This should probably be a blog post, but thought I'd throw it out here as a question.
I've been busting my butt for 3 years wholesaling and I've managed to do under 10 deals in West Michigan market from 3k-5k assignments each. After listening to a certain guru podcast about setting goals and figuring out how much you need to make per deal to cover your cost per lead and then some to hit your own profit goals per year I realized that I've pretty much been breaking even in my business. I want to break that cycle.
I feel like my market takes a lot of work to get a deal, I can honestly say that now after 3 years of hustling to make deals happen without feeling like a total newb with mailers, bandit signs, networking, being top dog on google yahoo and bing, but I'll see other wholesalers in different markets across the U.S. putting in a similar effort with great work ethic like mine and just churn deals out left and right consistently. I just shake my head and ask myself "Why is it so much harder to do that here... could I do the same if I were over there? Am I just suffering from grass is greener syndrome or is the grass really greener while I'm eating short dried up brown grass trying to survive?"
Side story: In college I did a sales internship with University Directories out of Chapel Hill NC. Great program by the way! We were trained for 2 weeks there how to sell print ads out of the back of our college directories to local businesses back in our college towns. I went to Northern Michigan University in the Upper Peninsula of Michigan in the great city of Marquette MI. Great town, but absolutely DEVASTATING to sell any kind of print advertising (just in general anywhere really, but in particular here) and we finished with about 30k in sales that summer. We didn't hit our goal, but we did well considering our market size and it was 2009 when businesses were tightening their purse strings. Day after day we would report our results for leads, sales calls, and actual sales. Then about an hour later listen to the daily sales call from HQ in Chapel Hill reporting in the Top 10 sales totals from the previous day to give them praise and congratulate them. All these other big market colleges like in Alabama, Ohio, NC, CA, Texas, and so on were absolutely CRUSHING IT! Every day was a 5-10K+ day! If they had 2 or 3 good sales guys at a big college on a good day would report in something crazy like 30k. I even trained with some of these guys, hung out with them, and felt like I was on par with them in sales skills when we would role play our scripts but they were killing it and I wasn't.
My point here is this: I feel like I've been trying to fish in a small pond for far too long. Not only deals in quantity are low and hard to come by, but also the overall amount of equity in houses around here don't allow for 10-15k wholesale deals. Does anyone feel the same in their market? I believe some markets are iffy for wholesaling while others are particularly primed for wholesaling success.
Feel free to disagree. I will always wholesale in my backyard, but now that I've cut my teeth over these past 3 years and come to this realization I will start marketing with the same effort to other cities to actually have a business that makes money and not one that just breaks even.
I definitely agree with you Michael. Some housing markets are easier to wholesale in than others. To me, every housing market has deals to wholesale for one aspect of REI or another(for those seeking residual income, to flip, to lease/option). Usually the issue is finding a genuine cashbuyer. Yes I know its said that if you find a true deal buyers will come but its not always that cut and dry and those that are in the grind wholesaling know it. You'll get the ones claiming to close fast on any deal but everyone has criteria, even if they don't know, which is often the problem. If they only have access to $50K to cover purchase and rehab then they should know that and not be seeking out property in areas of town going for $100K & up. Likely they'd need a partner or sorts and may even benefit from the wholesaler helping them find that source if they'd be upfront. Sure they may be able to secure a loan hardmoney or otherwise but will the 30 days that the wholesaler has the contract for be enough time for their endbuyer to get themselves situated to close. A sizeable issue for many wholesalers is when you come across cashbuyers that you haven't worked with before to entrust that they know how to handle all of the necessities to close in the specified alotted timeframe. All pieces to the puzzle must fit or its no good. Many of them aren't who they say they are and will collapse a deal if you don't have a back-up buyer / plan. Great topic @Michael Lerch .
Have you thought about getting a real estate license? Even with the same approach, it would let you make money from the sellers who are looking to get a retail price.
I love this topic too but for a different reason. I too would like to see some stories from successful wholesalers, I am a buy and hold guy and have been for over 30 years but I have not yet met a wholesaler that has made ANY real money. I have seen people write about making money and I am certain there are a few (very few) that have mad a decent amount of money. I just haven't met anyone.
Making 15 or 20 thousand for a whole year or two is not making any money in my book. Making a thousand or two isn't making enough to bother with so why all the shouting about a way to get into real estate. Most make nothing and actually lose money.
Doing 30 deals in a year and making $30,000 seems like a lot of work for not much pay off. so who out there has a great story to tell about YOURSELF; not some one you have heard about or someone you know.
There's always pros and cons with getting licensed. For me I don't think it would fit my business model from a time perspective. Yes, it opens up other revenue streams, but I believe it would actually distract me from doing what I do best. If there were more barriers that made it hard to wholesale unlicensed I would consider it for that reason, but at this point it doesn't make sense to do that just yet.@Jesse T.
@Mary B. I've definitely had my share of tire kicker buyers. You could sit down with them over lunch, know exactly what they're looking for, serve it to them on a platter and NOPE! For one reason or another whether it be price, cash on hand, or just hubris they don't buy it. I've learned to ask the right questions since then. As I venture into other markets to virtually wholesale I will probably JV with credible wholesalers I know who can get the job done while I learn more about their market and buyers. Seems worth it to me.
@Martin Scherer That's a great point. I do know of a few wholesalers who do make $50k+ a year, but like you said, you have to do a lot of deals to net that in the end. They are also not in markets like mine. They're in metro city areas. The guru's do a great job of selling their systems, but when they talk about their deals and flash their checks they're all higher margin deals in those big cities.
I think we have to take a step back and think about the term "Wholesale" and how that works in other industries. To make money as a wholesale distributor you need VOLUME because you're passing on the profit to the retailer. In our case this is passing it on to the @Martin Scherer investors with over 30 years investing experience to make the big bucks doing buy and hold or flipping. I'm not saying you can't go out and be like Martin here from day 1, but it takes capital, skill, and a little bit of luck from the get go. What makes wholesaling great to start off is minimal investment, gaining experience, and serves as a great entry into the more profitable avenues of real estate investing since you can find great mentors that do buy and hold and flips. Do I think wholesaling the guru way just tying up properties getting started with limited experience is the best way to get into real estate in general? Heck no! It'll always be a local mentor that can do 1 on 1 even if it's another wholesaler.
To go back to the wholesaling and volume point: Are you getting enough deals in your market to hit your volume to actually make money as a wholesaler or just spinning your wheels breaking even or even losing money?
Originally posted by @Michael Lerch :
There's always pros and cons with getting licensed. For me I don't think it would fit my business model from a time perspective. Yes, it opens up other revenue streams, but I believe it would actually distract me from doing what I do best. If there were more barriers that made it hard to wholesale unlicensed I would consider it for that reason, but at this point it doesn't make sense to do that just [email protected] T.
From your website, it looks like you are tailored to people who are close to foreclosure. You may get the occasional person who has equity but a lack of income or an outrageously expensive loan where you can wholesale. However it seems most situations people would not have equity, especially if prices have declined.
Right now the main option you can offer a seller is sell quickly for roughly 3/4 of the property value.
If you were an agent you could set-up what you currently wholesale as a dual-representation for the seller and your cash buyer. For homes over 100K your take in that situation should be over 3K. Also once you build up some cash to invest you could take some of the best ones as a buyer, which is where the real opportunity is.
For sellers that need a short-sale you would get less and it might take a while, but you could convert those leads into money. They probably can't price low enough for investors, but if they can you get another dual-representation opportunity.
For those who want to sell retail, it looks like a 15% mark-down would get a quick sale in your market. So they seller could easily net twice as much if they have the ability to wait a few months.
Generally well above market asking prices aren't going to be worth the hassle if you are trying to do volume. However you can always refer them to an agent who isn't having as much success getting listings.
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