoned investors towards those wholesalers who refer to them selves as investors. 

Get off this topic it's a non issue. 

The political correctness around here lately is MIND BLOWING.

Everyone seems to want to label everyone else for some reason... 

It really depends on your definition of 'investing.'  Technically, rehabbing/flipping isn't investing, landlording -- when you do your own management -- isn't FULLY investing, note buying -- when you do your own servicing -- isn't FULLY investing, etc.  These things all have components of running a business as opposed to (or in addition to) just holding cash-flowing or appreciating assets.

I wouldn't get hung up on definitions here, though.  Remember, Warren Buffett probably shouldn't be considered an investor either...  :-)

I don't think Warren shows up at closings for his Hathaway brokerage outfit, I think he qualifies as an investor.

Look young'ns I wasn't trying to be little you and I stated that, the question was about being in some RE niche and being called an investor, gave you the answer, like it or not. The rest was to give you some social graces in dealing with real investors, that's the way the world is, need to recognize that.

Reminds me of another saying of why people get into RE, "I want to be my own boss" well, ROTFLOL

If you're in RE, you have more bosses than a Private in the Army! The general public is pretty much your boss, don't tell me you can just ignore others and stay or even be in business.

"Investors" yes, I have used the term improperly when I am actively engaged in some RE activity. However, buying notes and collecting payments is not active, servicing notes is active. If you buy bonds and clip coupons or get your interest payment, you're not in an active mode there, you're still investing. Note brokerage activities are active as well.

Many times we don't need to be that politically correct, but you're just rather uniformed socially because you're not aware when being politically correct is to your advantage, you get pie in your face. Just a tip :) 

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

Wholesaling is a tool. Just like many other tools in the real estate world. I don't believe in wholesaling as a business model but it surely is a tool I use in my investing business. The more tools you have the better "investor" you can be.

When I show up at a seller meeting I listen to what they have, need and want. The seller and their property will dictate the necessary tools to get them where they want to go. Missing just one right tool can keep you from making a seller happy. Better yet forcing a seller down a certain path, because you don't have the right tool, can ultimately cost your investment business in the long run.

Medium rarebird logoMike Nuss, RareBird | [email protected] | 503 789‑9821 | http://myrarebird.com

Originally posted by @Bill Gulley :

I don't think Warren shows up at closings for his Hathaway brokerage outfit, I think he qualifies as an investor.

So, if I stop going to my closings (no reason I need to, as I can just have my wife or partner sign on my behalf), will that make me an investor?  :-)

More importantly, you mentioned earlier that you can determine your investor status by looking at the type of income you generate.  The bulk of Buffett's net worth came to him in the form of business equity (value of his Berkshire stock), which is certainly considered earned income.

By your own definition, Buffett has primarily amassed his fortune as a business owner, not an investor.

EDIT:  Not really looking to argue this point.  Definitions of things like "investor" are necessarily going to be somewhat arbitrary, and in many ways I agree Buffett is an investor.  But, if I had to categorize him, I'd probably choose "business owner" first.

Have no idea how Mr. Buffet holds his stock, and stock appreciation is not necessarily earned income, depend on how it is held. But we do agree, Warren invests, didn't even mention putting your own capital at risk, for wholesalers I don't think a tank of gas really qualifies as risk of capital. :) 

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

Originally posted by @Richard Pretlow :

Typically RE investors start there career as wholesalers to learn the business and help provide funding for flip or buy and hold properties later.  As a wholesaler you learn how to do repair assessments, marketing, comps and the best property areas in your community. Unless you have a lot of experience in RE I recommend trying wholesaling before you jump in with both feet. 

Just my 2 cents :)   

 Since I am not going to start my investing career as a wholesaler, will I find investing in real estate more difficult?

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