Correcting the Top 10 Mistaken Beliefs About Wholesaling
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesCorrecting the Top 10 Mistaken Beliefs About Wholesaling
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Investor · Tampa, FL · Member since 2019 · 1k+ posts · 1k+ votes
2yQuote from @Account Closed:
Quote from @Don Konipol:
1. It’s WHOLESALING, not WHOLE SELLING
2. It’s a job/business, not investing
3. You CAN’T be successful doing it without capital
4. “Driving for dollars” is not a viable strategy; the people successful at wholesaling spend $10,000 + monthly on marketing
5. You need to know real estate principles, real estate law, and real estate finance. None of these subjects are taught by wholesaling gurus
6. You can’t be successful part time; it requires a full commitment.
7. In most common methods of wholesaling you are NOT a principal, you are an intermediary.
8. The law is not on the side of the wholesaler; states are attempting various ways of limiting wholesalers profitability.
9. Only a small minority of people getting involved in wholesaling are in any way competent
10. Wholesaling does NOT lead to investing, studying real estate finance, principles and law and working for an investment real estate company leads to successful real estate investment.
And yet another, recording a memoradum of purchase agreement to cloud title and then not releasing the memorandum in order to hold the property hostage for a fee, is a serious legal issue.
And another, signing a purchase and sale agreement without the intent or ability to close, is fraud.
And another, in some states now, you have to disclose, in writing to the seller, that you are not the end buyer or be fined with a hefty fine.
These may get glossed over by the "community" but they are starting to be cracked down on in a bunch of states. There are new laws being implememented in some states as well.
Hey Ken, I agree with you on people doing business the wrong way, just like in the creative side with people not properly disclosing how liable the seller is in a sub-to transaction.
There are indeed people promoting a property instead of the contract, which they do not have the right to do so. You can include a marketing clause in the purchase and sale agreement that will give you the rights to promote the property, which is the right way to do it.
Unfortunately, memorandums are a necessary tool for our business because we usually work with very distressed property owners who might go for a higher offer even after executing an agreement. The right way to do it is by adding to the paperwork a copy of the memorandum that will be recorded with the county, and also the release to ensure the sellers know they have to get a receipt of the release if a cancellation happens and it's approved by both parties. I don't always fill them, but sometimes it is indeed necessary.
I agree with not signing a purchase agreement without the intent to close. I started out flipping and then transitioned my business to wholesaling so I can easily close on any transaction if I have to.
I don't like the bad reputation that wholesaling has because of people jumping into it with no idea or understanding of best practices, but hopefully, with regulations, we can clean out the bad ones.
12 Replies
- Investor · Tampa, FL · Member since 2019 · 1k+ posts · 1k+ votes2y
Love it! I 100% agree with all of your points. This is what I preach on the forum every day!
"Only a small minority of people getting involved in wholesaling are in any way competent." This is thanks to the gurus who make it seem easy.
- Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes2y
Quote from @Account Closed:
Right on @Don Konipol: And another big one is that advertising a property for sale that you don't own, is called "being a real estate agent". Most of them are selling the property, not the paper. There's a Big Difference in the eyes of the authorities.Quote from @Don Konipol:
1. It’s WHOLESALING, not WHOLE SELLING
2. It’s a job/business, not investing
3. You CAN’T be successful doing it without capital
4. “Driving for dollars” is not a viable strategy; the people successful at wholesaling spend $10,000 + monthly on marketing
5. You need to know real estate principles, real estate law, and real estate finance. None of these subjects are taught by wholesaling gurus
6. You can’t be successful part time; it requires a full commitment.
7. In most common methods of wholesaling you are NOT a principal, you are an intermediary.
8. The law is not on the side of the wholesaler; states are attempting various ways of limiting wholesalers profitability.
9. Only a small minority of people getting involved in wholesaling are in any way competent
10. Wholesaling does NOT lead to investing, studying real estate finance, principles and law and working for an investment real estate company leads to successful real estate investment.
And yet another, recording a memoradum of purchase agreement to cloud title and then not releasing the memorandum in order to hold the property hostage for a fee, is a serious legal issue.
And another, signing a purchase and sale agreement without the intent or ability to close, is fraud.And another, in some states now, you have to disclose, in writing to the seller, that you are not the end buyer or be fined with a hefty fine.
These may get glossed over by the "community" but they are starting to be cracked down on in a bunch of states. There are new laws being implememented in some states as well.
Ken, your analysis is spot on, as usual. In a way wholesaling is a lot most things, it CAN be done, by people with the knowledge, experience and access to capital to do it successfully (like subject to!). But you just don't learn enough, let alone have enough experience to to it correctly and successfully from just taking a guru seminar, or buying a mentorship.
I'm constantly amazed by what the naive will spend for a program run by a marketing professional with limited real estate experience and then refuse to spend a penny with someone who has done it for the last 20 years. The conclusion I've drawn is that the major "skill" of the nationwide "guru" is an ability to tell the naive wanna be real estate newbie EXACTLY what he wants to hear, although it just isn't anywhere near reality. Then when you inform the newbie of the reality of dong subject to transactions, or I inform them about the pitfalls of originating hard money commercial loans, they accuse us of being bias, killing their dream, "hating" them, etc.
When I hear about some of these deals people being "mentored" by some well known guru are attempting to put together, I know by experience that there's a 90% chance it ends up in court. And that's when all the dubious legal basis and opinions their transaction is based on come tumbling down.
- Investor · Tampa, FL · Member since 2019 · 1k+ posts · 1k+ votes2y
Quote from @Account Closed:
Right on @Don Konipol: And another big one is that advertising a property for sale that you don't own, is called "being a real estate agent". Most of them are selling the property, not the paper. There's a Big Difference in the eyes of the authorities.Quote from @Don Konipol:
1. It’s WHOLESALING, not WHOLE SELLING
2. It’s a job/business, not investing
3. You CAN’T be successful doing it without capital
4. “Driving for dollars” is not a viable strategy; the people successful at wholesaling spend $10,000 + monthly on marketing
5. You need to know real estate principles, real estate law, and real estate finance. None of these subjects are taught by wholesaling gurus
6. You can’t be successful part time; it requires a full commitment.
7. In most common methods of wholesaling you are NOT a principal, you are an intermediary.
8. The law is not on the side of the wholesaler; states are attempting various ways of limiting wholesalers profitability.
9. Only a small minority of people getting involved in wholesaling are in any way competent
10. Wholesaling does NOT lead to investing, studying real estate finance, principles and law and working for an investment real estate company leads to successful real estate investment.
And yet another, recording a memoradum of purchase agreement to cloud title and then not releasing the memorandum in order to hold the property hostage for a fee, is a serious legal issue.
And another, signing a purchase and sale agreement without the intent or ability to close, is fraud.And another, in some states now, you have to disclose, in writing to the seller, that you are not the end buyer or be fined with a hefty fine.
These may get glossed over by the "community" but they are starting to be cracked down on in a bunch of states. There are new laws being implememented in some states as well.
Hey Ken, I agree with you on people doing business the wrong way, just like in the creative side with people not properly disclosing how liable the seller is in a sub-to transaction.
There are indeed people promoting a property instead of the contract, which they do not have the right to do so. You can include a marketing clause in the purchase and sale agreement that will give you the rights to promote the property, which is the right way to do it.
Unfortunately, memorandums are a necessary tool for our business because we usually work with very distressed property owners who might go for a higher offer even after executing an agreement. The right way to do it is by adding to the paperwork a copy of the memorandum that will be recorded with the county, and also the release to ensure the sellers know they have to get a receipt of the release if a cancellation happens and it's approved by both parties. I don't always fill them, but sometimes it is indeed necessary.
I agree with not signing a purchase agreement without the intent to close. I started out flipping and then transitioned my business to wholesaling so I can easily close on any transaction if I have to.
I don't like the bad reputation that wholesaling has because of people jumping into it with no idea or understanding of best practices, but hopefully, with regulations, we can clean out the bad ones.
- Investor · Tampa, FL · Member since 2019 · 1k+ posts · 1k+ votes2y
Yes, I'm aware of that. Here in Florida, it is not illegal, but there are regulations that you have to follow for the county to accept them. I keep escrow open with EMD to make sure we can enforce our contract in case the seller stops communication out of nowhere.
Yes, I agree with the licensing part. I'm actually licensed myself.
Regulations would mean a higher entry level, which means that all the bad apples will be weeded out and I'm all in for that! - 2yManny VasquezBusiness MemberReal Estate Agent · Orange County · Member since 2022 · 318 posts · 293 votes
Quote from @Don Konipol:
1. It’s WHOLESALING, not WHOLE SELLING
2. It’s a job/business, not investing
3. You CAN’T be successful doing it without capital
4. “Driving for dollars” is not a viable strategy; the people successful at wholesaling spend $10,000 + monthly on marketing
5. You need to know real estate principles, real estate law, and real estate finance. None of these subjects are taught by wholesaling gurus
6. You can’t be successful part time; it requires a full commitment.
7. In most common methods of wholesaling you are NOT a principal, you are an intermediary.
8. The law is not on the side of the wholesaler; states are attempting various ways of limiting wholesalers profitability.
9. Only a small minority of people getting involved in wholesaling are in any way competent
10. Wholesaling does NOT lead to investing, studying real estate finance, principles and law and working for an investment real estate company leads to successful real estate investment.
Wait???? What???....the whole time I thought it was "HOLE Selling" :)
- Lender · Dallas, TX · Member since 2017 · 100 posts · 57 votes2y
Nice to see some competent talk surrounding the subject. Demonized by some, and a get rich quick for others.
For those of us that are licensed and operate within the guidelines, properly disclose, and set the proper expectations, wholesaling at its very essence is problem solving.
- Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes2y
Quote from @Don Konipol:
1. It’s WHOLESALING, not WHOLE SELLING
2. It’s a job/business, not investing
3. You CAN’T be successful doing it without capital
4. “Driving for dollars” is not a viable strategy; the people successful at wholesaling spend $10,000 + monthly on marketing
5. You need to know real estate principles, real estate law, and real estate finance. None of these subjects are taught by wholesaling gurus
6. You can’t be successful part time; it requires a full commitment.
7. In most common methods of wholesaling you are NOT a principal, you are an intermediary.
8. The law is not on the side of the wholesaler; states are attempting various ways of limiting wholesalers profitability.
9. Only a small minority of people getting involved in wholesaling are in any way competent
10. Wholesaling does NOT lead to investing, studying real estate finance, principles and law and working for an investment real estate company leads to successful real estate investment.
I agree that “Driving for dollars” is not a viable strategy. Being constantly aware of your surroundings so you don't miss out on opportunities should become part of an investor's DNA but it's not a repeatable strategy to grow a business. I disagree that to be successful you have to spend $10K per month on marketing. If an individual idea of success is $1M per year- then yes $10K on marketing. If their idea of success is only $100K per year then.....
I disagree that one cannot be successful part-time & it requires a full-time commitment. Again it depends on how one defines success. I assess that whether full or part time to be successful one has to invest in systems to manage the business when you're not or unavailable. Those systems once in place must work on autopilot.
- Wholesaler · Member since 2024 · 99 posts · 39 votes2y
Quote from @Ali Radoncic:
Nice to see some competent talk surrounding the subject. Demonized by some, and a get rich quick for others.
For those of us that are licensed and operate within the guidelines, properly disclose, and set the proper expectations, wholesaling at its very essence is problem solving.
I agree. The only ones who have issues with some of the regulations are the ones who are looking to still be sneaky in my opinion. I am excited for the new rules because my business will adapt.
- Wholesaler · Member since 2024 · 99 posts · 39 votes2y
Quote from @Crystal Smith:
Quote from @Don Konipol:
1. It’s WHOLESALING, not WHOLE SELLING
2. It’s a job/business, not investing
3. You CAN’T be successful doing it without capital
4. “Driving for dollars” is not a viable strategy; the people successful at wholesaling spend $10,000 + monthly on marketing
5. You need to know real estate principles, real estate law, and real estate finance. None of these subjects are taught by wholesaling gurus
6. You can’t be successful part time; it requires a full commitment.
7. In most common methods of wholesaling you are NOT a principal, you are an intermediary.
8. The law is not on the side of the wholesaler; states are attempting various ways of limiting wholesalers profitability.
9. Only a small minority of people getting involved in wholesaling are in any way competent
10. Wholesaling does NOT lead to investing, studying real estate finance, principles and law and working for an investment real estate company leads to successful real estate investment.
I agree that “Driving for dollars” is not a viable strategy. Being constantly aware of your surroundings so you don't miss out on opportunities should become part of an investor's DNA but it's not a repeatable strategy to grow a business. I disagree that to be successful you have to spend $10K per month on marketing. If an individual idea of success is $1M per year- then yes $10K on marketing. If their idea of success is only $100K per year then.....
I disagree that one cannot be successful part-time & it requires a full-time commitment. Again it depends on how one defines success. I assess that whether full or part time to be successful one has to invest in systems to manage the business when you're not or unavailable. Those systems once in place must work on autopilot.
I appreciate this analysis.
- 2yJonathan GreeneBusiness MemberReal Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
I like this one the most: 7. In most common methods of wholesaling you are NOT a principal, you are an intermediary.
I like them all, but 7 is one that needs reminding because all of the fakers out there go bursting in with their "I will buy your house for cash" without a cent to their name. If they thought like a conduit or intermediary, the explanation phase would be a lot easier.
No, I am not buying your house. I am your bridge to local cash buyers that I know who are closers. That's why I get paid a fee in the middle at closing. If they started with this, they would have better success.
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