What do you think are the top mistakes new investors make when trying to wholesale?
They give up. They do one direct mail marketing campaign, don't get any good deals and give up.
Either that or they do not have a large enough network to get great deals to then relay onto other investors.
Building a wholesaling business is not easy. I would say that it takes at least 12 months to get a bit of a reputation and build up your buyers list.
They have unrealistic expectations and they don't want to put the time or money into proper marketing. Wholesaling is not easy to do repeatedly, it is probably not a good way to get started for most people, because if you haven't analyzed deals for yourself before you may have difficulty knowing what others are looking for.
Lack of money .
They quit when they find out the returnes are not worth the time and effort required.
They don't invest in their business enough.
undercapitalization is the #1 reason for business failure, wholesaling is no different.
This site doesn't help either where the ongoing mindset is that you can wholesale with "no money". How can anyone wage a profitable long term lead generating campaign with no money?!?!
The reason it's worked so well in the last ~8 years is because they market has been both HOT and loaded with distressed properties/owners. It's given a false sense of what's needed to be truly competitive.
easy come, easy go
Thinking they are investors. They are finding deals for investors. Wholesalers invest their time, but so does anybody in any industry sector.
Thinking it's easy. I didn't do it for years because you have to be fluent in all aspects of everything. My last few were Masters level course-like. Zoning to lien positions, drafting docs, disclosures , detailed title searches, the buyer and their partners and their issues, all things exit, you name it.
Because they've never done a rehab and want to start off with wholesaling. Thus they don't really know how much things cost and totally miscalculate the rehab and ARV etc.
Experienced investors look at those flyers, laugh and move on and don't even bother looking at the property or any future ones by that same 'wholesaler'.
- You don't know what you don't know and thus building up a negative reputation.
They wasted all their savings on a rip off “guru”
Most fail because they do not provide sufficient value to investors.
Plus to me I think a fair number operate in a manner that I would consider to be unethical. I do not want to do a deal where anyone is being gouged. I tell wholesalers I do not do double closings where the goal is hide either from the seller or buyer the wholesaler's fee. I will pay up to a 10% finders fee if the value is there. Some have just scoffed an said they won't do business with me; but that's okay-- I am lucky to live in a place where I can find more deals than I can afford to do.
They fail because they're brand new to real estate investing, which means:
- they don't know how to accurately assess repairs
- they don't know how to accurately assess ARV
- they don't know anything about contracts, negotiating, closing
They also tend to have $0 money, which means:
- they have no money to market to homeowners
- they have no money to market to investors
- they are in a hurry to get a deal done, which means that EVERY deals looks like a great deal
- they can't double close a transaction
I think a lot of the replies here are spot on. Unrealistic expectations is a big culprit. Not every deal is going to be a home run. If you have all of your eggs in one basket and the deal goes south, you'll be quick to give up. Most of our successful investors are well funded and have a handful of deals under their belt.
If you're just getting started, it's wise to team up with someone with experience. Find a great local Title Rep. They are a great source of information.
Lack of knowledge, capital, licensing, etc. Many suffer from mythomania.
Thanks for the reply's everyone, from what I'm getting the most common mistakes new wholesalers make is miscalculating ARV, not having enough of a marketing budget, and not adding value to the deal. I'll be sure not to make these mistakes.
Title and question are 2 different questions. Most fail due to lack of perseverance and wrong information. Most common mistakes are not knowing contracts, lack of patience, being unfamiliar with the process and how it fits into local property code