How to shut up the Wholesale bashers

How to shut up the Wholesale bashers

Wholesaler · Madison , WI · Member since 2016 · 79 posts · 64 votes

Wholesaling real estate can be life changing. I know a lot of people who started from nothing and now make 6+ figures annually doing so, that pisses agents off lol. 

The things I see about wholesaling on BiggerPockets are discouraging and borderline hate speech. 

Basically, the kids that grew up the nice comfortable middle class neighborhoods, went to college like mommy and daddy told them to are telling people that dont have the credit to get a traditional loan or capital to close on a property that you can't be in real estate. 

If you don't have a sh*t load of money to spend, or near excellent credit you shouldn't be in real estate, is the summary of the BS I've been reading. 

Now on to the legal part of it all...

Is wholesaling ILLEGAL? 

No. Wholesaling is simply buying something low and selling it low enough for the end buyer to make a profit. 

Assignments are legal in most states, some not so much...in every state that doesn't allow assignments I GUARANTEE there's an agent pissed off at guy who made his annual salary in one deal. 

Guys and gals, remember: From a legal perspective for a contract to be legitimate you have to have the intent and ability to close. 

The intent comes when you partner with a Transactional lender to fund your deals, you then have the intent and ability to close, if you meet the transactional lenders criteria with the way the deal is set up. 

Now I can already see someone saying "well if you're wholesaling you don't have the intent to buy" Well...you do. But you're only going to close on it if you can sell it, that's actually smarter to me. Rehabbers buy with the hope to sell, as a wholesaler we buy (double close) when we KNOW we can sell and I advise you to be upfront with your sellers as well. 

If you're an inspiring wholesaler be careful with what you pay attention to on here, chance are you got into the business due to lack of a big ol' fat bank account, excellent credit, connections, etc. (All the things the guys bashing wholesalers seem to have...hm...)

Organize your business, learn the laws, help sellers, be honest with them, and by all mean IGNORE THE WHOLESALING BASHERS ON THIS SITE. I bet none of them had to wholesale their way out of $37,380 in debt and a motel room. They don't know the struggle, they don't want you have a bigger pool than Kanye! 

But all jokes aside, guys and girls wholesalers get a bad rep because there are some people who mislead sellers, honesty and full disclosure is the key. 

I understand some people are afraid to tell sellers they wholesale, and that's understandable Don't say that; What you want to do is set up an LLC before you start, get the website the logo, etc. Look credible. Build your buyers list, build your transactional lender team as well, your business is dependent on those things.

So what do you say when a seller asks what you do or what the hell the and/or assigns means? 

"I work with a group of investors (the transactional funders and cash buyers; truth here!) I buy and sell properties to other investors, sometimes I'll assign the contract just to simplify things, that's less in transfer taxes, etc. 

....if they don't want you to assign it (yeah some people are picky and sensitive) and the numbers make sense just double close using a Transactional lender, 0 money out of pocket. It's very simple. 

So, let's go over that again. 

The "INTENT AND ABILITY TO BUY" comes from having a Transactional lender on your team, develop a relationship with them, get to know them. 

Too many people just brush off this idea, well let me tell you, the agents are getting tired of us helping sellers and making a killing so they're running to the big bosses and trying to stop it all, one day assignments may be illegal everywhere unless you're an agent, so in case that day comes be ready. 

Excuse any spelling or grammatical errors... actually don't, I don't give a sh*t. I made my point. 

Happy wholesaling! 

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Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
10y

This thread should get a lot of responses:)

Your arguments are bogus. Selling a contract is NOT investing. Closing on a deal and then reselling is investing. Laws vary state to state. Regardless of your arguments, most are just unlicensed operators acting as brokers. Most of the time they bring no or little value to a deal. I just saw a guy "wholesale" a property 20% under market in a HOT area. Any agent could have listed the property and got the seller EASILY 30K more after commission. Please tell me how this benefited the seller?

p.s.--you want to "shut up" people that disagree with your concept, disagree with a lot of post promoting dishonest, etc. What does that tell the BP readers? If you felt like making a statement about disagreeing with posters (I am one well known for expressing opinions) maybe that would promote better responses? I don't recall any posts from people wanting to "shut up" people promoting dishonest or illegal practices. BTW, what professional licensing do you hold and who holds you accountable for honesty and ethics? Anyone? Your arguments are FALSE and misleading. Some people need to do that to convince themselves they are right.

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  • Stafford, TX · Member since 2016 · 37 posts · 11 votes
    10y

    Great thread and kinda heated. What I dont understand is why would someone come to BP (a forum designed to teach people different ways to invest in real estate INCLUDING wholesaling) and just start verbally vomiting. 

    If you dont like it, change the channel. Dont try to intimidate or shame me out of trying to find a way to keep a roof over my wife and kids heads and keep them fed.

    I'm just starting my investment career (have yet to do a deal) but i did build a website because of something i heard on the podcast and it says on my website for anyone to read; we are investors and in order to stay in business we have to make a profit. The house could be fixed and flipped (for a profit) or it could be sold immediately (for a smaller, but quicker profit), I want to help people out of their situation but im not doing this for my health. 

    Truth be told, we all have our place in this thing, wholesalers, investors, agents we all have a role to play. Why not instead of tearing each other down, we figure out a way to work together, get more business done, more houses rehabbed, more neighborhoods revitalized and some Bigger Pockets for ALL of us not just the ones with a license...

  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    10y

    After reading and digesting all written in this thread, I have done some serious thinking about wholesaling and based on my 38 years experience as a real estate investor, note buyer, private lender and syndicator here are my thoughts

    1. People who have the gumption to try and set up their own business, as wholesalers, should be praised for their independence, entrepreneurial spirit, and drive in attempting to become successful.

    2. The fact that gurus and their hype lead some to believe that wholesaling is easier than it is, more financially rewarding than it is, and teach ethically questionable practices, is unfortunate.

    3. Whether or not a wholesaler needs to be licensed is a question for Judicial interpretation, I do not trust state real estate commissions to make an unbiased judgement.

    4. If a wholesaler can't or won't close on a purchase unless he assigns the contract, it is only moral and ethical that he inform the seller of such before the seller signs the contract. If he hedges in any way, then he is not representing himself honestly.  However, doing such is not illegal.

    5. Real estate brokers model usually precludes them from successfully representing sellers of very low priced houses, or houses needing more than just cosmetic repairs ( although they will sometimes still be willing to list these type properties, they will not put marketing effort or dollars into them, and their success rate of selling them is low). In these situations, a wholesaler may be the sellers only viable option to sell the house.  Since rehabbers are better off concentrating on rehabbing and paying a little more for product, wholesalers provide an efficient method of sourcing this product.  In these instances, wholesalers add value and provide a needed service.

    6. The huge number of unknowledgeable, unrealistic, unethical (intentional or unintentional) and inexperienced wholesalers operating with no oversight produces problems for seller's and hurts the reputation of the real estate industry.  Investors fear increased inappropriate governmental regulation will result.

    7. Despite widespread misuse of the term, wholesalers are in no way, shape or form real estate investors.  Just as brokers, appraisers, inspectors, plumbers, etc. are not real estate investors.  To be a real estate investor, one must own real estate as an investment.  So, if you assign contracts, or double close, you fail the test of ownership.  And if you do take ownership, short term with the intent of a fast flip, you fail the "as an investment " test. You own real estate as inventory, not "as an investment".  And despite the belief of some of the wholesalers, the distinction is very important.

    Private Mortgage Financing Partners, LLC
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y

    @Don Konipol good post! I certainly don't mean to come off as a hard *** about wholesale, as I think there is surely a niche to be served, especially with some of the examples you listed. In the light of the morning, my biggest objection to it is the total lack of barriers, such that any knucklehead is suddenly an "investor", with zero skin and zero knowledge. The standard answer to the age old BP question of "I've got no money, no job, $100k of debt, a credit score of 400, and I want to be a real estate investor and have financial freedom - what should I do?" is always "Become a wholesaler!" Virtually no one tells these cats "Hey, try getting a first job and saving some money first."

    Skyline Properties
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  • Investor · Dublin, OH · Member since 2015 · 75 posts · 24 votes
    10y
    Originally posted by @Brandon Ingegneri:

    Make so much money that they apply to work for you.  Let em bash while you count cash.

     Exactly my thought too.

  • Investor · Cincinnati, OH · Member since 2012 · 506 posts · 331 votes
    10y
    Originally posted by @JD Martin:

    @Don Konipol good post! I certainly don't mean to come off as a hard *** about wholesale, as I think there is surely a niche to be served, especially with some of the examples you listed. In the light of the morning, my biggest objection to it is the total lack of barriers, such that any knucklehead is suddenly an "investor", with zero skin and zero knowledge. The standard answer to the age old BP question of "I've got no money, no job, $100k of debt, a credit score of 400, and I want to be a real estate investor and have financial freedom - what should I do?" is always "Become a wholesaler!" Virtually no one tells these cats "Hey, try getting a first job and saving some money first."

     It seems that your biggest issue is the appropriation of the term investor.  Is that right?


    Let me paint a picture here and ask for an answer to a question.  Let's say you're a guy that wants to flip houses and so begins to do so.  While you're searching for houses, you realize that you seem to be able to buy more good deals than you have the ability to rehab yourself at any given time because you only have the cash and infrastructure to manage 2 projects at a time.  You also find that you're able to negotiate better prices than other folks in the flipping game as evidenced by actual transaction records.  What should you do?  Pass on all of the other houses that you could buy at a discount, add a margin for your effort and sell to another investor at a price they'd have been willing to pay without you finding the deal?  

    Here in Cincinnati, most rehabbers make $25k-$40k per deal.  If you can do 2 at a time and do it twice a year, you could make $100k to $160k a year.  Of course, if you have a family, it's pretty hard to save much of that to grow your business past 4 deals a year because you have living expenses.  Again, you've found that you can find a lot more than 4 great deals a year.  Should you not do anything with those deals or is being an entrepreneur more important than whatever label a bunch of people on an internet site want to argue about?

    My business doesn't exist without active rehabbers.  Some of our customers only buy houses from us.  Some others only buy from us or our competitors.  I double close great than 95% of our transactions because most are bank deals.  Our average deal sells to a rehabber at $100,803.00 this year with the smallest sale at $25k and the largest at $375k.  Our gross revenue this year is tracking to be large enough that I'm not comfortable posting it on the internet.

    I'm fine not being called an investor.  I'm a business owner.

  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    10y

    I just don't get why so many wholesalers are so sensitive to being told that they are not real estate investors?  They act as if informing them that they are misusing the term is condemning them to being a social outcast, second class citizen, or somehow arrogantly stomping on their dreams.

    As I pointed out, many, if not most activities associated with real estate is not real estate investing. Wholesaling is one of these activities.  In order to be an investor, one must invest capital as a primary activity.  In order to be a real estate investor, one must own real estate as an investment, not as inventory.  Wholesalers fail one or both of these tests.

    I am not exclusively a real estate investor; I am also a lender, syndicator, and financier and occasionally flipper, however I don't associate these activities as real estate investing, or owning a real estate investment.

    I think that experienced real estate people are frustrated by the success gurus have had at convincing people that armed only with the knowledge they gained at the guru's training classes they can earn 6 figures with limited or no invested capital as a real estate wholesaler.  Experienced real estate people know that the percentage of people able to earn a decent living at real estate wholesaling is very small, that the failure rate is scandalously high, that the knowledge required is significantly greater than what can be obtained in guru classes and seminars, that the vast majority of wholesalers do not inform sellers that they will not close unless they are able to assign the contract for a profit, that inexperienced and under capitalized wholesaler do nothing but muddy the waters in many ways, etc.

    These are the facts as learned by experienced real estate people through their continuous years of participation in the field.  It is not borne of class prejudice, racism, jealously, etc. as at least some people have implied in this thread.  It is the reality of the situation.  

    Private Mortgage Financing Partners, LLC
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y

    @Don Konipol Exactly! Much more elegantly stated than I have done :)

    Skyline Properties
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  • Flipper/Rehabber · High Point, NC · Member since 2016 · 276 posts · 183 votes
    10y

    I personally don't care about the title of "investor".  The only issue I have is when people say things like, "All wholesalers are sleazy unethical monsters that steal money from sweet little old ladies." (I paraphrased some)

    I take issue with this when newbies and wannabe investors are told that all wholesalers are the scum of the earth, and that if they become wholesalers (especially if they use contract assignment) that they will be bringing some huge evil upon the world.  I believe that education and encouragement would go much farther than trash talk.

  • Wholesaler · Madison , WI · Member since 2016 · 79 posts · 64 votes
    10y

    Well some wholesalers use the money to buy rentals, stocks, notes, etc. So in that sense they are investors. Let's just end the discussion because now it's reached the point of pointless back and forth bickering. 

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