What don’t they tell you about wholesaling?

60 Replies

@Leroy Feireira-shearin

Big risk and uncertain reward. You're going to be lying to a crapload of people about being a flipper and reneging on a lot of contracts. Very few of the people you're going to be cold calling are going to be nice. Some might say unkind things about your momma. Some of the people you dupe into believing that you're going to buy their house and then screw over by reneging on the contract are going to have friends who do unreasonable things like find out where you live and hide out in the bushes near your car with lengths of steel pipe and degenerate pygophiliac designs.

@Leroy Feireira-shearin

Without a major marketing machine, it's extremely hard to find properties that are discounted deeply enough that you can buy them and then resell to someone who can renovate and still make their own profit.

The most difficult thing about wholesaling is finding the properties to wholesale.

its highly market specific also.. some areas of the country are much eaiser to that in.

IE low value  more homes than peeps.. older functionally obsolete money pits that kind of thing.

keep in mind in the cities where wholesaling works.. there are tons of vacant homes even today.

I think for instance indy has 4k vacant homes.

Detroit who knows how many

Chicago thousands.

Philly 10k plus

Baltimore same thing.

those areas is where buying low seller for more is quite common.. and other smaller little towns throughout the mid west and northeast..  Robust areas its much much tougher.

@Leroy Feireira-shearin They don't tell you that if you don't have a buyers list - you've got nothing.  

It makes sense to have multiple buyers in mind when you put something under contract.  My opinion:  If you don't have multiples in mind to purchase the property, don't get it under contract.  I know the best wholesaler in Indianapolis and he always has buyers in mind.  He's not wasting the seller's time.  He's honest and forthright about his approach. 

I don't do contract assignments myself.  I buy with cash and own properties.  I've also never made a single purchase through assignment.  

If you want to be ethical - don't market using potential rehab costs.  Only attach rehab costs if you have a fair to high knowledge of construction.  Also, use tight comps, don't fudge them or be deceptive.  

Originally posted by @Leroy Feireira-shearin :
@Ritch Bonisa Thanks, this makes way more sense than going out getting a contract and having no where to sell it . I am entering real estate with little to no money so wholesaling is the best option for me .

And the odds are you will be exiting real estate the same way. with no money .

Why not take the course and get your real estate license ? 

@Leroy Feireira-shearin I tried wholesaling for a few months. Spent about $800 the first month and $500 the second month to send out mail. The first mailer i sent out I got 5 - 6 calls and walked through 2 houses. I made offers, but got politely rejected. The second rejectIon I beat myself up over because I forgot to show the seller comps, etc. I then realized I wasn’t saving my money to eventually buy rental properties like I want to. Decided to stop the wholesaling process. It was a good experience though and I actually enjoyed talking with people (I’m normally bad at that and it got me out of my comfort zone). I made the decision to get my license. Almost done with my last course online and only costed $400. I would say it’s well worth it because you learn about the laws and everything. Wholesaling made me also have a clash with my values. I didn’t want to tie people up with a contract and then have to back out for whatever reason. To me that’s not right. I’m excited to get my license though. The small things I learned during the wholesale process will definitely be applied to working for other people.

I'm really surprised at the amount of negativity here. Obviously many of the posters are in markets where wholesaling must be problematic for some reason.  It is in fact very easy and profitable if you are smart about it and manage risk well.

My advice is to start off looking for deals for a wholesaler so you have access to their expertise and analysis. This will teach you the ropes and keep you out of trouble.

The only "difficult" parts are

1. Building an ever growing buyers list. Takes time and you have to learn how to find buyers.

2. Learn how to find deals. All the folks in this thread saying how hard it is to find deals with margin says to me that they haven't learned where to look in their market.  When I was full time in Memphis I found multiple deals literally every day and flipped them mostly to other wholesalers until I had my own buyers.  You have to figure out where the low hanging fruit are in your market. For example some of my best deals in Memphis came by looking for houses for sale on Craigslist that had been posted in the wrong category. I would contact them and they would say how disappointed they had been that nobody had bought their house and I would buy them! 1 lady had 3 homes in the same street. I literally signed a contract, drove to my wholesaler friend and he gave me a 60K assignment fee and closed on them 3 days later.

So don't let people tell you it's hard because it isn't. What it is though is HARD WORK. IF you're lazy don't bother starting. But if chasing deals excites you and you don't mind being in your car at 7AM and getting home at 10PM then get into it!

FREE TIP: Outside of institutional sellers you will always get the best deals negotiating face to face with actual owners. FSBO, tired landlords, deceased estates etc., that's where the gold is.

@Leroy Feireira-shearin Everything every one said that I've read is true. But I think the number one thing they (the gurus) don't tell you is how difficult wholesaling is for so little profit in return on average and how much it will cost you. They say you need no money to wholesale but marketing is not free, its very expensive. Now that does not mean wholesaling is bad it's just a huge let down for many who buy the hype. As long as your expectations are true and realistic wholesaling is a good strategy.

I think to be a good wholesaler you need to understand investing, rehab costs, and how to value property. The problem is that it is hard enough for investors to find deals with enough meat on the bone let alone paying a wholesaler. Every day I get offers from wholesalers where the ARV estimate is much too optimistic and/or the repairs estimate too low. Most of the deals I receive would be money loosers.