RE AGENT VS. WHOLESALER

Hello Lauren, I'm new to wholesale myself but you are definitely on the right track so far from the little knowledge that I have acquired this far, so that should be a good start for you.

OP

Member since 2018 · 10 posts · 1 vote

Thanks Josh, I appreciate the encouragement!

Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes

Think about this: when you sign a contract to purchase, are you financially prepared to complete the deal if you cannot unlicensed broker the deal OR do you plan on deceiving sellers with BS escape clauses? In reality, signing contract with NO intention of purchasing or ability is called FRAUD. Personally, I won't "wholesale" even though I can because WHY GIVE AWAY TENS OF THOUSANDS OF DOLLARS. I just made 100K buying two properties. If I assigned them, I would have made maybe 30K. I'd rather take the 100K. Everyone 3rd post on BP seems to be about "wholesaling"...and most of them disappear after a while because they cannot make any money, or find out their actions are illegal in their state. I am NOT referring to TX--laws are more lax there but I bet they change in the future due to the number of victims of "wholesalers". BTw--IF IT WAS A LEGITIMATE SERVICE--WOULDN'T THE STATE LICENSE THE PRACTICE? It isn't--and the victims are sellers that get ripped off for tens of thousands of dollars.

OP

Member since 2018 · 10 posts · 1 vote

Thanks for your input and opinion John, I truly appreciate it! It's important to see things in this line of work for what they actually are rather than what I want and expect them to be. I feel wholesaling is so popular amongst 'newbie' investors because on paper, it seems easy and seamless:

1) Find a deal

2) Market it to a cash buyer

3) Cash out!

though it sounds easy, I'm aware it takes tons of willpower, due diligence to make sure the numbers are correct and not to mention the controversy surrounding it over the ethics and morality no matter if it's technically legal or not. It's a fine line to walk on, considering me being a brand new investor even though my intentions are to be 100% transparent with all parties, however I'm aware of the risks and reputation of wholesaling. With that being said, would you recommend any other strategies for getting started in investing? Thanks in advance!

Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes

@Lauren Patrick

free tip: get licensed. Buy the great deals, list the others. You would be surprised at the people that will take a low offer to sell today rather than list and wait for more money. If you offer to buy for "x" or list for "y" you are being completely honest with the sellers. Here was one of my deals: seller advertised a house for 135K. I offered to list at 159K and it would have sold for very near that. I also offered to buy for 120K. He took the 120K and we are friends today and doing other deals together. He wanted it gone TODAY---and gave me 40K FREE equity. TODAY it is worth $235K. I just bought another one for 145K worth over 200K. I offered to list it for 200K...but he was so close to losing everything he took the 145K and leased it back from me. I could have made maybe 20K-30K before my brokers cut by assigning...but WHY? I now have another asset making me over 10K a year in my pocket each and every year. The majority of "wholesalers" are out of the business within a few months. Go where the money IS...not the guru land of milk and honey.

3 Reply

Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes

Originally posted by @Lauren Patrick:

Thanks for your input and opinion John, I truly appreciate it! It's important to see things in this line of work for what they actually are rather than what I want and expect them to be. I feel wholesaling is so popular amongst 'newbie' investors because on paper, it seems easy and seamless:

1) Find a deal

2) Market it to a cash buyer

3) Cash out!

though it sounds easy, I'm aware it takes tons of willpower, due diligence to make sure the numbers are correct and not to mention the controversy surrounding it over the ethics and morality no matter if it's technically legal or not. It's a fine line to walk on, considering me being a brand new investor even though my intentions are to be 100% transparent with all parties, however I'm aware of the risks and reputation of wholesaling. With that being said, would you recommend any other strategies for getting started in investing? Thanks in advance!

What I would do as a new investor:
1. get licensed. You will find more deals that way. BUY the great deals, make money listing the retail deals. Make sure and line up OPM to close on the great ones. This can be had through HML, friends, family, co-workers, etc.

To find money other avenues--advertise for it. I just borrowed 120K from advertising on CL. Also, find lenders on BP. There is lots of money looking for a home. My two most recent deals were from someone that found me on BP. It isn't fast--so don't get discourage. Stick with it and you will find success. You won't catch fish every day you go fishing, but some days you will catch the big one. Same with RE.

2 Reply

Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes

@Lauren Patrick

One last note: people will trust a licensee MUCH faster than a non-licensee. That has been my actual experience.

OP

Member since 2018 · 10 posts · 1 vote

Thanks for a new prospective, very insightful. I have a couple of questions, say I get licensed and sign with KW. Will they allow assignment contracts? From what I understand from your story about the 40k free equity:

You found a seller going for $135k but they ending up selling right away for 120k... after the transaction I'm assuming you kept the property as a buy and hold? If so, what were the numbers like with this deal and when did you begin to see profit?

Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes

Originally posted by @Lauren Patrick:

Thanks for a new prospective, very insightful. I have a couple of questions, say I get licensed and sign with KW. Will they allow assignment contracts? From what I understand from your story about the 40k free equity:

You found a seller going for $135k but they ending up selling right away for 120k... after the transaction I'm assuming you kept the property as a buy and hold? If so, what were the numbers like with this deal and when did you begin to see profit?

Yes buy and hold. It is bringing in $1425/month. I borrowed about 100K...used 20K of my own money. Cash flowed since rehabbed (cost about 8K to rehab). As you grow your portfolio and pay down mortgages you can cash out and have money to buy more deals. You can also borrow more money once you start if you pay on time and prove to the lender you are a good risk. Don't borrow money at sky high rates (yes--I charge those) unless you can flip within a very few months and make a good profit. You can't keep everything. As you build, sell off the less desirable ones and get nicer newer units which will bring in higher rents. Remember--you make your money when you buy.

You don't have to hang your license with any specific broker. Find one that allows you to be an agent and investor and allows assignments if that is your priority. Remember though--assignments won't build sustainable income. Rentals will.

OP

Member since 2018 · 10 posts · 1 vote

I'm assuming the $1425/month is going toward the 100K loan payments? I apologize in advance for the series of questions, I'm just trying to interpret real life scenarios as clearly as possible. Another question, do large brokerages such as KW usually allow assignment of contracts? Could I do a traditional wholesale transaction, but if I fail to have an end buyer, just list it for a higher price?

Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes

Originally posted by @Lauren Patrick:

I'm assuming the $1425/month is going toward the 100K loan payments? I apologize in advance for the series of questions, I'm just trying to interpret real life scenarios as clearly as possible. Another question, do large brokerages such as KW usually allow assignment of contracts? Could I do a traditional wholesale transaction, but if I fail to have an end buyer, just list it for a higher price?

I don't know KW policies. Take listings at FMV...but before doing so offer to buy if you want to own it. Just have money lined up first. Sellers are not going to be happy if you sign to buy and then back out. They will be your worst advertising. Get them what they want, and they will be your best advertising. There are legitimate reasons to back out. Set up a 5-7 day inspection period. If it has lots of problems and will cost too much to fix, cancel the contract right away. Forget the 30,60 day inspections. Those are game players and hurt not only the public, but potentially yourself. People WILL talk...both good and bad.

Nick Rutkowski

Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes

Get licensed. You’ll have connections to better education, more deals, and mentorship from your broker. Wholesalers walk a fine line, sure. Why would you want to walk that line when you can do exactly what you want to do with a license? Now you’re covered by E&O insurance! Have you ever been sued for misleading someone? It’s very easy to do, especially in residential RE when emotions are also on the line.

OP

Member since 2018 · 10 posts · 1 vote

I see no lies! I'll look into it for sure, thanks so much for your input.

Cody L.

Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes

I agree with what 99% of @John Thedford says. Holding to build wealth vs. flipping a contract. Not being sleazy by going under contract w/o the ability to buy but rather to try to sell it (and then possibly not finding a buyer and dumping the contract). Being honest with sellers to build up your rep, etc.

Where you lose me brother is your hard core insistence on government blessing your business. You come across like the guy in those news stories where a little girl with a lemonade stand is being busted by the cops because she didn't get a permit.

Edit: I know you've gone on rampages about people not posting their lic here. I've never felt a need (as I'm not trying to get business here). But FYI I've been licences for about 7 years now and have done countless closings as buyer/seller principle

Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes

Originally posted by @Cody L.:

I agree with what 99% of @John Thedford says. Holding to build wealth vs. flipping a contract. Not being sleazy by going under contract w/o the ability to buy but rather to try to sell it (and then possibly not finding a buyer and dumping the contract). Being honest with sellers to build up your rep, etc.

Where you lose me brother is your hard core insistence on government blessing your business. You come across like the guy in those news stories where a little girl with a lemonade stand is being busted by the cops because she didn't get a permit.

Edit: I know you've gone on rampages about people not posting their lic here. I've never felt a need (as I'm not trying to get business here). But FYI I've been licences for about 7 years now and have done countless closings as buyer/seller principle

Naples made national news a few years back for the lemonadegate fiasco. I saw two boys selling lemonade last week. It was $1 a cup. I paid for three and took one. LOVE to see ambition at an early age.

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

Podcast Guest on Show #222

Originally posted by @Cody L.:

I agree with what 99% of @John Thedford says. Holding to build wealth vs. flipping a contract. Not being sleazy by going under contract w/o the ability to buy but rather to try to sell it (and then possibly not finding a buyer and dumping the contract). Being honest with sellers to build up your rep, etc.

Where you lose me brother is your hard core insistence on government blessing your business. You come across like the guy in those news stories where a little girl with a lemonade stand is being busted by the cops because she didn't get a permit.

Edit: I know you've gone on rampages about people not posting their lic here. I've never felt a need (as I'm not trying to get business here). But FYI I've been licences for about 7 years now and have done countless closings as buyer/seller principle

some state require you to put your license number on all forms of advertising.. so since your not advertising just being on here for the social benefits no problem.. I am licensed in 3 states and I am a licensed mortgage banker but since I am not here like you trolling for clients specifically its not required..

States are starting to really take notice as the wholesaler how to guru's have done such a great job getting thousands of folks interested in this .. they are seeing many more complaints than in the last decade.. so you know govmit pretty slow to move.. but its moving..

OP.. I was recently at an event the folks that make what I consider money at this and I am sure Cody would consider money or a decent living. will send 50 to 100k plus mailers per month.. they have knock dead interactive lead capture websites.. they have staff that runs down the leads in real time.. and they are real closers.. Plus they have quite a bit of capital to close on many of the deals.. some will run the assignment game in states where unlicensed activity is not really regulated .. in other states this is a highly capital intensive business.

Not sure where folks get the idea its a starter gig.. I cant think of a tougher thing to do in real estate.. IE work for yourself.. have to know lead Gen.. have to know contracts.. Have to have a clue on rehab costs.. build buyer seller data bases .. how do you do all that buy yourself.. Ergo to Johns point.. somehow folks think this is easy.. I can tell you the folks that do it and make any kind of money are mature companies vertically intergrated and spend a ton on their business.

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