The Truth about Wholesaling!

893 Replies

Originally posted by @Kim Lanclos :
@Will Barnard both myself and my husband are venturing into wholesaling. Would you have a Wholesale Assignee Contract that you use in your deals that you'd be willing to share? Thanks in advance!

 I have not wholesaled a property in years but if I was to do that today, I would simply use my state RE purchase and sales agreement (CAR form - CA association of Realtors) and simply add verbiage in that contract that the buyer reserves the right to assign the contract. Any purchase and sales agreement that specifies this right for buyer will make it assignable. Do keep in mind that if you are not a licensed agent and you market the property for sale while under contract with no intent to purchase the property, you could be found guilty of RE sales without a license and subject to fines and more. One should consult a real estate attorney if going about this process without a license to ensure your docs are correct and you are not violating any state licensing laws/regs.

I don't know about this particular company but I was taught to get the ARV from an agent and get a contractor down to the property to get a quote on major repairs. I am still learning but I was always taught to give as accurate a number as possible and that the magic happens during the negotiation.

Great post @Will Barnard ! I got started wholesaling about 8 months ago now and definitely agree that the more due diligence and clarity on repairs and ARV you can provide in your initial marketing to buyers the better the experience is for everyone. We make sure to provide a breakdown of each system in the house including its age, condition, etc. Also always like to run and attach a CMA to each of our marketing emails. This way the potential buyer knows exactly what to expect and much less time is wasted for all parties.

I thought I would post a question on BP at some point but every question I've had (and there's been many) has already been answered on BP! I'm actually building a business process line for wholesaling. I'm currently getting to know my county of interest and developing an intial buyers list. Big data yes please! I Held lean six sigma certification.... YAWN YES over kill for REI but also an awesome edge. As I'm learning my hood I'm building a lean process line that's fits where I'm at and the time I have. The truth about wholesaling the numbers are the easy part. My focus is on being transparent and working an agile process with great people in the deal chain. A bad process will beat a good person everytime, but I'll get your numbers right even if I take the haircut.

Thank you for this valuable information @Will Barnard . I am new to RE wholesaling and, I’m on my journey to becoming one of the greatest wholesalers in history no matter the challenge. I’m boldly asking for help, guidance and or suggestions that can potentially get me there. Any advice is greatly appreciated.

@Raymond B. Very true, I’m new to wholesaling. However, I have been in and around real estate for the past 5 years, and have dealt with many investors. That’s the thing that separates us good wholesalers from the fly by night ones. You have to know what your buyer wants.

Originally posted by @Trevion Langford :

@Will Barnard When you mentioned that the deal was at 80 or 93 %, what does that mean?

 That means that the purchase price, plus the rehab costs, divided by the sold price or estimated sold price = the %.

So if you buy a property at $200k and have a $50k rehab and expect to sell it at $320k, then the math would look like this: 200,000+50,000=$250,000/$320,000 = 76.923%. Look up the 70% rule which in today's market is very hard to find but if you are at or around the 75% margin, you typically (not always) have a deal to flip.

So newbie wholesale question. 

I am structuring my methods around allot of the bp posts.  I want to be accurate, fast honest and I have a cheat sheet I have for RE. The RE sheet will be included in my whole sale packet to buyer among with my comps and tax info. The sheet will give the investor/ buyer an idea of how I figured the RE. 

but for sold comps.  In some areas in my market, houses haven't sold in less than 1 year. It's hard top make accurate sold comps.

so I do the best I can with the closest like houses in the zip/sub division. Combined with red fin and realtor. C

would you as a buyer have suggestions for me to increase the accuracy of my off my sold comps in those areas?  

(I know your gonna run the numbers yourself but I want to build my brand on accuracy and dependability) 

As a buyer, the biggest area I care about most is in the accuracy of the rehab estimate because often times I'm considering properties out of the state. As you stated, I can run comparables myself from home, but I can't necessarily determine rehab estimates remotely. If you can get good a estimating rehab costs you'll help me more and you'll also benefit from negotiating better deals with owners buy proving why your offer is fair and reasonable.

For buying from wholesalers, how much % off retail should I be expecting? When I do this with vacant land it's 50% but my gut tells me 20%-40% for properties. Thoughts?

I'm new to wholesaling and may potentially be getting my first wholesale deal. Once I have the property under contract, should I allow an investor/potential buyer to walkthrough a properly before or after they sign the assignment contract?

@Will Barnard - I am only cherry picking off of your initial post and some of the comments. I wholesale- and I am proud of it, but dear lord I cannot agree with you more on the stigma that wholesaling has garnished due to the high number of people who, quite honestly, do not know what the hell they are talking about. 

Let me take a stab at some of the pain points from wholesalers:

1) Posting on Facebook investor groups " Where are my (insert zip code) buyers at"

2) Over inflating ARV's by pulling comps WELL over hard city borders. In Philly, I see comps being pulled a half mile away to establish value. Over here, that can be the difference between homes selling for 500k or 50k. This is not an exaggeration. Anyone who has "Philly" under their keyword searches, feel free to back me up on that statement. All ARV's should be done the exact way that FHA appraisers would evaluate a house because the largest end user is often someone who applies for this type of loan.

3) Rehab budgets. Dear god. Rehab Budgets. How many agents or wholesalers alike have swung a hammer, pulled permits, fixed a foundation,  or done anything to get those big meaty fingers that the real contractors have earned (we all know what I am talking about). There are general rules for certain neighborhoods and rough "rule of thumb" rehab ranges, but to advertise rehab budgets as a wholesaler is an asinine practice. We are more often than not the ones swinging the hammer.

4) Barrier of entry. Let's all remember that there is no barrier of entry to wholesale. Anyone who has seen a youtube REI guru that says "put no money down and stand to make 50k" gets into the profession. Not everyone follows up with the effort or diligence to actually know what will be successful.

I feel your pain @Jimmy O'Connor hence the posting of this thread many years ago and it is still going. I believe this thread has the record for the most posts and the most votes for any one single post on BP so that is a testament to not only the thread's popularity, but to the value it brings to so many. I certainly hope this thread has reduced the number of would be wholesalers making the same regurgitated mistakes and poor business practices, one can only hope anyways.

@Will Barnard as someone who’s new to RE and trying to start in wholesale, i aprreciate this list. From what I’ve learned so far cash buyers are truly the business partner of a wholesaler, so your 4 listed outlines are exactly what I needed to hear, THANKS!

@Will Barnard wholesalers often inflate ARV, low ball repairs, provide inaccurate details like square footage, number or bedrooms, etc....There is no license requirements to be a wholesaler therefore no repercussions if they provide inaccurate info. DO YOUR DUE DILIGENCE before you buy a from a wholesaler. I do believe they can provide a valuable service but seems like lately everyone is or wants to be a wholesaler.