Wholesaling in a recession

5 Replies

Let's say the economy goes down. How does this affect the wholesale business (of single family homes)? If the economy turns down, then more people would be facing foreclosure and desperate to sell their homes, right?

Could a recession actually HELP the wholesaling industry?

Has anyone experienced this firsthand?

Good Morning Patrick,

Great question, I've thought about this myself since I recently began my direct mail campaign. I think carefully identifying those neighborhoods that have been hit less than others during past recessions is something to look into. My business partner @Tommy Mejia  and I have done a great deal of research on market trends in our target areas to see which ones have already started to show signs of a distressed local economy.

I'm assuming it can "help" the wholesaling industry when you look at the number of leads and motivation from sellers as times get rough. Obviously, theres no telling how bad things will get and how steep property values will fall. The way we prepare for this is by staying current on market conditions and local economies.

I'm sure I left a ton of stuff out since I'm fairly new to the game so I'm looking forward to seeing what more experienced BP members have to say on the matter...

Best of luck to you!

-Abel

You just need to be in AND out BEFORE any crunch - or, don't go in until after! Cheers...

That's wishful thinking. 

One of the reasons wholesaling is booming is that there's a million or more people in the U.S. wanting to be real estate investors, and in many cases, buying up mediocre deals. Wholesaling is relatively easy money right now, just like being a headhunter was during the tech boom or a real estate agent was before the 2008 crash (and that's easy money again right now, of course).

When a crash happens, a lot of the wannabe investors will find their funding has dried up (or they've lost their jobs, or don't feel secure enough to live with the risk of REI). There will be fewer people buying, and less of a market for wholesalers.

Inevitably, a crash weeds out the weak. Strong, established, well-funded wholesalers will have some down years, but will survive. Same with real estate investors. They'll struggle for awhile, but end up with a better market position. It won't be fun, and lots of people will lose money. But that's how markets work.

Or I could have said it this way: Make sure your Offers already assume that the crunch WILL happen before you can get out - so that you'll STILL make a profit any which way! 

(Sure, you'll get less deals that way - but what AMAZING profits you'll be making until the crunch!)

I am certain every market is different but around here when we are in a down economy investor activity actually spikes because properties are cheaper. Back in 2010 cash sales represented the vast majority of the market because sub prime lending went out and cash is king! Investors steal properties when the market is down so its not a problem but of course the price you will offer to a motivated seller in a down economy will be less. 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here