The Truth about Wholesaling!

893 Replies

Originally posted by @Nina Grayson :

@Will Barnard . So True. While Wholesaling can be the fastest way to earn an income in REI, there are Wholesalers who give it a bad name. In the last few days I was back-and-forth on a deal, where we even increased our offer to get the property. When it was revealed to us the Wholesaler was asking for a $32k AF on a $212k pp, I was disgusted. 15% AF Fee? That's crazy.

Well, this is why many wholesalers love double closing. 

Originally posted by @Maurice George :
Originally posted by @Nina Grayson:

@Will Barnard. So True. While Wholesaling can be the fastest way to earn an income in REI, there are Wholesalers who give it a bad name. In the last few days I was back-and-forth on a deal, where we even increased our offer to get the property. When it was revealed to us the Wholesaler was asking for a $32k AF on a $212k pp, I was disgusted. 15% AF Fee? That's crazy.

Well, this is why many wholesalers love double closing. 

That may be so, but it does not make it right. A wholesale fee should be reasonable and if they locked it up at such a low price to have such a large spread, then they likely stole equity from the seller, did not disclose properly, and or did not morally and ethically perform the deal.

I need honest opinion..what should my cut be providing leads to wholesaler. See my business model below.

I found a wholesaler to team up with. I'm good at online marketing. I created a website, did SEO and now just recently am paying BIG bucks for Google Ad spend. The website is starting to produce leads. Out of about 12 leads 4 where hot and 2 are about to get closed on for a profit of $15k total on both leads. My cut is 20% of his assignment fee. So I get $3k and he gets $12k. After my adspend bill my profit is actually $1,500. Doing this website has proven to be a challenge because of all the competition, but I got it ranking very close to the top organically. I feel like I provide a great marketing product and its worth more than 20%. Do you agree or disagree??

It doesn't matter what you think it is worth or what I think it is worth, what matters is what does that particular wholesaler believe it to be worth? So with that in mind, simply quote him a higher fee and see how he takes it, or better yet, explain to him after all your costs to gain the closed leads, you are not making enough so how much is he willing to increase your lead fee. Let him/her quote the number first and negotiate from there.

I have completed over a dozen flips over a dozen years ago and am just getting back into it in the DC Market. In that market, before all of the regulations on lending, appraisers, and realtors--it was impossible to not be overbid. I presented offers with escalation clauses almost every time. The same houses which I flipped are now back on the market at 100% appreciation. There are very few deals which are 70%-repairs in this current market. Wholesalers are really more for the buyer who is looking for sweat equity. I think that is mostly due to wanting to make a killing on each deal. They have a tendency to pick the highest sale in the area as the ARV.

As a side note, the one thing I have always completed in all of my renovation were the systems (HVAC) upgraded the plumbing and electric, and made certain that roof and grading are inspected and functioning. I do not want the reputation of putting lipstick on a pig. I work with a lot of buyers and while many are in awe of the "waterfall" counter or the shiny new appliances, some are weary of the possibility of poor workmanship and would rather customize themselves. 

I love this because i'm learning from others newbie mistakes. I'm excited about wholesaling for a lot of reason but this post inspires me how I can be different from other wholesalers starting out. Thank you!

Originally posted by @Nicole Draper :

I love this because i'm learning from others newbie mistakes. I'm excited about wholesaling for a lot of reason but this post inspires me how I can be different from other wholesalers starting out. Thank you!

 Fantastic, that was the entire point of this thread, to educate others on what not to do and what to do. Since this post was first started, many things have changed and one of the major factors is that certain ways people would wholesale is now illegal in most states, i.e. locking up a contract, publicly advertising said property, and then assigning the contract. That constitutes brokering without a license in most states so you must be sure to do it the right and legal way if you choose this path.

Quite frankly, most people think wholesaling is the easiest way to get into real estate and the gurus prey on this. The fact is, in this market, it is actually one of the most difficult things to do. I believe it is much easier to find your own deal, find the money and rehab it yourself. To find a deal with enough spread for the rehabbed to make a profit AND then still have more spread for a wholesale fee is no easy task. On top of that, you have to avoid all the legal pitfalls as well.

I have wholesaled in the past and quite honestly, I don’t think I could have done it prior to having my rehab flip experience under my belt first. Food for thought. . . .

@Will Barnard

I completely agree. I am a realtor and I work with several investors. I also work with off market properties and some wholesalers ( not often). The wholesalers numbers for ARV are never right. The comps are not accurate ( not using mls to generate true cma's ). 90% of the time they are greedy and take the profit out of the deal for the rehab guy. The other problem is that they are taking advantage of a lot of new flippers who truly don't know how to work the numbers as described above. A lot of wholesalers are getting in trouble. They claim to be selling a contract ( not real estate ) so they can do it without any licenses. No knowledge of laws or expertise in the industry. It's just a get rich quick thing. I love working with my clients and I work very hard to make sure they are educated. Hollie

We need to start Educating and vetting our wholesalers.

A lot of wholesalers are not taught how to accurately analyze the ARV/Repairs of a deal.

If you find that you are continuously getting inaccurate numbers from one of your wholesalers,

you should drop some wisdom on them about the proper way to analyze the ARV/Repairs and

everything else you deem wrong. At the end of the day we are all a team, think of how much

money you could make if you vet your wholesaler on how to accurately analyze deals rather

than shutting down every wholesaler that gives you inaccurate numbers.

Think of how much time you can save by simply educating your wholesalers, so they know

what a deal actually is, how to estimate repairs ect!

So many wholesalers are ignorant to the proper way to determine repairs ect, lets just

inform them and change the game!

Originally posted by @Armani Emon :

We need to start Educating and vetting our wholesalers.

A lot of wholesalers are not taught how to accurately analyze the ARV/Repairs of a deal.

If you find that you are continuously getting inaccurate numbers from one of your wholesalers,

you should drop some wisdom on them about the proper way to analyze the ARV/Repairs and

everything else you deem wrong. At the end of the day we are all a team, think of how much

money you could make if you vet your wholesaler on how to accurately analyze deals rather

than shutting down every wholesaler that gives you inaccurate numbers.

Think of how much time you can save by simply educating your wholesalers, so they know

what a deal actually is, how to estimate repairs ect!

So many wholesalers are ignorant to the proper way to determine repairs ect, lets just

inform them and change the game!

I agree and was the entire intent of this thread which has helped many better understand what they need to do and how to do it. If we all help educate others, more positive business can be accomplished.

Originally posted by @Tyrell D Bradshaw :

@Will Barnard So what path would you suggest, for someone interested in starting out in real estate, with not enough capital to work with. And whats the best way to learn about accurately pricing rehab costs? 

That is difficult to say as everybody's likes, abilities, and markets are different. You need to choose a strategy that fits your goals, likes, and abilities, then learn all you can about that strategy from start to finish.

As far as capital, if you don't have enough to start, you need to find capital from others or wait until you have saved enough, perhaps from a second job, side gig, or whatever.

Whats a CMA? - CMA stands for comparative market analysis which is basically what an agent does putting together comps for a subject property showing market conditions and other data.

@Will Barnard Thank you for your advice! I’ve been working for free for a wholesaler in my area doing some cold calling, putting out signs, etc. I’ve learned alot in the few months I’ve been doing it. I want to wholesale but aI also just want to use private money and rehab properties to rent. I’m trying to find a common ground between the two.

@Will Barnard

Thanks for sharing! And, I’d bump your 4th bullet up to #1.

Without honesty, the perception of the wholesaling industry will definitely be poor. And those who fly straight in the business will be unfairly affected.

Originally posted by @Franky Aikens :

@Will Barnard

Thanks for sharing! And, I’d bump your 4th bullet up to #1.

Without honesty, the perception of the wholesaling industry will definitely be poor. And those who fly straight in the business will be unfairly affected.

The 4 bullet points in my first post of this thread we’re not placed in any specific order of importance as I would argue that each of the 4 are equally important but you are correct, if more or all would head the advice of #4, the wholesaling industry would not have such a dark cloud over it. 

@Will Barnard great post, and it helps me to see things like this as I try to get into wholesaling myself. One thought that occurs to me is they might have been new like me, and not known how to estimate and assess the property properly. In situations like this, do you as the flipper help to educate the wholesaler? Or simply move on, and hope they learn down the road?

Originally posted by @Jason Hammond :

@Will Barnard great post, and it helps me to see things like this as I try to get into wholesaling myself. One thought that occurs to me is they might have been new like me, and not known how to estimate and assess the property properly. In situations like this, do you as the flipper help to educate the wholesaler? Or simply move on, and hope they learn down the road?

Great question. It depends. If the new wholesaler sends me a property with specs (or even seasoned ones) and the numbers are off or does not fit my criteria and needs, I will often provide them feedback of my numbers and criteria in hopes that next time they hit the nail a bit closer on the head. They can use that information or ignore it, its up to them but if they want to do business with me, they will need to either bring a real deal fitting my criteria or at least get there numbers right on the next one. Anything short of that will be a waste of my time and find their emails in the trash.

@Will Barnard hi will I just came across your post and I really liked your suggestions at the bottom where you identified what it takes to be a successful wholesaler. With that being said I'm a first time wholesaler and I'm in communication with a owner who is selling their land a 1 acre parcel for 70k, the land is in a residential area. What are some things I should look for when analyzing this potential deal? I appreciate your feedback.