Arnold, MD · Member since 2014 · 28 posts · 7 votes
As a new investor, I'm trying to gather as much info as possible before I jump into the wild. Reading these posts have been great but as I get further into the notion of wholesaling the natural question has popped into my head. Why would an investor want to buy from a wholesaler at a marked up price, why wouldn't they just buy from the source? What benefits does buying from a wholesaler provide? Save in time/sanity?
Sorry if this sounds like a remedial question but I'm curious as to the answer.
Realtor · Albany, OR · Member since 2014 · 128 posts · 30 votes
12y
I too am new to the real estate investing world and I have done a lot and a ton of reading. :) I am interested in starting with wholesaling and learning from that to move to my next step. I have read blogs/articles that are positive and negative to wholesaling. Mostly positive, but there were those investors that state they do not want to deal with wholesalers. In my opinion, we all have to start some where and at some point everyone is a beginner, so being new, it does make me a little nervous to think about starting as a wholesaler. But on a positive note, my readings have taught me that there are investors out there that will work with a wholesalers to get a great deal. I think as long as the wholesaler does the deal correctly, it does save an investor time so they can move on to their next deal... and that is my goal... dedication and determination to get the deal done and succeed!
Thanks so much for the response. You sort of confirmed my thinking on the subject, just wanted to get someones opinion that has experience in the matter.
Real Estate Agent · Tampa, FL · Member since 2009 · 456 posts · 123 votes
12y
The wholesaler might be better at negotiating (ie maybe the wholesaler got the property for 10-20k less than what the investor would have been able to negotiate.)
Or you could just be paying a middleman fee for no actual added value. It depends on the situation.
Secaucus, NJ · Member since 2014 · 32 posts · 7 votes
12y
I cold call to grow my buyers list. Many of the potential buyers I deal with are either:
1) Not so smart that they would or could do what I am doing on their own. Some are immigrants, their families own a property, they are looking for others but don't have the wherewithall to do research, comps, etc.
2) Focused on managing their current portfolio and do not have the time to find the properties.
Even if they could find the same property on their own I supply them with:
Comps
Photos
Repair Estimates (if available)
And all of the finds aren't available on MLS and are also at least 70% ARV, so they are getting great stuff IMO.
Realtor · Albany, OR · Member since 2014 · 128 posts · 30 votes
12y
Hi Paul! WOW... its great to read a positive post from an experienced investor. Its good to know that investors can appreciate wholesalers instead of saying they are a burden in this business.
Hi Paul! WOW... its great to read a positive post from an experienced investor. Its good to know that investors can appreciate wholesalers instead of saying they are a burden in this business.
Good wholesalers, who know what constitutes a deal, are a valuable asset.
Unfortunately, good ones are in the minority, probably because too many people think they can do it with no money, no knowledge and no effort.
Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes
12y
Reasons as other people have mentioned are typically, the rehabber doesmt have the time or expertise to get the deals.
Although our focus is buy rehab and sell, we wholesale quite a few to other rehabbers who dont have the time or skill to consistently find deals. We have a system in place to consistently find deals, it is time consuming and you have to be good at it if you want to do well.
Fyi, I have also bought two wholesale deals from another rehabber, one was my most profitable deal in 2013. If the numbers work I am happy to buy from a wholesaler.
But to be honest although I have been approached by many "wholesalers" none ever brought me a workable deal.
Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
11y
If you can find a good wholesaler that can find good deals and give you houses with a lot of meat they will be a tremendous asset to your business.
Just on the practical money side of the "I can just do that myself" argument:
Let's say as a rehabber a Wholesaler brings you a deal you are willing to pay $100K for and they offer it at $100K. They have it under contract for $95K hence making a $5K assignment fee on the deal.
However to find this deal they purchased a list of 1,000 names and sent them direct mail. Amortizing the cost of the list and using 1st class postage they are running about $1/letter for simplicity. This deal came after the 3rd mailing.
So they spent about $3K to make that $5K. This is putting a $0 value on the time and effort to get the mail out, to field all the calls (most of which are useless), going on however many appointments needed to vet out any other promising leads, making the comparable and repair estimates to determine value, negotiate the price with the seller and get it under contract and finally market it to the end buyers.
Going direct you only get out of the marketing to a buyer step.
If you put much value on your time one can easily argue that you actually save money in this case by buying form the wholesaler (If you bought it form the seller for the $100K you are willing to pay).
Of course you can just as easily make up an example of a guy throwing a "We Buy Houses" add on Craigslist getting a place under contract and selling it for a $20K profit without ever even seeing it......
Houston, TX · Member since 2014 · 22 posts · 5 votes
11y
@Corey Demuth @Timothy J. @Shaun Reilly
(and others): Thanks so much for sharing based on your experiences. As a newcomer, it is extremely valuable for me to understand what active investors look for when a deal is presented by a wholesaler.
In addition to comps, improvement estimates, photos and estimated monthly cashflow / spread (based on an assumed purchase price), what are other pieces of key information that an investor would expect when approached with a potential deal?
Also, I would appreciate your thoughts on how you prefer to be approached-- for instance, would you rather be
(1) provided a list of properties under contract with accompanying key info or
(2) asked up-front for your selection criteria to direct a wholesaler's efforts?
Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
11y
A wholesaler who knows the values in the markets they farm, wraps properties up with good contracts, knows the features (good and bad) of their inventory and offers those properties at a price at which I can turn a profit is a valuable resource. I have purchased two properties from a wholesaler and will be happy to purchase many more. I made money on the first. The second one is still under construction but I expect that will also be a profitable deal.
The corollary is that a wholesaler who expects me to do their due diligence and offers properties they do not know or do not have locked up at prices above the market are a waste of my time. Their e-mails are quickly relegated to the junk folder.
Aubrey, TX · Member since 2014 · 37 posts · 12 votes
11y
That has been my experience here in Dallas. The wholesale deal sale price is at or above the area comps. Still trying to find that experienced wholesaler that leaves some "meat on the bone". I believe that once I find two or three good wholesalers they will keep me busy.