Wholesaling Can Get You Into Trouble

[Ken M.]

Just a quick note to make people aware, if you do wholesaling the wrong way, you can get into big trouble.

Everybody has been told that wholesaling is an easy, no cost way to getting into real estate. Well, I've seen a lot of "wholesalers" come into the market all bright and cheery eyed, only to leave as broke as they entered, just like the 80% of agents who never sell anything. Here are some of the reasons

1. It's work and takes months to get a payoff, if you do it correctly. No payoff at all, if you do it wrong. It isn't so easy to begin with.

2. You have no credibility, no one knows you and you don't know how to sell and they won't buy from you.

3. You don't know a good wholesale deal when you run into it.

4. The first three will leave you broke, but this one will get you into trouble: You try selling a property and you're not a licensed real estate agent. Unlicensed people are not allowed to sell properties and represent sellers.

Think that one through . . . . . . . . . . . . . . 

5. What you are allowed to do, is to sell your contract. Now, what does that even mean? Hmmm?? Yes, there is a difference. 

Know the rules and stay out of trouble.

[Jay Hinrichs]

Quote from @Don Konipol:

Quote from @Joseph Nwani:

Thanks for your response, @Don Konipol. I really appreciate the perspective you shared about commitment and passion in real estate. It definitely made me reflect on how important it is to truly understand the industry rather than just chasing opportunities. My question is: how does someone new to real estate discover their niche? I’m genuinely interested in getting into the field, but since there are so many areas—investing, wholesaling, property management, development, and more—I’m trying to understand the best way to explore them and find where I fit best. I’d really value any advice you might have on how beginners can learn the different sides of the business and identify the niche that suits them.

Study real estate principles, real estate law and real estate financing first.  As you discover the various roles you can play in the real estate field, one or two will get you excited (if real estate industry is for you).  Pursue these and related sub “niches”.  

My first entree into real estate was as a VERY small investor just out of grad school.  This investment was sold when I accepted a job in Switzerland. After 3 years I decided to enter the real estate field as a commercial real estate broker.  Two years building savings and credit, and I was into real estate investing more or less full time.  Still brokered some deals, but considered my main occupation investing, not sales or brokerage.

All during this time I was pursuing education.  Study for brokers licenses in 3 states; I had taken 4 real estate classes in college and grad school, now I audited more advanced classes for no cost as an alum; took two classes given by the CCIM institute; read probably 200 real estate books.  At one point I was attending 15 commercial real estate networking event monthly.  

For someone wanting real estate INVESTMENT as a full time career, starting as a broker is NOT the best way to start.  I would have been better off starting going to work for a REIT, but the salary that I was offered paled in comparison what I could earn as a broker, and, unfortunately I let that influence my decision.  I still haven’t closed the gap to what experience and knowledge I forwent by making that decision. 

ON a practical side vis a vi wholesaling.. what is often not mentioned is the capital it REALLY takes to make any kind of money.. those that are successful with wholesaling and to me that means 100 to 200k net a year at least.. have budgets of 10 to 30k per month for outbound marketing.. they have a person dedicated to pouncing on the leads day one and they have someone for dispo. trying to do all this by ones self with little to no training or knowledge I cannot think of something tougher.. most will lack basic sales skills ( how to close a deal verbally) They wont have the time to chase all the leads down visit the homes figure out if the home is in need of massive repairs etc.. Then the knowledge to take a funky title property through the closing process.. 

In addition to me you spend all this time but you dont really build a clientele base with sellers.. your one and done with the sellers your not going to get referrals from sellers.. So you only as good as your new and constantly marketing.  As opposed to building a business in RE through sales agent or mortgage broker or commercial agent. these business's create referrals and referrals is how we make our money 10 years down the line.

Lastly many states are really cracking down on this activity and are implementing pretty stringent disclosure laws. Oregon for example you need a Wholesalers license that requires a bond and full disclosure on all out bound marketing.