The ugly truth about Wholesaling

12 Replies

Wholesaling is easy. Wholesaling on a consistent basis is HARD.

First of all most newbie wholesalers have little capital, so saying "we buy houses" is a lie if YOU don't personally have the funds to close.

Lie (Noun)

Actual definition:

a false statement made with deliberateintent to deceive; an intentional untruth.

BUT WAIT....

If you use a "transactional lender" you technically are buying the house right?

Well yes... But.....

Then there's the proof of funds dilemma.. You cannot target the average Becky and Joe Dunn who have a real estate agent and attorney working with them 99% of the time the deal will blow up before you even get a contract signed.. Proof of funds that you can just download off of the Internet most likely won't work with the average seller, they will call or check the website and get freaked out.

You need to target DISTRESSED HOMEOWNERS that NEED to sell quickly, at least in their minds. Vacant properties will serve you best, your chances of contacting a FSBO from Craigslist and getting them to sell 70% ARV minus repairs, minus your fee is very slim.

Guru's make it seem so easy, "find a motivated sellers and a buyer and ...Boom make $10,000!" That's BS. There's title issues, tax issues, the seller may have family members that kill the deal, your title company may not know how to do or allow certain transactions, etc.

There are people that wholesale successfully but I could count them on one hand, I've noticed most of the guys that used to kill it are now coaching, HM...I wonder why (because the income is inconsistent!)

If you really want to wholesale target Vacant properties, dealing with tenants in the home is extremely difficult especially when your buyers want to see the home, although there are ways around it the buyer could easily go around you (just wait for your contract to expire).

Wholesaling is a rough, gritty business don't fall for all the glitz and glamour tales you get from the guru's, YES you can succeed in Wholesaling but if you don't target the right people and prep them for what you're gonna do you'll end up like 99% of all the other wannabes...

Actually, if you don't learn real estate, expect failure. Learning wholesaling is not learning real estate, it's marketing and usually you'll end up in trouble at some point, when you act as a straw man. Close in your name, there are better ways that are legal, but, you'll need to learn real estate. :)

Exactly! I didn't even mention understanding repair costs, etc. Just kind of wrote this in 3 minutes to give people a general idea of the war zone their entering I.e Wholesaling. 

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Originally posted by @Lakeem Allen:

Exactly! I didn't even mention understanding repair costs, etc. Just kind of wrote this in 3 minutes to give people a general idea of the struggle.

Originally posted by @Lakeem Allen:

Exactly! I didn't even mention understanding repair costs, etc. Just kind of wrote this in 3 minutes to give people a general idea

Sure , i can agree to a lot of those points. Wholesaling does have its place, but just not your sole business in real estate. Here are some of the pros

-You can take action NOW. You don't have to wait to accumulate 20% down payment or find that mentor you can add value to

-It teaches you how to find discounted properties (valuable for any real estate investor)

-You learn as you go, sure you'll make mistakes, but at least you'll learn real life, not just book info (which is great but there comes a time to put that **** down and go take ACTION!)

-You will build relationships with sellers, buyers/investors, title companies etc... (be a good person, don't try and screw people, be ethical and try to add value to all parties)

Disclaimer:

I don't wholesale with the sole intention of assigning it for a fee. My goal is first to buy it, fix it up and then either sell it or rent it out. If there are properties that come in that are great deals, and i can't handle it that month, then I will look to wholesale it to someone who can. But only if its a win win situation for everyone involved. 

I agree that trying to replace your job with strictly wholesaling takes one hell of a salesmen. I prefer to invest in RE and not be just a salesmen. 

Logan, that's pretty much guru talk, take action now! 

Well son, you're 14 now, you've seen me drive the truck for 10 years, here are the keys, go  to town and get me some beer and milk for the cat. Go down the road, get on the interstate, turn off to get into town, go six blocks and turn left, you'll see the store. Be careful, Barney hangs out at the coffee shop, don't let him see you driving.

Learn how to drive legally before you start driving my yourself. Learn real estate before you jump into real estate. You won't be finding a value without knowing real estate, you might guess, but you don't know. :)

Originally posted by @Bill Gulley :

Logan, that's pretty much guru talk, take action now! 

Well son, you're 14 now, you've seen me drive the truck for 10 years, here are the keys, go  to town and get me some beer and milk for the cat. Go down the road, get on the interstate, turn off to get into town, go six blocks and turn left, you'll see the store. Be careful, Barney hangs out at the coffee shop, don't let him see you driving.

Learn how to drive legally before you start driving my yourself. Learn real estate before you jump into real estate. You won't be finding a value without knowing real estate, you might guess, but you don't know. :)

 I did take that advice to stay action right away and I don't regret it. What ends up happening over time is that you learn real estate really well before you become experienced and competent enough to be able to wholesale. I do think that it is much more easy to invest in a real estate agent course and learn the industry seeking houses and then moving into flipping and wholesaling.  It took me close to seven years to get to a high level of competence and I think I would have cut that time in half of I worked have started that way.

Originally posted by @William Johnson :
Originally posted by @Bill Gulley:

 I did take that advice to stay action right away and I don't regret it. What ends up happening over time is that you learn real estate really well before you become experienced and competent enough to be able to wholesale. I do think that it is much more easy to invest in a real estate agent course and learn the industry seeking houses and then moving into flipping and wholesaling.  It took me close to seven years to get to a high level of competence and I think I would have cut that time in half of I worked have started that way.

 A suggestion I've made many times on BP is for new folks to go to Amazon and buy a text book for agents licensing, you can get a used one for 10-15 bucks. It doesn't need to be a current edition because the basics or real estate hasn't changed. These texts usually have sample test questions and a quiz with each chapter or section. Read the book and take the quiz/test! If there is a question or area that isn't understood, ask someone or post it here and mention me, I'll explain it.

You can't help but learn by doing, as I did too, but things have changed, getting into real estate today isn't like it was 45 years ago or even 5 years ago. Those that jumped in were more lucky than skilled, most fail going this route.

The legal and compliance areas of real estate and related areas have changed drastically, the difference from a few years past is like the difference between a camp fire and a microwave.  Both can burn you if they don't function properly, you can feel the heat from a camp fire and avoid it, but the damage from a microwave may not be felt until the damage has been done, your mistakes can surface later on without realizing what you did wrong. 

I recall a discussion on BP about the Federal Trade Commission a few years ago, another top poster disagreed that the FTC had jurisdiction over real estate transaction, well, they do, you can go to the FTC site and search for sanctions and you'll find some hefty fines levied against individuals who violated advertising and truth in conducting business. The FTC now has a real estate "department" and they go after violators aggressively. In terms of regulatory history, this is rather new and it is real.

Jumping into real estate thinking houses are just widgets or a commodity will lead to trouble, real estate is unique and so are the regulations. Ethical dealing is also different in real estate from dealing in boots or cars, when some guru type suggests applying tactics of dealing in personal property to real property, they are taking you down the wrong road. 

You don't need to turn yourself into a legal eagle to get into real estate, but you do need to understand Tort Law, Business Law as well as laws applicable to real estate!

Your learning curve to make money will be much shorter by learning the basics of real estate. 

Having an idea of what goes on after you contract with a seller will keep you from getting into tortuous conduct that gets you sued or fined or jailed! 

Having an idea of who can advertise what and when will keep you from getting fined and changing your life as a felon. 

Understand that stealing equity by deceiving or misleading an owner can also get you sued, fined or jailed. 

Know that messing around in financial aspects is more serious than any real estate blunder. That can go to fines of $100,000 and/or 10 years in a federal prison, for one count! Financial Feds don't mess around!

So, you just want to jump in and do it? You're in a big hurry for a financial gain, but the odds are not in your favor! Learn before you leap! :)     

For anyone thats curious about the FTC sanctions in real estate after reading @Bill Gulley 's post:

https://www.ftc.gov/tips-advice/business-center/le...

A good chunk of them are for foreclosure relief scams,  but it does show the FTC is somewhat actively investigating in the space.

The complaints are fun to read since they go into great detail about the crimes the perpetrator committed and the evidence against them.  The press release is a good easy read to see how badly the FTC sanctioned them.

Originally posted by @Bill Gulley :
Originally posted by @William Johnson:
Originally posted by @Bill Gulley:

 I did take that advice to stay action right away and I don't regret it. What ends up happening over time is that you learn real estate really well before you become experienced and competent enough to be able to wholesale. I do think that it is much more easy to invest in a real estate agent course and learn the industry seeking houses and then moving into flipping and wholesaling.  It took me close to seven years to get to a high level of competence and I think I would have cut that time in half of I worked have started that way.

 A suggestion I've made many times on BP is for new folks to go to Amazon and buy a text book for agents licensing, you can get a used one for 10-15 bucks. It doesn't need to be a current edition because the basics or real estate hasn't changed. These texts usually have sample test questions and a quiz with each chapter or section. Read the book and take the quiz/test! If there is a question or area that isn't understood, ask someone or post it here and mention me, I'll explain it.

You can't help but learn by doing, as I did too, but things have changed, getting into real estate today isn't like it was 45 years ago or even 5 years ago. Those that jumped in were more lucky than skilled, most fail going this route.

The legal and compliance areas of real estate and related areas have changed drastically, the difference from a few years past is like the difference between a camp fire and a microwave.  Both can burn you if they don't function properly, you can feel the heat from a camp fire and avoid it, but the damage from a microwave may not be felt until the damage has been done, your mistakes can surface later on without realizing what you did wrong. 

I recall a discussion on BP about the Federal Trade Commission a few years ago, another top poster disagreed that the FTC had jurisdiction over real estate transaction, well, they do, you can go to the FTC site and search for sanctions and you'll find some hefty fines levied against individuals who violated advertising and truth in conducting business. The FTC now has a real estate "department" and they go after violators aggressively. In terms of regulatory history, this is rather new and it is real.

Jumping into real estate thinking houses are just widgets or a commodity will lead to trouble, real estate is unique and so are the regulations. Ethical dealing is also different in real estate from dealing in boots or cars, when some guru type suggests applying tactics of dealing in personal property to real property, they are taking you down the wrong road. 

You don't need to turn yourself into a legal eagle to get into real estate, but you do need to understand Tort Law, Business Law as well as laws applicable to real estate!

Your learning curve to make money will be much shorter by learning the basics of real estate. 

Having an idea of what goes on after you contract with a seller will keep you from getting into tortuous conduct that gets you sued or fined or jailed! 

Having an idea of who can advertise what and when will keep you from getting fined and changing your life as a felon. 

Understand that stealing equity by deceiving or misleading an owner can also get you sued, fined or jailed. 

Know that messing around in financial aspects is more serious than any real estate blunder. That can go to fines of $100,000 and/or 10 years in a federal prison, for one count! Financial Feds don't mess around!

So, you just want to jump in and do it? You're in a big hurry for a financial gain, but the odds are not in your favor! Learn before you leap! :)     

 This post should be part of getting started in real estate, one of those old texts should be added as a must read book.  I am taking the agent course after having been learning by doing and I cannot imagine all of the time and hardships that that would have saved me.  Thank you for posting here.

Originally posted by @Jesse Tsai :

For anyone thats curious about the FTC sanctions in real estate after reading @Bill Gulley 's post:

https://www.ftc.gov/tips-advice/business-center/le...

A good chunk of them are for foreclosure relief scams,  but it does show the FTC is somewhat actively investigating in the space.

The complaints are fun to read since they go into great detail about the crimes the perpetrator committed and the evidence against them.  The press release is a good easy read to see how badly the FTC sanctioned them.

 The last time I looked, it was a string of Realtors and individuals with false advertising, it seems they go in spurts, concentrating on different activities at different times. Complaints might pile up to an investigative level, then they may hammer away. I've never worked with them but a "team" approach is common in government. 

And, it's rather odd to see so may law firms screwing up, IMO, but, there are good ones and bad ones in most everything. :) 

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