Startup costs and time to profitability for new wholesaling operation???

Question

I'm burnt out on my job and want something flexible / where I can be remote, and been thinking about wholesaling for a year or so now. I know that technically speaking you don't need much capital to start wholesaling - but how much capital is recommended if you want to start with software / automation services and marketing of reasonable quality? And if two hardworking, relatively savvy people go all in on the venture, how long to modest profitability, like say 10k / month?

I'm an attorney and have familiarity with real estate law, contracts, negotiation, and practice has included construction defect litigation. So, coming from a place with relevant knowledge and skills, and no stranger to hard work - but zero network in the real estate industry, would be building from the ground up with my wife. Thinking of focusing on 2 markets we know, Denver metro and Vegas.

David Ramirez · Answer

Hey @Thomas Cantley,

If it helps as a starting point I do 2 deals per month and spend around 7k a month on marketing with a profit margin of 60% because we keep our team very lean cause we have only been doing this for close to a year. Your conversion rate and profitability depends highly on your sales and communication skills.

Feel free to reach out with any questions!

Good luck

Ben Einspahr · Answer

@Thomas Cantley before dropping your reliable (though stressful) W2 and going all in on something you do not have any experience in... I would leverage your W2 to qualify for traditional financing and house hack. There is an immediate boost of ~$1000/month in savings plus a future rental.

Grind it out at your W2 to do this 3-4 times over the next 5 years, reevaluate your goals then make a move. Your cashflow from your HH's turned rentals and net worth growth will give you much more flexibility.

Pros

-Less capitol to get started

-Much less risk.

-Higher success rate of successful HH'er vs. wholesalers

-Higher ROI

Happy to send some case studies to put some context to it. Let me know!

Best of luck

Don Konipol · Answer

Based on my “gut” feel, I’d say to have a shot at six figure net in a reasonable amount of time you’d need to start with $100,000. Most of the successful wholesalers I know spend $10,000 monthly on marketing. Heck, a good on going SEO program costs about $2500 + monthly. Add SEM, tele marketers, general advertising, transportation, list or program rentals, software, social media platform time and it adds up quick.
For the serious business operator, there is a way to separate yourself from the armies of people who fancy themselves as "wholesale" investors and muddy the waters. The way is to actually close on a purchase in your name, and then flip the property for a profit. This eliminates having to find an end buyer within a limited time frame, enable you to hold out for the best price thereby earning a greater deal spread, enable you to expose the property to a much bigger market via MLS, and allow you to offer a fast, fast close while your competition is offering a 60-90 day closing.
A modified version of this is to use options, placing money at risk for the right to purchase the property at a predetermined price for a specific length of time.
Obviously, actually buying the property before you have a buyer lined up does not allow for an inexpensive exit should you have incorrectly evaluated the property value. But in my opinion to be a wholesaler you need to buy the property at a wholesale price and resell at a greater price. If you merely tie up the property via a contract for purchase and then sell that contract at a greater price, you are brokering, not wholesaling. And you will be limited to brokering “commissions”, if that’s the case why not just get a brokers license and be able to “list” those that don’t want to have you “wholesale” their property?

Bill B. · Answer

Assume it’s like any business. Then assume 90% of new businesses fail in first five years. So there’s a 90% chance that no amount of money is enough. You are trying to take business from someone already doing it. That’s not going to be easy or necessarily possible.

If you were already working as an assistant to a wholesaler for a year or two. You were involved in 80-90% of the business, not just one area. Maybe that rises to 50/50? I bet a survey on BP about number of people tried wholesaling and the number who succeeded using it as their only source of income is probably closer to 1-2%.

Thomas Cantley · Answer

Thanks everyone for the responses

Startup costs and time to profitability for new wholesaling operation???

Startup costs and time to profitability for new wholesaling operation???

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