Market Crash for wholesalers?

Question

Hello! I am new to wholesaling and ive made couple deals but there have been alot of talk about the market crash starting off 2022 so i just wanted to know IF the market crashes will that hurt wholesalers alot? Or be better for wholesalers? Or remain the same? What will happen to wholesalers and Any advice?
Thank you!

Nick C. · Answer

There's been a lot of talk about a market crash for at least 7 years now. Many investors have been waiting on the sidelines for a repeat of 2010, but this isn't going to happen. If you were lucky enough to buy and hold back then you did magnificent. But if you need a once in a lifetime event like that to be successful in real estate keep your day job.

The biggest difference was back then there were very few buyers, mostly local mom and pop investors. Now if the market were to "crash", if prices slipped even a little, if there were magically more inventory somehow, there's literally trillions of dollars foaming at the mouth to buy it up. So thanks to the law of supply and demand we're going to be stuck with these prices for the foreseeable future.

Cassi Justiz · Answer

There is always space for successful wholesalers. There will always be people that need to sell houses that do not have the ability to go "on market." New and inexperienced wholesalers may have a hard time if there is a large market adjustment because theoretically there will be an increase in inventory. If there are 100 distressed houses for sale on the MLS, the distressed house that you are trying to sell will be in direct competition with those. You will need to be able to price it competitively which will be a little more tough if there is a surplus of distressed homes available. The wholesalers that don't know how to price their inventory will be the ones that end up locking up deals at prices they can't move and falling out of the game.

Ryan Talmadge · Answer

Just FYI the fed has guaranteed the interest rates until 2025 and affordability is at an all time low though values are up. It's just speculation based on inflation. This market is guaranteed until 2025 unless the fed magically changes their own mind which would take voting etc.... Real estate has survived hundreds of years, wholesaling has survived decades.... don't believe the hype that's designed to get attention.

Also theres no such thing as the "Real estate market" theres hundreds of different markets across America all with different tolerance and insights. Is your market a C market? Then yes probably it will suck for you... Is your market buy and hold? Probably it won't suck for you... etc.... Assess your market based on your own data and compare it over time.

Good luck brotha!

Carlos Ptriawan · Answer

what's the mathematical mechanism that wholesalers could gain benefit (or losing money) during a downturn market? I thought the wholesaler/realtor has little skin of game to the market.

Mike Terry · Answer

@Ryan Talmadge I agree with @Karl Eisenhofer. Thinking anything is guaranteed in economics is dangerous. I don't think we will have a catstrophic housing crash, but there are too many variables to consider and account for and the ones you don't think about will have the biggest effect (ie a global pandemic).  I am preparing for an accelerating inflationary environment.  I will lock up long term rates, maintain conservative loan to values, account for cap ex, repairs and vacancy at a total of 25% of rents, dump low performing properties, maintain a capital cushion to jump on opportunities and hope for the best.

Steve Vaughan · Answer

I would think a hot sellers market is bad for wholesalers.  Owners all think their house is worth the moon.

When times are tougher, sellers are more open to quick and creative solutions. I hardly hunt at all in this market.

Bill B. · Answer

The fed obviously didn’t “guarantee” rates until 2025. They’ve gone up in the last 30 days.  There is zero chance rates will be the same in 2025 as they are at this moment. They might be higher, god forbid they might be lower (that’s means something REAlLY bad has happened if they are lower than now.) But they wouldn’t guarantee rates 4 years in the future even if they could, and they can’t.

If anything slows them from raising rates or raising them very fast is the stock market crash they will cause by too much/too fast.

Karl Eisenhofer · Answer

It is an interesting question if the Fed will be able to defy reality for that long.  Anyone can observe that inflation and asset and commodities prices are on the rise (anyone built a deck lately?)

Ultimately lending will grind to a halt as the artificially low interest rates result in negative real returns.  Only the government wants to lend money in that environment (and by lending, you know the Fed is printing the money to lend).

The Fed can only fight the tide for so long before they are swamped.. I would not bet the farm on low interest rates that long into the future.

Cullum Stirling · Answer

Like anything for sale, it's the buyers / sellers that dictate the final price. The only way you change that is if you have a monopoly on the leveraged side, aka the side that holds what others REALLY want.

People will always need shelter over their head. The price that they can afford and what they are actually willing to pay for that specific type of shelter will vary as our environment changes.

Ryan Talmadge · Answer

The numbers are artificial to soften the blow of inflation and increase inflationary spending. Only time will tell, but the idea that you can even have a WHOLE MARKET CRASH is crazy. There were markets that survived 08'. My only point is purely that every market is different and reacts differently. Also policymakers all voted to keep the interest rates where they are until 2025 it's not like a rumor.

Market Crash for wholesalers?

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