Am I a fool for quitting wholesaling?

Shawn Roberson

Investor · Chattanooga, TN · Member since 2015 · 38 posts · 11 votes

10y

Wholesaling got me where I am today. It was my stomping ground to success. I was always upfront with what I was doing. The main thing is letting your client know how you make your money. Most wholesale deals Realtors can't touch due to condition and that's when you get involved. It's all about your verbage. Your not the cash buyer but you are in connection with cash buyers that have cash and can close quickly because you built a data base of cash buyer.Take the pressure off you and make sure you interview your cash buyer and they are ok with a wholesale fee. If your numbers make sense there is no reason you should make no less then $2500 on a wholesale deal. I did this for a few years while working a full time job with 3 kids. If I can help just let me know.

3 Reply

Aaron Mazzrillo

Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes

10y

I've done all I can think of in real estate with the exception of development; options, foreclosures, probate, rentals, flips, wholesales, notes, seller carry (both as the seller and as the buyer), subject to and a few more that I can think of at this moment.

To me, flipping is THE BEST education you get in real estate and I really think there isn't much risk... with the exception of you paying too much and/or over rehabbing the house.

A great flipper is nothing more than a project manager who overseas all aspects of the project;

Wholesaler or agent finds the deal and handles the negotiation & contract.

Private or hard money lender funds it.

If you're truly "broke ***" then a partner could put up the gap funding and rehab costs/holding costs.

Contractor rehabs it.

Agent/Broker lists it and handles that side of the paperwork.

You, as the PM, make sure everyone does their part. The more rehabs you do, the more you start learning about contracts, estimating ARV, estimating rehab costs, you'll start putting together your own deals, you'll start looking at niches where you can find deals and learning how to market and negotiate to those niches.

Rehabbing is where I started. I didn't know A THING about doing real estate. I bought a property of a very reputable wholesaler and then asked a buddy for a referral to a contractor. I funded with a HELOC, but could have used a hard money loan and credit cards. My neighbor is an agent so I had her list it. I just made sure all the pieces came together. I made $26,000 on that first deal. I kept buying from the same wholesaler and he slowly taught me about title trusts and contracts. I kept copies of all the listing and sales docs so I could sell the houses myself (I was in fact licensed at the time, but still knew nothing about paperwork because I had never sold a house or even worked one hour as an agent. I got my license only because I took all the required classes at the local community college.)

After dozens and dozens of rehabs I became more interested in finding and putting together deals than I was in fixing broken houses. Now, I rarely do a rehab. I actually wholesaled a house this morning for $1,500 only because I absolutely do not want to get into another rehab. I basically reverse bribed my buyer to take it off my hands.

4 Reply

Pauline Jones

Residential Real Estate Broker · New York City, NY · Member since 2016 · 142 posts · 21 votes

10y

hi which city in NC are you references to

Andrew Herrig

Rental Property Investor · Dallas, TX · Member since 2012 · 502 posts · 263 votes

10y

@Heather M. If you're going to wholesale, do it ethically, and get educated enough to know whether or not you have a deal. I personally do not put houses under contract unless it is something I would close on myself (even if I intend to assign it). If you don't have the cash in your bank account, go build a relationship with a hard money lender. If you have a deal they won't fund at least close to 100% of, it's not that good of a deal.

Wholesaling isn't easy. If you're doing it as a newbie to real estate investing entirely, you will have a longer learning curve. It's a good niche where you really can help people in tough situations, but you need to understand exactly what wholesaling is. A few people mentioned the Flipping Junkie podcast with Tom Krol. He equates wholesaling with a pawn shop, which I think is pretty accurate. If that doesn't sit well with you, I would recommend looking at becoming an agent instead.

Tim Lindstrom

Investor · Douglasville, GA · Member since 2014 · 313 posts · 181 votes

10y

@Heather M.,

Instead of wholesaling, why not use the leads you are working to try and land a property?

You might be able to get one subject to, or owner financed. If someone is really in distress, they will work with you on creative ways to help them out.

If you happen to land a deal that only works with cash, THEN wholesale it. I think a change in mindset to looking for your next property, and wholesale it if it doesn't work for you, works better than; finding enough properties for other investors to hopefully make enough to buy one yourself.

http://www.realtor.com/realestateandhomes-detail/2...

OP

Kannapolis, NC · Member since 2016 · 18 posts · 9 votes

10y

Originally posted by @Louis Kelley:

@ heather Macaulay

Then dont do it. Quit and get out of the business. If you're too scared to make a decision with your money then put it into a bank CD and keep going to your 9-5.

I don't know if this deal works (numbers/location wise) but in a NY min I found a duplex in your area that allows you to house hack. So you either want to buy and hold or you don't.

so either .... or get off the pot.

Make it an awesome day!!

Believe me I want to go directly into buying and holding but I didn't think I could get a good investment property (good area, minimal rehab) with only $6-9k in; am I wrong in assuming that? I am going to read the book everyone keeps recommending about getting in with little money down.

OP

Kannapolis, NC · Member since 2016 · 18 posts · 9 votes

10y

Originally posted by @Matthew Maggy:

That sounds terrible. I hate sales and wouldn't want to do it. Here in my market, $12k down plus a couple grand in closing costs will put you in a rental property. My opinion is that if you were to do some part time job for that 8 to 10 hours, or take on more clients in your regular business and save a couple grand more to buy a rental that cash flows well, you'll be able to build the wealth you want, albeit probably much slower.

Also, one of the head honchos here at Bigger Pockets has a book called "How to Invest in Real Estate with Low and No Money Down" which gives a ton of ideas on what you could do. I think I paid like $30 w/ the Audio Book and physical copy.

I haven't read through other responses, so if I'm repeating something that's already been said, I'm sorry.

Yes I am thinking I should just save and wait a little longer to invest the way I am more comfortable doing. I don't like the idea of leaving money on the table and I do have several properties under contract that I am still going to attempt to wholesale but I feel that, at least the methods I've been taught by my mentor, are not up to my moral standards and that's not worth it to me.

OP

Kannapolis, NC · Member since 2016 · 18 posts · 9 votes

10y

Originally posted by @Aaron Mazzrillo:

I've done all I can think of in real estate with the exception of development; options, foreclosures, probate, rentals, flips, wholesales, notes, seller carry (both as the seller and as the buyer), subject to and a few more that I can think of at this moment.

To me, flipping is THE BEST education you get in real estate and I really think there isn't much risk... with the exception of you paying too much and/or over rehabbing the house.

A great flipper is nothing more than a project manager who overseas all aspects of the project;

Wholesaler or agent finds the deal and handles the negotiation & contract.

Private or hard money lender funds it.

If you're truly "broke ***" then a partner could put up the gap funding and rehab costs/holding costs.

Contractor rehabs it.

Agent/Broker lists it and handles that side of the paperwork.

You, as the PM, make sure everyone does their part. The more rehabs you do, the more you start learning about contracts, estimating ARV, estimating rehab costs, you'll start putting together your own deals, you'll start looking at niches where you can find deals and learning how to market and negotiate to those niches.

Rehabbing is where I started. I didn't know A THING about doing real estate. I bought a property of a very reputable wholesaler and then asked a buddy for a referral to a contractor. I funded with a HELOC, but could have used a hard money loan and credit cards. My neighbor is an agent so I had her list it. I just made sure all the pieces came together. I made $26,000 on that first deal. I kept buying from the same wholesaler and he slowly taught me about title trusts and contracts. I kept copies of all the listing and sales docs so I could sell the houses myself (I was in fact licensed at the time, but still knew nothing about paperwork because I had never sold a house or even worked one hour as an agent. I got my license only because I took all the required classes at the local community college.)

After dozens and dozens of rehabs I became more interested in finding and putting together deals than I was in fixing broken houses. Now, I rarely do a rehab. I actually wholesaled a house this morning for $1,500 only because I absolutely do not want to get into another rehab. I basically reverse bribed my buyer to take it off my hands.

Thanks Aaron. I was actually thinking of using a HELOC to buy my first rental but I was talking to a family member about it who very adamantly said it was a bad idea and unfortunately my husband jumped on that bandwagon so apparently that's off the table for now but I didn't really see a downside for it as long as we could afford vacant months here or there (the properties I'm looking at would only have mortgages of $300-$400 a month which we could swing)

Don KonipolBusiness Member

Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes

10y

One of the main points often missed ( because it is intentionally misstated by those selling mentoring type services) is that wholesaling IS NOT INVESTING, it is a JOB, or service business at best. I often run into people who somehow think being a real estate broker is drudgery, but being a wholesaler is heaven. I wonder if you added up all the income earned by "wholesaling" real estate, and divided by the total number of hours spent in this pursuit, how much BELOW minimum wage the amount would be?

Private Mortgage Financing Partners, LLC

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4 Reply

OP

Kannapolis, NC · Member since 2016 · 18 posts · 9 votes

10y

Originally posted by @Don Konipol:

One of the main points often missed ( because it is intentionally misstated by those selling mentoring type services) is that wholesaling IS NOT INVESTING, it is a JOB, or service business at best. I often run into people who somehow think being a real estate broker is drudgery, but being a wholesaler is heaven. I wonder if you added up all the income earned by "wholesaling" real estate, and divided by the total number of hours spent in this pursuit, how much BELOW minimum wage the amount would be?

That is an excellent point as well – I actually love my other business. It was just hard after I moved from California to NC I couldn't find any full-time positions in my field that were less than an hour and a half away which doesn't work with well with having toddlers. So I started doing the same work on a consulting basis which has been wonderful because it's given me total control and flexibility – but a lot less of an income which I was hoping would be supplemented by wholesaling. However, in the past 5 months I've spent a lot more hours attempting to wholesale rather than working on my other business which actually makes me consistent income. This is a big reason why I'm thinking I might be smarter to save my money for an eventual rental rather than dumping it into a marketing budget for wholesaling

Account Closed

Everywhere · Member since 2016 · 63 posts · 26 votes

10y

Heather Macaulay Your post has really resonated with me. You have worked on wholesaling for five months and you don't like it. That's ok. You may be so close to the gold mine but if you hate it there's no need to pursue it any further unless you want to give it another chance. There are other niches and strategies out there and like others have mentioned you could do buy and hold and do owner financing or find a money partner or work your other business and save up more money. It seems like so many newbies start without money and decide to go into wholesaling to raise capital so they can do buy and hold. That's what I thought I wanted to do too but it seems so overwhelming and intimidating and so many people are trying to do it. I'm just wondering if it's even worth it myself. At least you got out there and tried it.

OP

Kannapolis, NC · Member since 2016 · 18 posts · 9 votes

10y

Originally posted by @Joseph Caracappa:

Heather Macaulay first off don't be discouraged about anything! You said you don't like wholesaling, not your quitting real estate all together! You are always learning even if it is learning what you don't want to do. Pe patient! This business is built over years, not months!

If your long term goal is to buy and hold, then keep saving, keep learning, look for seller financing with lower down payment possibility, try to find private money and look at a fha loan around 3.5% down(that would have to be owner occupied for a little while) etc.

I am not saying to quite wholesaling, that you have to figure out for yourself! But I am saying that I am a firm believer that no one should have to do things they hate, life is to short and money is not worth your sanity! Figure out exactly what you want and exactly why you want it, and move for it everyday! You will do great!

To your success!

The realtor I used to purchase my home told me that an investment property would require 20% down - is there a way to get an FHA loan for 3.5% on a 2nd home?

Joseph Caracappa

Investor · Santa Rosa, CA · Member since 2012 · 127 posts · 90 votes

10y

Heather Macaulay an fha loan would require you to live in the property, so if you already own a home that's probably not the avenue you will want to go down. It's not everyday, but you can get sellers to finance their property for lower than 20%. If you can educate them on the benefit of carrying the note, and they feel you can pull it off, that might be a way. If they own the property out rite and they don't need the cash now this process goes a lot smoother! Educate yourself on the process first! And try to structure the note with a least a 10year ballon, 5years goes really fast!!! Or just keep saving for that 20% down... Keep in mind I know nothing about your market! You will have to figure out what will work and what will not. To your success!

Christopher Hutchins

Powder Springs, GA · Member since 2016 · 20 posts · 22 votes

10y

Wow, some of these responses! There ARE some ethical wholesalers out there, and everyone has to start somewhere. I believe it's about the way one treats the people with whom they have contact that determines whether or not they're ethical or not. I've run across shady real estate agents (so-called professionals), as well as lazy ones while getting started. Real estate lawyers as well, but I won't cast a long shadow on an entire segment of the industry. Everyone has their lumps in the beginning, and will experience some level of crap while they attempt to gain a solid foothold. To the OP, keep your head up, pull together some creative financing, don't quit, and find YOUR niche in this real estate odyssey . Secure some funds, and then you can lock up a property and won't have a need to lie to anyone. I'm looking to do exactly this as we speak. Negative Nancys tend to believe that THEIR way is the best way to skin a cat. That's hardly ever accurate. Congratulations on jumping in, you've taken the hardest step, ACTION!

4 Reply

Joseph Caracappa

Investor · Santa Rosa, CA · Member since 2012 · 127 posts · 90 votes

10y

Heather Macaulay do not know if has already been mentioned? But you can also look into @brandon turner brrrr strategy. Ton of info on biggerpockets about that!

Katrina Prather

Real Estate Investor · Griffin, GA · Member since 2014 · 15 posts · 5 votes

10y

@Heather M. Interesting! Our stories are very similar in regards to investing. My ultimate goal was to be a buy and hold investor. I felt like wholesaling, then rehab & flip were going to be my path to get to B & H. I experienced some of the same feelings when wholesaling. I also did not want to quit and questioned whether I should after 5 months of direct mail and driving for dollars.

Wholesaling allowed me to better understand my market which includes the metro Atl area. I began to see that it just wasn't a lucrative time for that aspect of REI. Are people out there doing deals, making money, etc. ; of course they are.

My suggestion would be to first, trust your gut instincts. Work on analyzing deals in the area that you plan to buy. Also, continue to save your money so that you can make that down payment and have the reserves that you need. Continue to learn about B & H investing, but don't go overboard because experience is the best teacher. However, you want to know enough that will help you make wise choices (that's prob a bit vague).

I became interested in REI in 2014. Mostly did some learning and joined my local REIA the first year. Jan 2015 is when I started wholesaling and stopped in May. I am scheduled to close on my first property next week (praying that all goes well). In hindsight, I wish I had someone to advise me to just work on saving my money and prepare to B & H. I have a FT job and make sacrifices so that has been helpful for me. Plus, in my area I have only heard experienced investors confirm that B & H (vs wholesaling) is the wealth builder if that's your goal.

Good luck!

OP

Kannapolis, NC · Member since 2016 · 18 posts · 9 votes

10y

Originally posted by @Katrina Prather:

@Heather M. Interesting! Our stories are very similar in regards to investing. My ultimate goal was to be a buy and hold investor. I felt like wholesaling, then rehab & flip were going to be my path to get to B & H. I experienced some of the same feelings when wholesaling. I also did not want to quit and questioned whether I should after 5 months of direct mail and driving for dollars.

Wholesaling allowed me to better understand my market which includes the metro Atl area. I began to see that it just wasn't a lucrative time for that aspect of REI. Are people out there doing deals, making money, etc. ; of course they are.

My suggestion would be to first, trust your gut instincts. Work on analyzing deals in the area that you plan to buy. Also, continue to save your money so that you can make that down payment and have the reserves that you need. Continue to learn about B & H investing, but don't go overboard because experience is the best teacher. However, you want to know enough that will help you make wise choices (that's prob a bit vague).

I became interested in REI in 2014. Mostly did some learning and joined my local REIA the first year. Jan 2015 is when I started wholesaling and stopped in May. I am scheduled to close on my first property next week (praying that all goes well). In hindsight, I wish I had someone to advise me to just work on saving my money and prepare to B & H. I have a FT job and make sacrifices so that has been helpful for me. Plus, in my area I have only heard experienced investors confirm that B & H (vs wholesaling) is the wealth builder if that's your goal.

Good luck!

Thanks for the encouragement Katrina- I think I've had it drilled into my head from all of the salesmen out there that I NEED to start out wholesaling but I'm realizing from stories like yours, and others who have reached out to me since I posted this, that that is not the only way to go about it.

Katrina Prather

Real Estate Investor · Griffin, GA · Member since 2014 · 15 posts · 5 votes

10y

You're welcome @Heather M. ! That's what happened to me as well...subconsciously. You're right..you just have to focus more on what's right for you.

Jon Behlke

Accountant · Hopwood, PA · Member since 2015 · 125 posts · 92 votes

10y

A quick look on Zillow showed me a 2/1 at 1218 Burke St. in Kannapolis offered at $39,900 that's been on the market 47 days. There's also a 3/1 at 1205 Woodlawn in foreclosure at the same price that's been on the market a month. New listing at 1002 S Ridge Ave for $30k. I don't know what your rental market is like down there for these types of places, but that's at least 3 that you would be able to put 20% down on and maybe work with the seller on seller financing.

None of these may work out either, but if you can work out seller financing on a property, you can avoid the wholesaling gig altogether. Real estate auctions also appear to be popular in your area. You may be able to scoop up your first rental that way.

Christopher Winkler

Specialist · Dallas, TX · Member since 2014 · 900 posts · 392 votes

10y

so many great replies from all ends of the spectrum, and everyone is good. Its up to you to stay, go, or vear off to another RE path.

Heather, whatever way you go, good luck to you. I was going to post this, so what the heck.

Read 3 Feet from Gold or get the audio, https://www.amazon.com/Three-Feet-Gold-Obstacles-O... and drive around while looking for dollars in your 20 mile radius. Then read Trumps book Never Give Up. https://www.amazon.com/Trump-Never-Give-Up-Challen...

You are so close, at some point you have to stop with the gurus and just do it. Go make your mistakes. Its like sales, its a numbers game so you have to do get the no's out of the way, and remember, each one puts you closer to a yes.

And mailing is very expensive, so if you dont' have it, do other ways, bandit signs, craigs list, small ads, reverse ad marketing. Then come back and share your successes.

Think you can, think you can't, either way you are right. You are 8 inche from success, the distance between your left and right ear... Go get em!

Account Closed

Everywhere · Member since 2016 · 63 posts · 26 votes

10y

James Watts Thanks I will check it out!

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

10y

Originally posted by @Don Konipol:

One of the main points often missed ( because it is intentionally misstated by those selling mentoring type services) is that wholesaling IS NOT INVESTING, it is a JOB, or service business at best. I often run into people who somehow think being a real estate broker is drudgery, but being a wholesaler is heaven. I wonder if you added up all the income earned by "wholesaling" real estate, and divided by the total number of hours spent in this pursuit, how much BELOW minimum wage the amount would be?

Great point Don. Many people talk about wholesaling as the avenue they want to take. When others explain they should become an agent or a broker the soon to be wholesaler scoffs at the idea because they want to invest for themselves, not become a slave to the industry.

Sorry to break it to all of you folks out there who drank the wholesaling koolaid but all a wholesaler is, "is a poor mans version of a broker/agent." Outside of legal ramifications and moral argument let's look at what the two business plans can do for the person attempting to earn their living performing them.

In order for a wholesaler to earn a paycheck they must:

Meet an extremely motivated seller and place the property under contract at a price so far under market that they can sell it investors who will capitalize on any deal that is under market value. Thus meaning the wholesaler has to work vigorously to find that needle in a haystack seller who would not know the value of their property if it slapped them in the face.
- Note: Typically this must all take place in 30 days or less and the wholesalers marking reach is limited to sites like craigslist.

In order for a Real Estate Agent/Broker to earn a paycheck they can:

Meet an extremely motivated seller.
Meet a semi motivated seller.
Meet a seller who is just kicking the tires.
- Note: When working with a seller the listing the agent typically has 6 months or more to sell the property and their marketing includes use of the MLS which incentivises thousands of other real estate agents to show their clients the home. There will be clients will buy properties at steep discounts, at fair market value and sometimes even over fair market value.
Meet a buyer.
Meet a person looking to rent a property (tenant)
Meet a person looking to rent their property (landlord hires you for leasing only)
Meet a landlord looking for full service property management.
Assist another agent who has too many leads.
Send an agent leads if they themselves have too many leads.
Mentor or lead another agent.
Perform a BPO.

Now you have to ask yourself, which one of those two professions is the real slave to the industry?

Aaron Mazzrillo

Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes

10y

Originally posted by @Don Konipol:

One of the main points often missed ( because it is intentionally misstated by those selling mentoring type services) is that wholesaling IS NOT INVESTING, it is a JOB, or service business at best. I often run into people who somehow think being a real estate broker is drudgery, but being a wholesaler is heaven. I wonder if you added up all the income earned by "wholesaling" real estate, and divided by the total number of hours spent in this pursuit, how much BELOW minimum wage the amount would be?

This whole post is laughable at best. The whole argument about investing vs. speculating is just pointless and I'll even say just stupid. One person thinks the other person is speculating and not investing, and so what? The "investor" is better than the speculator? The speculator is better than the investor? Guess it depends at the end of the year, who made more money. Or does that even matter?

I wholesale. I guarantee you I work less than any broker who brings in what I bring in every year. GUARANTEE it. GUA-RAN-TEE it. (say that last one slowly in a deep voice.) Do I want to deal with the mounds of absolutely stupid and pointless paperwork involved in traditional sales? Hell no. That's the number one reason I got of rehabbing. That and flaky buyers who fall out of escrow. That and the 45 day escrow it takes to close a loan these days. And the home inspection. And the termite inspection. And the appraisal.. And the going back and forth between the two.. And the... Like my good friends back in NY say,!! Sounds like drudgery to me. Sounds like just another crappy J.O.B.

I don't own a suit. Or a dress shirt. Or a tie. Or a single pair of dress shoes. But I cash lots of 5 figure checks. And I'm home all day EVERY day watching my daughter grow. You might not think it is heaven, but I think it's maybe the next best thing.

OP

Kannapolis, NC · Member since 2016 · 18 posts · 9 votes

10y

Originally posted by @Jon Behlke:

A quick look on Zillow showed me a 2/1 at 1218 Burke St. in Kannapolis offered at $39,900 that's been on the market 47 days. There's also a 3/1 at 1205 Woodlawn in foreclosure at the same price that's been on the market a month. New listing at 1002 S Ridge Ave for $30k. I don't know what your rental market is like down there for these types of places, but that's at least 3 that you would be able to put 20% down on and maybe work with the seller on seller financing.

None of these may work out either, but if you can work out seller financing on a property, you can avoid the wholesaling gig altogether. Real estate auctions also appear to be popular in your area. You may be able to scoop up your first rental that way.

Hi Jon,

Thanks for taking the time to look those up – I will look into them. I had gotten the impression from my previous searches that anything I got in that price point would need some serious work done before I could put a tenant in them but I will keep looking.