The Truth about Wholesaling!

891 Replies

The problem with wholesaling as I see it: it is pitched as an easy way to make money with using little of your own.
The result: people who have accumulated very little money looking to make money without working hard. That is not a good combination.
There are some good wholesalers out there and they work very hard to be successful, but the term is used all too often to describe uneducated people looking to make a quick buck. For the successful wholesales out there, congratulations! To the legitimate wholesalers looking to be very successful, good luck. The those of you who know nothing about real estate and want to jump into the business before you know what you are doing and waste investors time with your so called deals...please get educated, learn your market, and learn how to estimate rehab cost, then come back and try again.

First, sorry for that multipule post, I have no idea what happened, my cpu got the hicups.

On the wholesaler topic, has anyone ever found a place that legitimate wholesalers congrigate, such as a club, a web site of some kind, anything?

I myself have not found this magic spot. And the advice of REIA meetings, real real spotty in my experience. I am certain there are many legitimate ones, but figuring out exactly who is and is not, I have not found the short formula for doing so, just trial and error. Or I should say near error, discovered after wasted time and deal verefication.

Myself, no joke, I spend easily 7/10 of my time reviewing bs deals. I get swamped every day with submissions. My due diligence is not quick, it eats my time up. In the last months, I seriously have reviewed 2 TWO legitimate wholeasler deals, both from the same guy. Bogus ones, gotta be over 100, well over. Worst part, I suck as a wholesaler, lol. I can buy MLS all day, negotiate like a champ, but the good money is in wholesale and I'm stuck on stupid on that avenue.

Originally posted by James Hamling:
First, sorry for that multipule post, I have no idea what happened, my cpu got the hicups.

On the wholesaler topic, has anyone ever found a place that legitimate wholesalers congrigate, such as a club, a web site of some kind, anything?

I myself have not found this magic spot. And the advice of REIA meetings, real real spotty in my experience. I am certain there are many legitimate ones, but figuring out exactly who is and is not, I have not found the short formula for doing so, just trial and error. Or I should say near error, discovered after wasted time and deal verefication.

Myself, no joke, I spend easily 7/10 of my time reviewing bs deals. I get swamped every day with submissions. My due diligence is not quick, it eats my time up. In the last months, I seriously have reviewed 2 TWO legitimate wholeasler deals, both from the same guy. Bogus ones, gotta be over 100, well over. Worst part, I suck as a wholesaler, lol. I can buy MLS all day, negotiate like a champ, but the good money is in wholesale and I'm stuck on stupid on that avenue.

I have experienced the same thing as you in my short period in the business. I have not found any way to find legit wholesales (REIA included). I think the fact of the matter is they are few in far between, but if you come up with something let me know.

Arturo,
Most people on this board are already onto advanced wholesaling. It sounds like you are still stuck with the traditioanl model.

If you do not switch over soon you will not be able to offer the rock bottom prices Will is talking about.

So many have already posted on here a similar comment, but it really needs to be pointed out that what most of us consider to be the traditional wholesaler is a lost art. The one man (or woman) band who has their pulse on the market and the ability to farm a particular area and pull deals out of that area each month like clockwork. The wholesaler who could be counted on at any given time to have a true deal.

I purchase from one such guy here in Memphis who is very content to make 2k-4k on each deal he does and we purchase 4-5 a month from him and he might sell 1 or 2 more to others. He has great contacts and is very familiar with the areas we work and is VERY familiar with the pricing his buyers are looking for.

Due diligence aside, we know when he brings us opportunities, they are going to fit our criteria and if we don't want them it is not because they are priced wrong. He never tries to make more on a property and is very satisfied with the role that he plays.

That is one of the big problems today. New individuals and even companies set up and they want higher and higher cuts on each property and they do not take the time to build relationships with their buyers. It is a churn and burn approach with no real thought to building relationships for the future.

I have been buying properties for going on 10 years with the same individual and I don't know that I will find another person who thinks and acts like he does anytime soon.

Chris

I don't understand how people buy-into the Wholesale Guru hype. If Wholesaling was as easy as they claim and you could make as money as they claim... they'd be too busy to coach because they'd be out wholesaling hundreds of homes and getting filthy rich.

When I first started attending my REIA meetings I thought it was rude to walkout on a speaker. Not now, if I hear any of the Guru B.S. (system, cash on cash, yada yada) I simply stand up and walk out.

Have any of you REI Pro’s made an attempt to train a newbie investor to work as ‘your’ wholesaler?

Maybe train a newbie, pay a small starting salary, give him an office, and quickly move him to straight commission once he learns the ropes. As Chris stated above, a good wholesaler can be a great source for deals and save you the time of marketing and appointments.

I don't understand how people buy-into the Wholesale Guru hype. If Wholesaling was as easy as they claim and you could make as money as they claim... they'd be too busy to coach because they'd be out wholesaling hundreds of homes and getting filthy rich.
You could say that about just about every guru program, if it really was that easy, they would just do that and make a killing. The TRUTH is, it is not that easy and it takes both time and money invested to make things happen. The only "easy money" in this business is the guru business selling general info (and often outdated) to hungry newbies without a clue to the real world happenings of RE. That is the only easy money game.

As to the thought about training a newbie to be your wholesaler, the problem with taht is the following: I would not train AND pay someone only to have thme learn the ropes and go off on their own. Secondly, to get deals via wholesaling requires marketing to motivated homesellers which requires money andm ost newbies either do not have it or will not commit to it. I would rather pay an office worker to address envelopes and pull/organize data collected to create mailing lists, keeping the inside business apllications and systems to myself as to not lose it to them. That makes more sense.

If the deal is so good. Why are they not buying it themselves? If I lack capital, I have plenty of people I could call. The best way to understand a business model is to meet their long term partners/capital partners who would do business with them again.

From what I have seen. 95 percent of the wholesaler types have a terminal case of "guru-itis" and are trying to live out their dreams/use this 5K course they bought from the info salesman (who claimed to be in real estate). We have one company in Lee County that is doing double closings on REO's to out of state people. If your local REIA has some investors who are doing business. Take the deal to the reia meeting. If 3 "seasoned" local investors pass, it is not a deal.

If the deal is so good. Why are they not buying it themselves? If I lack capital, I have plenty of people I could call.
Jeff, there are many reasons why someone would wholesale the deal and not keep it for themselves. Some investors may not have enough money contacts to call, others may have a ton, but also do a ton of business and get too many at one time to fund OR too many at one time and do not want another on their plate to have to manage. Other reasons could include business models, some may not have the desire to do rehabs. Also, as is the case with most of the deals I wholesale, is that they are outside my farm area and I refuse to travel to far to do rehabs and going outside my farm area could put me into areas i am less familiar with.

As to the balance of your comments, I agree 100%. Too many people have heard too many gurus preaching pipe dreams!
I love the advise that you should take a potential deal to your local REIA and if 3 seasoned pros pass, YOU should too! That is excellent advice.

Want some more truth about wholesaling? Come see (and hear) me speak live at the Orange County Investors Club in Tustin this Friday, Oct 28, 2011 at 11:30AM. For more details, check out this thread:
http://www.biggerpockets.com/forums/72/topics/68497-will-barnard-live

Bump. . .

I think it is important for all to read Chris' reply above. he really hit the nail on the head. if you want to be a true wholesaler, learn what it takes and add value to transactions. Going with the thought process that an easy $10k can be made by simply marking up a deal is not wholesaling. I advise all to read Chris Clothier's last post.

Great thread Will, I just came across it. I definitely agree with you that you have to give accurate facts when pitching a deal to a buyer. The buyer is going to find out anyways when they look at the property and do their due diligence.

Don't waste both your time and your buyer's time but BSing the facts.

Good bump Will!

I have a real problem with gurus and wannabe gurus, some having been construction guys or something, and pitching this as a straegy in and of itself. Totally silly, it's a property and who would want it, that's the bottom line. If it needs work market to people who do work on properties, if it needs very little, market it to anyone, including investors, landlords and Harry Homeowner!

Totally agree that if you are going to market a property to someone at least know what the true nature of the deal is and act responsibly...

Very true Bill, knowing your buyer and their criteria is so important. This is one of many reasons why I suggest that people build a buyer's list and in doing so, identify each buyer's criteria. This allows the wholesaler to "shop" for those specific properties so when they get one, they know they already have a buyer and are not scrambling to find one like so many do these days. Often, that is a result of the deal not being a deal at all, but in any event, why not have the buyer in place and shop for what they want!

Will, don't know what your thing might be or your approach, not to disagree as I have not read all of this and it's an old thread......

I have seen newbies asking and saying that they will go find a property, say driving for dollars, and then try to market the property to an investor/rehabber, go look for the buyer. This, in my opinion is bass ackwards, know who rehabs and purchases buy and holds, learn what they want, then find the property that fits their needs. Properties are easier to find than buyer in my opinion.

When you are looking for the apple, you may find an orange, knowing who buys oranges can make that a deal. You may not find any apples but you'll likely come across something.

That's why I don't see specializing in one strategy, that simply limits your possibilities, while looking for that apple again, you could find a pear and knowing what to do with a pear can add to your success of eating better.

While I can't prove it, I bet that any networks with others, that learns how to value a property, can identify the best transaction for a property and knows how to structure that deal will be more successful than following any guru system or trying to do specialized deals, just logical I'd say!

Originally posted by Bill Gulley:
I have seen newbies asking and saying that they will go find a property, say driving for dollars, and then try to market the property to an investor/rehabber, go look for the buyer. This, in my opinion is bass ackwards, know who rehabs and purchases buy and holds, learn what they want, then find the property that fits their needs. Properties are easier to find than buyer in my opinion.
I couldn't agree more, we are both on the same page Bill. Find your buyers, know what they want, go shopping for it.

Aj P, I've used the help of a contractor friend to compute rehab costs. . . then, like a veteran investor told me, always add an extra $5-10k. It's better to be surprised than shocked and dismayed.

Mike G, amen & ditto

This is my favorite thread so far but I have many more to study. Thanks everyone for jumping in

Will said, "I don't make a ton of offers or even 2 in one day on MLS listed properties, but I do things differently than most because I have found what works best for my area and that is forming relationships and having deals brought to me BEFORE the public knows about them."

Will, I worked as a bird dog/flipper with a friend back in 2003. I did the marketing and phone work and she did the rest. I was able to find a few deals by working with preforcs. Is that what you meant by the comment above?

Thanks!

"While I can't prove it, I bet that any networks with others, that learns how to value a property, can identify the best transaction for a property and knows how to structure that deal will be more successful than following any guru system or trying to do specialized deals, just logical I'd say!"

WOW, Bill that is a mouthful! Boy if we could bottle that lol. Thanks for your post.

Originally posted by Melodee Lucido:
Will said, "I don't make a ton of offers or even 2 in one day on MLS listed properties, but I do things differently than most because I have found what works best for my area and that is forming relationships and having deals brought to me BEFORE the public knows about them."

Will, I worked as a bird dog/flipper with a friend back in 2003. I did the marketing and phone work and she did the rest. I was able to find a few deals by working with preforcs. Is that what you meant by the comment above?

Thanks!

@Will Barnard can speak for himself, of course, but I believe that he is referring to REO purchases he makes, by forming relationships with the listing agents. Not sure if he chases the pre-foreclosures or not.

That is correct Steve, that comment was regarding relationships with REO brokers? Pre foreclosures are short sales typically and I work thos too now, but at time of comment, REO deals were my bread and butter.

To be crystal clear, that comment was early in this thread and Mae some time ago. Times change as do market conditions. In our tight market today, I have opened up other opportunities by playing the MLS numbers game with the majority of buyers, but again, I use very advantage available to me when doing so to increase my chances over others.

Thank you Steve & Will for clearing that up; makes perfect sense.

It's so funny HOW much things have changed since '03. Now preforcs are mostly short sales . . . it's a mind shift for sure. Back then only a few wanted to do shorts but now it seems pretty standard.

RE is so fascinating!

I've been enjoying reading and re-reading this thread over the past year or so. I hear from wannabe wholesalers outside of California who want to do business here and insist that they have to be in at $.60 on the dollar minus repairs. In my experience this can be difficult to do in CA although it may be necessary in other parts of the country where prices are under $50,000. However with the prices in California that top the mid 6 figure mark the profits can still be attractive to investors. For instance there is a property I know of that is being sold for $419,000 with minimal repairs needed and an ARV north of $600,000. An investor could make a 6 figure profit even if his ARV was off by $100,000. I know Will said earlier that in his market he considered being all in at $.70 on the dollar of ARV to be a homerun. So I guess the question is what is the minimum percentage of ARV that investors should be all in at in California? I know they want it as low as possible but what's the top end?