Is wholesaling sustainable?

12 Replies

I just finished wholesaling my first home without cost whatsoever other than $45. I just called a FSBO sign and the roller coaster of emotions started with excitement, fear, sleepless nights, and huge learning curve. Out of this deal I started building my buyer's list, learned more about rehab costs from contractor's themselves and from referring to @J Scott 's books almost every minute I got for help on rehab costs, learned how to secure a deal and assign a contract. All in all, I made $8,500 off of assigning. Which is awesome

BUT, my question that I can't seem to find an answer to here is, how sustainable is wholesaling as a business? I got into REI a year ago and now own three cash-flowing rental homes. In my research, it seems like there was a huge emergence of wholesalers in the last 5-8 years. On youtube, I can't find any wholesaling videos that are dated pre-2008. Is wholesaling only good after bursting of housing bubbles like in 2007?

The reason I ask is, if I decide to get into this full time, with good marketing, systems, and buyers in place, will a wholesaling business work through good and bad times? Or will all these wholesalers disappear once another bubble starts forming?

At the end of the day... Investors are always looking for deep discount deals. I am brand new to the industry and haven't bought or sold any property. 

There are so many houses out there and not enough people to stay on top of it all.

I think Wholesaling is a huge part of the real estate market. I definitely think it is a sustainable business and will be for a very long time.

it makes so much sense.

Manny

Congrats on your first deal Aroldo! As for your question, wholesaling is very sustainable during crashes and specially right after and during bubbles. My company started in Orlando in 2009 after the crash and wholesales between 200-300 homes a year. Our best years were 2010-2013. The reason wholesaling is sustainable if you have the right systems in place is because there will always be people with cash wanting to invest and as the old saying goes buy low and sell high. During low times more people want to buy homes to buy and hold and gain passive income and in a few years have rapid equity growth. Now during those times it is hard to wholesale flips and those investors are the ones who suffer because the prices don't increase. If your model is to only wholesale flips then yes you will struggle during recessions in the market but if you wholesale both rentals and flips you will have a successful business.

@Christian Marin  I never thought about it like that. So we just have to adjust to the times. You mentioned your business was best 2010-2013, does that mean you were wholesaling over 300 properties per year? As of right now, are you focusing more on flips rather than rentals since the times are pretty good or how has your focus changed from 2010-2013?

I appreciate your reply, it helped me see that this is a viable and sustainable business. 

Between 2010-2013 we were wholesaling over 300 properties a year. We have slowed down a little now as the market is changing. Back in those days the market had bottomed out and all the hedge funds came to Orlando and they bought up everything for cheap as they new the market was going to rise. We had a 20% increase in home values in Orlando in 2013. Now it has leveled out as they have left. The days of flipping homes for under $100k and making $40k are also gone. Now rental returns are decreasing and flippers are making a more modest return so we have the best of both worlds right now.

Yes it is sustainable and can be done in any market. Sometimes it is hard to find deals but easy to find buyers. Sometimes it is easy to find deals but hard to find buyers. 

It is not always easy but you can build a sustainable business just wholesaling. Keep in mind there is a big difference between doing one deal (congratulations on that) and doing enough deals to build a business that you can live off of.

@Christian Marin  Great Info! Now off to research hedge funds.

@Ned Carey  Wise words! My goal is to have enough passive income to feed the wholesale aspect of my (future) business during the times when it is hard to find deals or to add properties to my portfolio when it is hard to find buyers. 

I hope I can be as successful as both of you in the near future. Thank you for sharing your knowledge!

Congratulations on your deal!  Thanks for sharing your good news. This inspires new investors to keep working toward their business goals. 

Wholesaling is a business and yes, it is possible to build and sustain a successful wholesale business.  Finding sellers who want and sometimes need to sell quickly is the problem for the wholesaler to solve.  The opportunity is available in any market and during any season. There are investors who want to buy discounted property all the time.  

The art of running a successful wholesale business, in short, consists of persistent marketing and continuous improvement of negotiating skills.  It is the ultimate "middle man" position.   

If you like and enjoy the tasks associated with wholesaling property, chances are high that you will succeed.  Many "would-be" wholesalers fall by the wayside because they simply give up.  It is often said that to wholesale property is an excellent way to get cash quickly.  If that is the primary reason for wanting to wholesale property, it's no wonder that many quit before completing their first deal.  

One can develop the skills and expertise required to wholesale property while actively working on the business.  Marketing, knowing an area well, an understanding of rehab or upgrade costs and contracts are some of the tasks involved in the wholesale business.  It is through the process of becoming better at delivering the service you provide to others that brings the monetary reward you seek.  

Go out and build the best wholesale business you want. The investors are waiting for your next deal!

If you can wholesale, you have options! You don't have to assign away every deal you lock up for a one-time payment.  We all need the ability to find deals at steep discounts.  That is the core of what we do, whether it be to fix and flip or buy and hold or assign.  I do not keep everything I come across.  Upper-end homes do not work for rentals and I do not renovate to the standards of that retail buyer.  Wholesale it is!  My point is, if you are able to wholesale, you are able to fix and flip or buy and hold or whatever your core strategy is.  Multiple options and exit strategies are then available to you.  Wholesaling in not easy and I have great respect for those that do it.  I sometimes scratch my head as to why one would do all that work for a one-time payment at a high tax rate, but I am a long-term cashflow guy at heart.  Kudos to you wholesalers!

@Victoria Winters  Thanks for your motivating message!

@Steve Vaughan  I want to increase my portfolio in regards to my long-term cashflow properties, but I just ran out of cash. Now I'm looking of ways to make money to add to my portfolio and enjoy all the tax benefits of it!

@Christian Marin

What approach did you take to help you locate potential homes for wholesaling?  I am just getting into wholesaling and would appreciate any info on how to locate good deals out there......I already have a good list of buyers in my area who focus on buy/hold.  Thanks in advance!!!

You mention YouTube videos pre 07/08, but really youtube wasnt that big back then.

I have been wholesaling for 6+ years. It has been a core part of my business. We have recently been transitioning into rentals and flips.

If you can wholesale consistently and succede IMO you have a great grasp on the mechanics of your local market.

Good luck!

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