Investors! Do you like wholesalers?

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Investors! Do you like wholesalers?

Ruby Ruiz
Investor · San Antonio, TX · Member since 2020 · 84 posts · 69 votes

It's a legit question right? I wonder what the pros and cons are in working with a wholesaler? Any Investors/wholesales have feedback or an experience you can share?

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Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
5y

The majority of wholesalers (over 90%) don't have a clue what they are doing and think they can scale into investing as a quick fix. Their ARVs are way too high (and fake) and their repair budgets are way too low (they don't know anything about repairs). The majority of wholesalers don't present the owner with a true view of how the transaction will take place and pretend that they have the cash to purchase when they don't. So, I don't enjoy most wholesalers.

I wouldn't even call very many of them, good, but the "good" ones are good on their valuation and repairs and pay more attention to their best investors instead of all the yahoos trying to get in with fake cash. The biggest downfall of the modern wholesaler is that they all spray and pray every property instead of just finding two or three local investors who will buy all the deals for a fair spread for them.

Too many wimpy shortstops trying to be homerun hitters when they are batting .206 with 1 RBI in 106 ABs.

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  • Adrien C.
    Property Manager · Griffith, IN · Member since 2015 · 1k+ posts · 913 votes
    5y

    Do you like working with insurance agents? Real estate agents? Plumbers? 

    I see what you’re trying to ask and it’s like any profession. There are good people and bad people. Ethical and unethical. Winners and losers. 

    So if you find a good insurance agent who provides value, you use their service. Same with real estate agents and wholesalers and plumbers. 

    A good wholesaler provides you with off martlet properties with hopefully fewer people fighting over it compared to the mls. A good wholesaler has tools that provides them with realistic comps (and- they have to know how to use the tools and understand how appraisers value houses). A good wholesaler should be able to explain the condition of the property but not necessarily estimate the rehab as two people could do the same thing at totally different costs. 

    43Reply
  • Ruby Ruiz
    OP
    Investor · San Antonio, TX · Member since 2020 · 84 posts · 69 votes
    5y

    @Adrien C.Really good points. Thanks for sharing!

    0Reply
  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    5y

    The majority of wholesalers (over 90%) don't have a clue what they are doing and think they can scale into investing as a quick fix. Their ARVs are way too high (and fake) and their repair budgets are way too low (they don't know anything about repairs). The majority of wholesalers don't present the owner with a true view of how the transaction will take place and pretend that they have the cash to purchase when they don't. So, I don't enjoy most wholesalers.

    I wouldn't even call very many of them, good, but the "good" ones are good on their valuation and repairs and pay more attention to their best investors instead of all the yahoos trying to get in with fake cash. The biggest downfall of the modern wholesaler is that they all spray and pray every property instead of just finding two or three local investors who will buy all the deals for a fair spread for them.

    Too many wimpy shortstops trying to be homerun hitters when they are batting .206 with 1 RBI in 106 ABs.

    [email protected]Podcast Guest on Show BiggerPockets Daily 667: 5 Amazing Benefits Multifamily Investments Offer (That Single Family Homes Don’t) by Gino Barbaro
    Zen and the Art of Real Estate Investing59 Reviews
    WebsiteView Page
    49Reply
  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    5y

    @Ruby Ruiz, do I like working with them? As Jonathan mentioned, yes and no.  There are some good ones, there are a lot of bad ones, and some that tend to fall in the middle.  

    Do I trust wholesalers? No, but I will work with them if upon running my own numbers the deal makes sense. But, to repeat everything Jonathan mentioned: ARV 20-30% too high, projected repair costs 40-50% of actuals, and sale price that is 30-50% too high.

    Thankfully no horror stories, but a couple tips: don't trust anything they tell you.  Do all your own due diligence.  Don't pay earnest to a person, only a brokerage or escrow account.  

    My one story is the house I looked at from a wholesaling group, that said repairs were about $30k, when the whole 1,000 sq ft house needed touched, including gutting kitchen and bath, rewire, new HVAC and roof.  But mostly the foundation was noticeably sliding down the very steep back hill.  They literally said, "finish the basement and the buyers won't notice the cracks" and "if you pour all new concrete outside, (note this was not in their rehab budget) the buyers won't be able to see how much the house has shifted".  And yet this wholesaler was a fairly prominent name, having their own offices and brokerage, as well as putting on "flipper" seminars.

    7Reply
  • Tim Bender
    Real Estate Coach · Joplin, MO · Member since 2017 · 13 posts · 65 votes
    5y

    I love wholesalers, because they are my bird dogs, along with all the area realtors, title companies, lenders and attorneys. They refer every deal to me that they can’t close because of title and lien issues. I pay them a referral fee only if I buy the deal. Since I’m the only one that buys ugly titles in my area, they usually feed me about 10 new deals day into my pipeline and it cost me nothing for these leads.

    12Reply
  • Ruby Ruiz
    OP
    Investor · San Antonio, TX · Member since 2020 · 84 posts · 69 votes
    5y

    @Jonathan Greene @Evan Polaski Thanks for the advice! 

    1Reply
  • Ted Sornson
    Member since 2020 · 12 posts · 34 votes
    5y

    As someone interested in getting into wholesaling, this is such good information. My honest hope would be to provide value to investors and get compensated, just as aim to do as an agent. My secondary hope would be to build relationships with the buyers of the wholesale deals in hopes of earning repeat business as well as guides as I make my way into investing myself. 

    I'm new to this. As a new wholesaler, how can one overcome the stigma of the trade and establish trust with the investor? Should I present them with my estimated repair costs, ARV, sale price? Or should I just send them the facts about the property as-is and a price?

    21Reply
  • Nate Sanow
    I​nvestor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Ruby Ruiz

    I wholesale some but am beginning to do it more and more from a place of basically passing up on deals that I’ve already ran numbers on as if I were to buy. I’m decently close & accurate because I also buy deals. I also want long term relationships with people so I don’t fudge numbers. I agree with the other comments 90% of wholesale numbers tend to be inflated but good ones are out there. I actually want to buy more from wholesalers in the future.

    6Reply
  • Ruby Ruiz
    OP
    Investor · San Antonio, TX · Member since 2020 · 84 posts · 69 votes
    5y

    @Ted Sornson Great Question.... any takers??

    2Reply
  • Ruby Ruiz
    OP
    Investor · San Antonio, TX · Member since 2020 · 84 posts · 69 votes
    5y

    @Account Closed You raise a good point, and thats something that can differentiate a "good" wholesaler vs a "not so good one." We should know our clients and send properties based on what they are looking for. 

    5Reply
  • Nate Sanow
    I​nvestor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Ted Sornson

    When new to wholesaling I can say simply put, find a good deal and investors will love you.

    Ok they might not actually say they love you but they will buy. If the deal is a deal and is GOOD.

    Adding in too much about what it’s worth fixed up or what it costs to fix it up is irrelevant for the HOT deal... if it is a hot deal the experienced investors will find you.

    If you get a tight deal that is harder to move, those numbers are handy for the inexperienced investors however 90% of them will pass on your deal and waste your time.

    Also buyers lists in my opinion are becoming an antiquated version of wholesaling and only have value if someone is doing that weird virtual wholesaling stuff where they make offers on properties on the MLS... in my area most of us pass on those and recognize that those are NOT good deals.

    2Reply
  • Alexander Szikla
    Real Estate Agent · New York City · Member since 2020 · 819 posts · 641 votes
    5y

    Some are excellent and some are lackluster - but they can certainly be valuable if you find competent folks to work with. Why not have more eyes looking out for you and canvassing the market?

    6Reply
  • Justin Robert
    Investor · Temple, TX · Member since 2015 · 111 posts · 83 votes
    5y

    @Ruby Ruiz I have yet to find one that produces actual consistent deals and/or follows through. Just on Friday of last week I reached out to one via FB Marketplace who had just posted his hot deal. In order to see the house I needed to sign his company's disclosure forms and then he could meet me as early as Saturday (the following day) to open the door and accept my $5K non-refundable deposit to begin the process of the double closing that I would pay for costs on both sides. I signed the disclosures as soon as I received them and never heard from him again except a few emails since that were clearly automated regarding other properties. I was supposed to be hearing from him as soon as I signed for the packet with information and comps so we could meet the next day. From there it was pure radio silence.

    That is not to say they don’t exist, I just have yet to find one I could buy something from. 

    The majority I have tried to buy from have terrible comps, repair estimates, etc… When questioned, they have no response, ever. Around me, they all seemed to have went to the same guru class. 

    1Reply
  • Dennis Wayne
    Member since 2020 · 339 posts · 356 votes
    5y

    Well I would like working with them to get off market deals but sadly most want to market their piece of junk house for three times what it's actually worth . In my experience They are completely clueless unethical and almost always have a crazy high unrealistic ARV number based on some immaculate home they found on a much better asset across town . It's called comparable for a reason lol . Their arv stands for

    “ absolutely ridiculous value “

    1Reply
  • Brendon Brooks
    Rental Property Investor · Houston, TX · Member since 2017 · 50 posts · 39 votes
    5y

    @Ruby Ruiz

    Good wholesalers are problem solvers for both parties; motivated sellers and investor buyers. They are deal finders and match makers.

    For motivated sellers - they find motivated sellers that may have just been procrastinating their problems so long that they're in a really bad place. They may be so behind on taxes, mortgage payments and or the property can be severally distressed from deferred maintenance and have just been in denial about their position until some one reaches out and says that they may have solution. They can help the seller sell their problem property quickly to help them move on with their lives. Which can be a major relief for them and can lift a huge burden from them.

    For investor buyers - they do all the grunt work pounding the pavement, marketing and talking to potential sellers in precarious positions and work out a great win win cash price that allows room for an investor to get a great deal on their buy and has room for a fee for the wholealers efforts. Many good investors are happy to pay this fee for the efforts of the deal finder. This is not an easy task, however with the right level of competencies and a lot of hustle and persistence a wholesaler can make some cash to hopefully invest in their on REI deals in the long run.

    I believe good wholesalers will give you an accurate estimate of what they know the ARV to be and what they know the estimated repairs to be. However, it is always prudent for anyone buying any deal that they should do their own due diligence. Most wholealers are in a business of building a buyers list, so they are not intentionally out to screw over investors that may be potential repeat customers. Would you? Yes there may be a few inexperienced wholealers that get their numbers off, but any investor worth their salt knows to check their numbers. Remember there are wholealers of all property types and segments within the REI world. Wholesaling is also not even just in real estate either it is found in almost all industries. It's nothing new.

    Although, not every wholesaler is good at what they do nor or are all ethical; this is also the case in most professions. No matter where you go and what you do you have to first protect yourself and do your due diligence.

    11Reply
  • Ruby Ruiz
    OP
    Investor · San Antonio, TX · Member since 2020 · 84 posts · 69 votes
    5y

    @Brendon Brooks good insight, Thank you!

    1Reply
  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    5y
    Originally posted by @Ted Sornson:

    I'm new to this. As a new wholesaler, how can one overcome the stigma of the trade and establish trust with the investor? 

    Disclosure - However that's anathema to most wholesalers.

    1Reply
  • Ruby Ruiz
    OP
    Investor · San Antonio, TX · Member since 2020 · 84 posts · 69 votes
    5y

    @Justin Robert Oh no! so sorry that happened to you, I am happy to connect and see where I can help!

    1Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    5y

    @Ruby Ruiz

    If I could ever meet one that wasn’t shady or had good deals, I might like wholesalers

    1Reply
  • Ruby Ruiz
    OP
    Investor · San Antonio, TX · Member since 2020 · 84 posts · 69 votes
    5y

    @Matt M. Nice to meet you! :) 

    1Reply
  • Joshua Nowell
    Rental Property Investor · New York, NY · Member since 2020 · 24 posts · 15 votes
    5y

    @Tim Bender

    Treating them as a lead funnel versus like a realtor is a great mentality👌

    3Reply
  • Guido Nunez
    Investor · Los Angeles, CA · Member since 2019 · 38 posts · 22 votes
    5y

    @Ruby Ruiz I only work with wholesalers in markets I am knowledgeable about. I won’t buy from a wholesaler within a market I have not purchase beforehand.

    2Reply
  • Ruby Ruiz
    OP
    Investor · San Antonio, TX · Member since 2020 · 84 posts · 69 votes
    5y

    Got it! @Guido Nunez

    0Reply
  • Joshua B Pruitt
    Real Estate Agent · Jacksonville, FL · Member since 2020 · 22 posts · 9 votes
    5y

    @Ruby Ruiz I wish I had positive experiences with wholesalers to share with you. All the ones I’ve talked to refuse to put me on their buyers list unless I can prove that I’ll buy $200,00-$300,00 deals all cash. I literally had a wholesaler tell me to ditch my partner, get a better job, and when I save enough money to give him a call, but there’s plenty of people in line ahead of me. It seems like the only way to get deals through a wholesaler is for their buyers list to go broke, and then maybe they’ll give you a chance.

    1Reply
  • JD Bock
    Investor · North Las Vegas · Member since 2020 · 18 posts · 9 votes
    5y

    @Ted Sornson My suggestion would be to really learn how to calculate ARV, plus estimate rehab costs and think about it from the perspective of the investor/flipper. Find out what would be a great deal for them, considering the risk they take, then add your fee onto that. I personally don't mind everyone in the deal making money, but wholesalers should be fair and understand that they shouldn't try to squeeze everything out of the deal. Flippers take a huge risk by rehabbing and selling. Problems with contractors, changes in the economy during rehab that affect the original estimated ARV, just to name a few. Unless you're dealing with properties in the $800k territory, then take a $5k-$25k assignment fee and you'll likely build strong relationships with some cash buyers that will work with you for years and everyone will prosper.

    6Reply
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