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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  • John Corum
    Rental Property Investor · Ailey, GA · Member since 2019 · 33 posts · 9 votes
    5y

    @Ted Sornson send all of that but tell them how you came up with the estimate. ARV can be tricky. Even three appraisers will give three different appraisals. If your are within 10k either way whats it matter? Buyers are taking that risk anyway because anything can happen to the market while under rehab. Don't always try to make 20k on a deal that you know only has 30k for your buyers after holding cost and repairs. Just be fair and honest. Be transparent and show your buyers you have their best interest in mind.

    1Reply
  • John Corum
    Rental Property Investor · Ailey, GA · Member since 2019 · 33 posts · 9 votes
    5y

    @Ruby Ruiz I think I bumped into you on Facebook the other day. The pros to working with wholesalers is no one person knows every buyer in any one market. Your company has deals, I have strong buyers for some of your deals. I can not present those deals to my buyers because yall don't work with us unless we are disposing a deal to yall. As a wholesaler i like working with other wholesalers. It gives me a chance to coach the new comers on how to know a deal, sell a deal, and or structure a deal to make it appealing. Even though I cant sell your deals I'd like to connect because I know there is value in every connection.

    1Reply
  • Chuks Erinne
    Rental Property Investor · Atlanta, GA · Member since 2017 · 221 posts · 188 votes
    5y

    @Ruby Ruiz when you change the way you look at things, the things you look at change.

    1Reply
  • TyJuan Lewis
    Flipper/Rehabber · Olathe, KS · Member since 2020 · 2 posts · 0 votes
    5y

    @Chris Poitivient

    you make a very valid point!

    0Reply
  • Troy Weaver
    Member since 2020 · 20 posts · 28 votes
    5y

    @Chuks Erinne that's deep and very true.

    1Reply
  • Raven Walker
    Specialist · Clementon, NJ · Member since 2016 · 67 posts · 18 votes
    5y

    @Ruby Ruiz being a wholesaler myself. It’s a toss up! I know that I have certain tools to do my job better and I also know I do a good job pulling comps and repairs. These are words that came from my repeat buyers. I also study the markets I’m in. I rather not put out a bad deal because that makes me look bad. Lol sometimes my “competition” complicates my job because we’re contacting the same ppl and if I’m not before them, I’m pretty much cleaning up their mess which makes my job harder. But if you are considering working with a wholesaler, allow all of them to bring you deals, evaluate them yourself. And when you find one that is most accurate and consistent, build a relationship with them. I personally only work with about 4 big buyers in my market. I know what they want, I guess you can call it low hanging fruit but I also rather only work with buyers I know are gonna close. Just like some wholesalers are trash, so are a lot of buyers.

    0Reply
  • Doug Pintarch
    Rental Property Investor · Harrisburg, PA · Member since 2018 · 369 posts · 406 votes
    5y

    @Inessa Stysis  Great post. Your thoughts about "How" wholesalers should be towards investors makes perfect sense, no handholding, it's on them.

    As a buy-and-hold STVR investor I am totally ambivalent towards wholesalers, but as our investment goals change in the coming years who knows if we'll use them? 

    0Reply
  • Josue Rosario
    Real Estate Agent · Tampa Bay Florida · Member since 2017 · 13 posts · 4 votes
    5y

    I feel a good wholesaler is one that understands the needs of the seller and the needs of the investor and uses that information to package a win-win deal.  What you are seeing currently on this market as of 12/2020 is that everyone is hot and heavy about maximizing profits because the market is "hot" and is "ok" to overpay for deals.  Savvy investors who are on the grind and KNOW what it takes to turn a property around will see a wholesalers' evaluations and know whether or not the person behind the evaluation knows their stuff.  

    I have done wholesale deals in the past and continue to be open to the idea. However, if you are a wholesaler and I see a trend of inaccuracy in the deals I am receiving from you, you best believe I am unsubscribing and sending you to the spam box. I just don't have time to waste.

    Pro Tip:

    If you're a wholesaler, spend time in the field. Don't be a "behind the screen real estate investor". Markets change, and for that reason, you need to spend time with landlords, Flippers, Realtors, Lenders, Insurance Agents, Contractors and gather information to help you craft the best deal possible. Know the cost of material, know the current hard money rates and fees in your area, know the labor cost, know rental rates, supply and demand, zoning restrictions, etc.  

    For example: In my extremely competitive market (Tampa, FL) there are sections in which if a window is replaced, the new windows must be "impact" or hurricane resistant windows in order to be code compliant due to the property's proximity to the coast. Impact windows are substantially more expensive than non-impact windows. Knowing little bits of information like this will help you achieve a more accurate repair estimate.

    I hope this helps.  

    0Reply
  • Jacob Martin
    Investor · Asheville, NC · Member since 2018 · 15 posts · 15 votes
    5y

    @Ruby Ruiz I love wholesalers. I’m perfecting fine with the extra fee if the deal still hits my criteria. A good deal is a good deal, having someone bring that deal straight to your inbox is an excellent method as they are usually using quite costly off market techniques to source those deals. I look at the fee as an indirect marketing cost upcharged for saving you a lot of time and energy from having to source that yourself. With that said, I would spend the time on proper due diligence on vetting that wholesaler’s track record, however.

    0Reply
  • Andre TaylorPro Member
    Rental Property Investor · Chicago, IL · Member since 2017 · 221 posts · 181 votes
    5y

    I dont like the wholesalers who provides inaccurate numbers and have no sense of the market.

    0Reply
  • Ruby Ruiz
    OP
    Investor · San Antonio, TX · Member since 2020 · 84 posts · 69 votes
    5y

    Thank you all for sharing, this has been a very insightful conversation. Listening to everyone's perspectives gets me excited to continue building my client list and deliver only the best opportunities!

    1Reply
  • Hayden Lyon
    Rental Property Investor · Fort Worth, TX · Member since 2016 · 31 posts · 20 votes
    5y

    I have nothing against the Wholesale model as I think it’s a great way to get started and can be tremendously successful as you scale. While I’m on a couple distribution lists, I’ve personally never purchased from one simply because the spread wasn’t there and none have ever met my buying criteria. Like most will advise, don’t take any numbers provided at face value. I’ve seen several properties come across my inbox with flat out wrong comps and estimates. Due diligence is key!

    My issue is most often with unethical behavior and complete misrepresentation to the seller/listing agent when getting to or going under contract. I’ve lost deals because the seller was told one thing, but turned out to have a different experience. At the end of the day, the seller gets their money, wholesaler makes their money, and buyer gets a “good deal” so maybe I’m just sour grapes!

    0Reply
  • Aaron Gordy
    Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes
    5y

    Yeah sure I will work with a wholesaler if its a good deal and the person bringing it is solid. Some have the reputation of being slimy, no doubt. Real Estate doesn't have to be slimy to make money and become wealthy. I will buy a deal or pass it along to a client if it seems solid but i don't do slimy deals.  

    0Reply
  • Cindy Lind
    New to Real Estate · Denver, CO · Member since 2020 · 3 posts · 0 votes
    5y

    I'm a new wholesaler in the Denver area. It's interesting to read these posts! I think it's very unfortunate that some wholesalers have participated in unethical practices! Overall, the goal should be to find solutions for home owners who are in difficult situations and match them with the right buyer to solve their problem.  Adding value to each scenario so everyone comes out happy is my game plan!

    0Reply
  • Dan Powers
    Real Estate Agent · Philadelphia, PA · Member since 2020 · 294 posts · 245 votes
    5y

    @Steve K. I can definitely provide some clarity on our process as it has definitely changed in the time you last felt with us. Now each office does things a little different so I'll tell you how things are done here in Philly.

    When a property becomes available I provide all the information up front, everything you'd want to know: price, arv, rehab needed (not the cost of rehab, but what's needed), comps, closing details, everything that you'd need to help make the best informed decision. The only time you're paying 10k is when you're ready to move on a property because that is the down payment needed. 

    I would say there's a 90/10 split of our inventory between off/on market, with 90% being off market. Now the 10% that does slip through the cracks of the MLS we always acquire below the list price so you'll never see a property listed for 100k and us selling for 110k. You would see 100k listed, 85k with us.

    We do not work with any contingencies such as finance or inspection, but, we will not close on a property if title is not clear. We do not have a $200/day thing that you are talking about, but our close dates are strict because they are not decided by us, there by the seller. 

    Also in the Philadelphia market we do not work on doubles closes which ensue the double closing costs, we work on assignment contracts since the transfer tax in Philly is 4.28% and if we did a double close that transfer tax would kill the buyer and eat up the margins.

    I hoped I was able to shed some light on our processes up here in Philadelphia. If you want to reach out and discuss more certainly reach out and lets connect.

    Dan Powers - Real Estate Agent

    0Reply
  • Ruby Ruiz
    OP
    Investor · San Antonio, TX · Member since 2020 · 84 posts · 69 votes
    5y

    @Aaron Gordy Well said!

    1Reply
  • Drew Poniewaz
    Investor · Saint Louis, MO · Member since 2014 · 101 posts · 16 votes
    5y

    @Ruby Ruiz. I love working with good wholesalers that bring me good properties in St. Louis. I don’t want to look for them. I’ll gladly pay an assignment fee as long as it fits my model.

    0Reply
  • Marlon Lacayo
    New to Real Estate · San Diego, CA · Member since 2020 · 19 posts · 21 votes
    5y

    New investor here!

    I'm trying to figure out my first path. I have a full time job and I'm saving about $2K a month. Trying to decide between flip, wholesale, and rentals.

    It sounds like wholesale might be a good route with minimal risk where I can learn analysis and presentation and help build capital.

    Any opinions on wholesaling as a first option?

    0Reply
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