Should I Wholesale or Look to Fix-N-Flip This Property

18 Replies

Hello, All,

I'm a relatively new investor in the Chicago area and have come across a great opportunity in which I want to run past fellow BP members. Here is the info: It's a property just about to come out of probate and the soon to be owners just want to get rid of it asap. It's on a nice block and on two lots. I believe I can get the property for around $25K. The ARV is $135-$140K. It needs a complete rehab and I estimate the total will be around $50K. I would love to go with a fix-n-flip on this, but the problem I have is funding. I can't locate a lender that will want to fund the project without me having quite a bit into this. Should I A) Continue to look for a lender, B) Look to partner with another investor that can help fund and can split the profits with, or C) Look to wholesale the property since I can't fund it?

Any suggestions are appreciated.  Thanks much. 


You could look at hard money lenders to pursue option A.

If you feel like a "relatively new investor" option B may be best if you partner with somebody experienced.  That way you get to learn from them, use their contacts to save money on the rehab and profit more than option C.

@John Montgomery  

If your deal is as good as it appears in the post you shouldn't have trouble doing any of these options.  As far as which one to do that really depends on your goals:

I'd figure out what you really want to do, what you want to be as a real estate investor and pick the one that makes the most sense. For me, I'd use it as an opportunity to learn more about flipping/renovating and try to partner with an experienced flipper. There are a lot of folks from Illinois here at BP so it shouldn't be hard trying to find one. Get out to some local REIA Meetups in the area and make the connections.

However, if you need money to pay the August Rent/Mortgage then wholesaling may be the best option.

All three are great of course.

You seem motivated.

Partnering would probably be the best idea, if you can hook with an experienced flipper.  

They can show you the ropes, and you can learn a lot from them.  Then you will have that under your belt and then the next time a deal crosses your path, you can show people what you have already done.

If you want to avoid financing you could just wholesale.  

Then take the money you make from the wholesale and put that towards your next project.  

I don't know your personal financial situation.
Keep us informed on how this deal works out.

Why not try to combine B and C?  

Act as a wholesaler and look to find a cash buyer who wants to rehab and flip the house.  In the process of negotiation, let them know that you are interested in getting into rehabbing and flipping and see if they would be willing to partner with you on this job to show you the ropes (profit splits will obviously be skewed toward the investor).  

You get to bank some coin, get a 'free' education, and if you come across similar deals in the future that you want to wholesale or partner, you have someone who knows you and can trust you are bringing them a good deal.

For sure B . If this is your first deal this will be a win win because you will make 1/2 and most import you will learn a lot. What price does the learning have. Then A will become easier with hard money since you'll have one under your gelt. I did private money on my first and went well. I'm in the south/west burbs. Let us know . Good luck .

I will suggest to go with B.

You will learn a lot and will be ready for the next flip.

I'm leaning toward B as well, especially if you're new to rehabbing and are looking to continue to rehab in the future. 
  I would just caution you to send out feelers to people you know and trust, who have experience with contractors. You'll definitely want to work with someone who comes highly recommended, even if their prices are a little higher. The experience they'll give you will be worth it's weight in gold. Gaining all that experience and making a profit on the sale is a definite win/win for you and the contractor!

Just my $0.02

What's worth more to you, quick money or the education? That's the real question for you.

Also, you don't have a deal unless and until you have a signed agreement with a seller who has capacity to pass title to you (or another buyer). 

Get a seasoned, experienced investor to work the deal and watch what they do, without interfering. That ought to be worth a $10,000 education that you can't afford to write a check for.

It seems like your answer is option B. 

On the one hand, partnering with the right investor is going to give you access to the needed funding for this project. On the other hand, you will hopefully be learning some stuff about fix-n-flips that you didn't know before. I've seen your plan work numerous times- someone puts up the funding, someone does the work, and then they split the profit. 

I would caution you not to let this project primarily become an education experience. I feel like you may end up getting the short end of the deal if that happens. Yes, learn, but learn by doing! This is business, and that doesn't change even if you're trying to learn a thing or two. A seasoned investor may try to pull a fast one if you're not careful, so you'll want to get everything in writing (of course), but also make sure you understand all of that writing before you sign anything or agree to it. That may be the point that you need to turn to additional resources and not just depend on your partner in this project for knowledge.

I think the key here is, if your numbers are accurate, you have multiple, workable, exit strategies.  That's a phenomenal place to be.  Get the property under contract, while deciding what your personal end game is at this very moment.  Until you have it under contract, you have nothing.  Once you get it under contract, attempt to execute the exit strategy that fulfills your personal goals.  If that is to get some mentoring with a real deal, then partner with a more experienced flipper.  If it is to pocket some quick cash so you can execute a marketing plan, fine.  It's completely dependent on what your goals are right now.  The hardest part is finding the deal and getting it under contract.  Ask any of our BP heroes how many offers they write vs. how many are accepted.  Get that property under contract!!!

Put it under contract and wholesale it is my vote. (option C)


1. If I'm an experienced rehabber and I am taking on MOST of the risk, why will I share my profits with you? I would rather pay you $10K or even $15K and not share the profit. So if I am the rehabber, I am not willing to do B. Sure, I can probably teach you but I will lower your fee to $5K. Why will the rehabber train his competition for free?

2. Since you don't have experience and the 10% skin in the game that most hard money lenders require, you can't rehab this yourself. A is OUT.

3. Focus your time and effort in being really good at finding, analyzing and controlling good deals. You can't do that if you go with B or A.

Think of putting multiple deals in your pipeline. The wrong approach I see most beginning investors make is they're too afraid of getting multiple properties for fear that they can't sell them. If the deal is good the money or the buyer follows. In a rising market, whoever controls the inventory wins the game. It's so easy to sell properties as long as they're really good deals.

I would suggest Option C for you. Easy way to get 5 - 10K without any investment, rehabbing, and headache.

You said you can't find a lender to fund it without putting a bit into it.

Define what "a bit" is?

If your numbers are even close to being right this is a pretty thick deal and you should not have any problem finding someone to fund it (Probably not 100% being your first deal) and give reasonable terms.

If you are worried about actually being able to do the rehab then look into B but if the only issue is funding pound the pavement and find more lenders and if you don't have a couple grand (if you are buying for $25K even if they want 40% of purchase we are only talking $10K) find a way to get it (Credit cards, HELOC if you own a house, personal loans, friends and family) then make it happen.

If you aren't willing to take a little risk to get the rest of the funding then just wholesale it, if the numbers are accurate you can probably get $15K or more.

@John Montgomery Congrats on getting close to negotiating your first deal...

I would say the most important thing is to "know your objective"...

There are a lot of great answers on this thread, but ultimately we are all making "shots in the dark" as to the best option for you because it's our perspective...

This is still valuable, but can become very confusing because you don't know each person's perspective...

MY Suggestion is to know your goal over the next 3-5 years...

I will let you know a little about my perspective...I am a Rehabber and Have Been Buying and Rehabbing over the past 8 years here in Chicago...I've been in your shoes...I wanted to be the Big Shot and rehab deals straight out the gate(Little to No Money & No Experience but a few REI Boot Camps- basically No Experience)...To say I've had a lot of Failures during my 14 years of being involved in studying REI is an Understatement...

If I was starting all over again, and my objective is to be able to build a robust REI Biz that can allow me to rehab 6-12 homes a year, wholesale 2-3 properties per month, and build a rental portfolio...I would first focus on getting good at one objective first...

Generally most people start out wholesaling because it doesn't require the money or experience rehabbing or landlording requires...

I would start with Wholesaling...go find 5-10 very good rehabbers and find out their Criteria for a Great Deal...Commit to building Value for them and ultimately a great relationship.

With this you will already have buyers lined up, you know what areas to look for properties in, and you can research public record and see what they are paying for properties on the acquisition(and also ask them, but keep them honest by researching public record)...

At this point become the best wholesaler to these will learn a lot just in this process alone...How to evaluate Comps, Repair Values, Neighborhoods, etc...Which a great wholesaler will know how to do...It will make your deals easier to sell...

Ultimately I would see which one of these Rehabber will be open to the idea of partnering/mentoring me on how to get into that arena...They may even allow you to follow the progress of their deals...Every deal has its surprises and over the course of 10-20 deals you will get a real life idea of what those surprises are, and even understand the "reason why" you calculate certain contingencies into deals and also what are the most costly mistakes or repairs to look for and avoid on deals...The value of this Experience will accelerate your learning curve...

In my experience one mistake for a beginner can cost you a ton of money and even put you out of the rehab business.

There is no way you can learn all the mistakes you must avoid by reading a book or taking a 3-day training program. 

Also keep in mind the experienced investor will have tons of relationships in place that you will be able to leverage that will save you 10,000's in time, money, and trial and error. They are not going to volunteer all these relationships to you, nor will these people treat you like the experienced investor, but if they know you have experience from working under that investor there is a chance they will be more open to having a relationship with you based upon the experience of the other investor.

Hope that helps...

PS The best thing about a mentor in your local market is a great mentor will know the market well enough to know a deal without having to use guess work, they typically understand the little differences in neighborhood that might cause a radical drop in house values of homes that might look like deals, but are really "Money Pits". Good Luck Bro!

Also to be fair to @John Montgomery since I am in the Chicago Market...I understand the market for Hard Money here in Chicago is very different from other markets...

The market would benefit from more competition because the handful of HML have their pick of the litter and can cherry pick deals...on average they won't even do a deal with a newbie rehabber, and if they will they will only fund the rehab portion to protect their interest and limit their exposure to risk.

Cook County is a much harder county to do foreclosures in, and that creates a lot more risk for the HML...

Finding a Good Hard Money Lender - matter of fact I wouldn't call most Rehab Lenders in Chicago HML because they function mostly like banks except for the interest rate and points...They want 20-35% of Investors Cash into the Deal based on Acquisition and matter what the % ARV is...Oh, and they still want 680 Credit Scores, and Full Doc Loan Submission...Not anything close to Asset Based Lending...

Any HML that are considering moving to a market where there is a ton of Opportunity, Chicago is a great market. There are a lot of Experienced Rehabbers that will gladly pay good points and high interest rate for HML for a lender that knows how to get deals closed and can be honest on their ability to fund a deal.

I've heard Horror Stories where HML in Chicago have come back to the Borrower and asked them to cross collateralize on a deal 2 days before was the HML being greedy...and nothing is wrong with it, but when you approve a deal, you shouldn't come back with crazy conditions 2 days before closing...

Best advice to John is also to consider that is the type of market you are dealing with in regards to HML too...if you don't know what you're doing a HML can cause you to lose your deal by offering "bait and switch" terms...

Good Luck!

Originally posted by @John Montgomery:

Hello, All,

Should I A) Continue to look for a lender, B) Look to partner with another investor that can help fund and can split the profits with, or C) Look to wholesale the property since I can't fund it?  

Any suggestions are appreciated.  Thanks much. 


John Montgomery,

Great name by the way. It would even be cooler if your middle name was "Michael". I've dedicated many of his songs to my wife when we were younglings dating.


Anyways, Let's make some assumptions here before we tackle this multiple choice question you have posed.

Assuming this is a hot (30 Avg DOM) to moderate (60 Avg DOM) market in your specified area to sell a property.

Let's make the following assumptions...

Now you state the "soon to be" owners want to get rid of it ASAP... Means this is most likely going to have to be an "ALL CASH" offer. But it doesn't mean you cannot negotiate terms as to allow you time to sell subject property.

Assuming the numbers are correct in your post... You must lock up a contract with these owners.

This would be your first step of action before you even pursue which option to go after. In other words, secure the property ASAP. Make sure you allow yourself some time to formulate a plan of attack. An example which would be ideal is 90 days.

Once you have secured a contract with hopefully 90 days, you can now go through your plan of attack much more thoroughly.

Let's say conservatively the home's ARV is $135K.
Your price is $25K and the total repairs is roughly $50K equaling $75K total.
This leaves you a gross cushion of $60K

If these numbers are as accurate as can be... Then there should be no reason you could not find a lender. Preferably a "Private" lender (HML - worst case scenario as most are not asset based). You can also try to gather the $25K (plus CC's) through a private lender (i.e. family or friend) and pay them an annual 12% return - assuming they could not lend you anymore for repairs... Then seek out a lender who can offer bridge lending. Some will actually partner with you and take a certain % of the profits (i.e. 20%-30%). The downfall (but necessary for protection) is you will have to dot your "I's" and cross your "T's" in order to fulfill your end to draw down money for repairs (materials, labor, etc). In other words, you will have to make sure the person you hire to do the work should be someone who is proven and who you trust. This is of course, if you wanted to go the rehab route for a better payday three to six months down the road.

If you do find a lender to at least buy the home at $25K (plus CC's), then you could wholesale this property as well. As previous posters have alluded to, $10K-$15K would not be unreasonable to collect as a fee for your finding.

Now could you partner with an investor and split the profits? For sure. But if you are new, some may do a split of 60%/40% or even 70%/30% split instead. It doesn't mean you could not negotiate for a 50%/50% split. Keep in mind, you will be using resources from an investor who should be established and who is placing everything on the table but the property. You will need to present strong arguments in why you should earn let's say 50%/50%. I won't break it down but you get the gist of it.

Lastly, could you wholesale it without actually buying it? Yes, however, you better have an iron clad contract for protection. Maybe even do an NCNDA with the seller. Just have small clauses within the contract this way they will not feel the temptation of circumvention. This is where it can be a "dog eat dog" business. So protect yourself. Because unless you own it, you will be susceptible to being undercut, back-stabbed, or circumvented. No one really wants to talk about this but it happens frequently in this business. I can give you 10K-15K reasons why it may happen. So try and work with people you trust. I know the number may be few, as even some who you think you have relationship/friendships with can still turn on you. Unfortunately, money has that effect on people.

I don't want to make this too long winded, but wanted to kind of elaborate slightly on the subject. I personally, would try to fix & flip. But if you have ZERO access to any money, then you may have to wholesale (via paper). Do a process of elimination in your circumstances as you know your situation better than any one of us and go from there. The path of least resistance considering your experience is more ideal than the alternative. Trust me, most of us can tell you, sometimes it is a financially painful lesson if you do not do your due diligence and make a decision which may cost you later.

Just my two pesos.

Big Henry

Thank you all so much for the GREAT advice!  I love BP!! :-)  This is invaluable information from those that have been in my shoes, so I appreciate it very much.  First things first, I will get it under contract.. without that nothing else matters.  I will post back with how it all goes.  Thanks again. 


Do a bunch of "C's" until you can fund a "B" for yourself. Then take those profits & be an "Option A" for other people in these situations. As your're seeing 1st hand - private money lending is necessary and can be profitable...

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.