I only have one rental property as of now, so I'm still very new. I am ready to get my next property, however when it comes to buying from a wholesaler I am extremely nervous. I see so many wholesalers with "deals" but I can't convince myself to make an offer. I know only using MLS is going to limit my options but how can I get comfortable with wholesalers? I hear so many horrors story from people that have purchased that way. Any advice would be great!

You're smart to approach wholesale deals with caution, but there are great deals that can be found from wholesalers.  A few tips that can help protect you from the liability issues that arise from buying an assigned contract:

• Ask how the contract is being assigned.  Laws vary from state to state, but make sure the escrow company will be able to insure the transaction, and your lender will allow the assignment
• Ask if the seller knows the contract is being assigned. In our state, title companies require the seller(s) acknowledge the assignment.  Your liability exposure exponentially decreases the more transparency there is. Don't be afraid to ask for transparency across the board. Make sure you understand the promises made to the seller and make sure you can honor those promises.
• Require that you can see the unredacted original sale agreement. Use an NCND if needed to make wholesaler feel comfortable with giving you access to is ahead of time.  You, an experienced friend, and/or an attorney should review the sale agreement, any addendums and the assignment contract.
• Run your earnest money through escrow. Even if it's a reimbursement of the wholesaler's EM, deposit your EM with escrow and authorize release of the same amount back to the wholesaler.
• Don't pay the assignment fee until you've closed.  It doesn't matter what the story is, this my hard and fast rule that has saved me several times.
• Don't buy a property in an LLC without attorney oversight, and a judgement search.

Good luck!

@Melba Chambers I know there are wholesalers that I would stay away from. I’m sure there are those where you invest that you should stay away from as well.

As with most things, there are bad ones and there are good ones. At the end of the day, the numbers have to work for you and your goals with the property. As was mentioned before, any deposit should go to the title company, not the wholesaler. They don’t get paid until the property closes. I would be less concerned that the seller knows what’s happening. That shouldn’t affect you one way or the other.

Ask the wholesaler for references of other investors he/she has sold to. They should be able to provide them.

I know if someone asked me for references, I could provide plenty of investors who love me because at one time or another I got them a deal they did well with. If you talk to investors who legit bought houses from a certain wholesaler, you can verify that the wholesaler isn't giving you phony references ie. verify names with property records. Then, ask those investors if the ARV provided was accurate. Ask if the repair estimate was accurate. Not because you want to trust the wholesaler's numbers...don't do that. But because it goes to show if the wholesaler is looking out for the investor by trying to give an accurate portrayal of the deal they are offering.

Fantastic advice by Tyler above.
Most important thing in any purchase as an investor is - do the numbers work? You certainly can’t rely on the wholesalers claim of rehab numbers, exit value, or rental value as most have no clue themselves or intentionally lie to make the deal look like a deal. There are a few good wholesalers out there and you won’t know it until you see some of their deals and run your own numbers. Make sure you know how to do this!!! I can’t stress that enough, never rely on seller numbers or wholesaler numbers.

So, just like with mls deals you analyze, start doing the same with the wholesaler deals and widen your net. Triple check your numbers, get inspections, and never pay a wholesaler directly, only through escrow and only after the deal closes.

@Melba Chambers what is it about dealing with a wholesaler that concerns you? You cannot trust what a wholesaler says about repair costs, expected rents or after repair value. However you can't assume just because someone is asking a price on the MLS, that it is worth asking price either.

@Tyler Combs Thank you

@Colby Hager Thanks

@Will Barnard Thanks

@Ned Carey not sure exactly...I guess that part of what I’m trying to figure out!

@Melba Chambers it sounds like you need to learn more about due diligence, especially what a property is truly worth.  This is something that comes with experience over time. 

@Ned Carey you may be right...I’ll just keep working at it and learning.

@Melba Chambers

A good way to figure out what your house is worth is checking Zillow or other similar websites SOLD houses close to yours with similar layouts, bed baths, sqft. That should give a good idea. If a couple houses that were the same 3/1 like yours and are updated similarly that is roughly what your house is worth. Make sure you are looking at sold houses. The zestimate and for sale house listing prices mean nothing.

As mentioned above. The ARV and rehab numbers shouldn't be trusted, but the price is the price. I've bought several from wholesalers, no issues and we always close at a title company just like any other closing.

Good luck!

Originally posted by @Melba Chambers :

I only have one rental property as of now, so I'm still very new. I am ready to get my next property, however when it comes to buying from a wholesaler I am extremely nervous. I see so many wholesalers with "deals" but I can't convince myself to make an offer. I know only using MLS is going to limit my options but how can I get comfortable with wholesalers? I hear so many horrors story from people that have purchased that way. Any advice would be great!

 If you are not comfortable with wholesalers find one or two real estate agents that have pocket listings.  As you expand your network you will have more deals than you can buy.