Wholesaling in a white hot RE marketplace.

5 Replies

I've been doing a fair bit of marketing to find properties at discounts and have received a good number of call backs.  the trouble is that all these people want fair market value, no matter how seemingly desperate they are to sell and no matter their condition.  Before you berate my marketing efforts you should know that in my area the inventory for SFRs is just over 1 month.  yup - home sell that fast here. 

so my question is this, would it be better to be a licensed broker and seek listings than a wholesaler seeking amazing deals in a market like the one i'm in? 

My gut feeling is yes based on my observation that wholesaling is quite popular in areas where prices are "low" or inventory is normal to somewhat high.  I'm thinking of areas in Florida, the entire Midwest, parts of AZ, NV and some NE states.  I don't see a lot of wholesaling activity in Manhattan, Key West, San Francisco, or the more desirable parts of Miami, DC, Seattle, Honolulu, Chicago, LA, etc.  in fact, there seems to be a direct correlation between wholesaling activity and average home price (an inverse correlation to be exact.) 

i'm curious to hear the opinions of others on this topic, especially real estate brokers. 

Hi Patrick, 

Good question. Though I'm relatively new to the real estate profession I did spend an awful lot of time researching and thinking through what I wanted to do in RE. 

Living and wanting to work in Chicago and its immediate surrounding area I figured that getting my license and working for a broker was my best bet. 

Now after a while on the job (we mainly sell investment properties in the $1mill to $30mill range) I have yet to see any of our clients get sweet wholesale deals. Even on not-so-awesome deals there plenty of activity, so I cannot imagine that in a market like this there would be enough "hidden gems" to make a living of off. But then again, I'm in a niche and know very little about what's beyond said niche. 

Also, I learned so much from taking my license and I feel like I'm more credible to buyers and sellers alike when I have that label. In short: I doubt you would ever regret getting your license. 

Not sure if that was helpful or not. 

Lars

I work with a team in the Chicago area. The last deal we purchased via a wholesaler was years ago. This is mainly because the wholesalers are bringing bad deals. As in they don't know the price points for the area right. They are so far off on rehab costs, etc.

I am currently in the early stages of a wholesaling campaign on Oahu (which I'd say has been white hot across the island, up to 30% growth in several months, not annually, in many parts), will report back. Look for a thread with details and thoughts which I will update monthly.

great stuff guys.  thanks @Lars Olsen  @Dale Stevens  @Andrey Y.

and yes, it would be great to hear about HI wholesaling.  

thinking as a seller for a moment...if i were under the gun to sell a higher end property (here that's anything north of $500,000) i'd go to a broker.  not only will they work hard to get that massive commission, but also the inventory here is so low that most of those places sell within 45 days, if not 15, regardless of condition.  

however, if i were trying to sell a decrepit $50,000 property with massive amount of deferred maintenance - i might be willing to sell at a large discount (to a wholesaler or anyone else) as many brokers wouldn't want the bother with only 1/10th the commission, the severely limited buying pool and the "stigma" that might come with selling something so run down.  

You've answered your question by summing up the market conditions. Sellers will more often list with a broker expecting the benefits of MLS exposure and internet marketing. Given your local market conditions, sounds like getting your license is the way to go.

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