Hey everyone, my name is Ethan, I’m a 20 year old guy from Texas and I’m looking to get my first wholesale deal. ANY answer is greatly appreciated! My question is:
As a wholesaler how can you structure a deal where the seller wins, the wholesaler wins, and the buyer wins? (How do I best serve my interests, the sells, and the buyers)
I want to be a wholesaler that solves problems, and gets good deals where everyone wins. Any advice would be greatly appreciated!
@Ethan Garrett I want to start by saying that I am not a wholesaler so this is from a POV outside of the wholesaling space. In order for the situation to be a "win" for all parties involved, we would have to define what a "win" is to each party.
In general (and in an ideal world): The "win" for the seller is that you are solving a problem for them that they do not have the time/resources/wherewithal to solve themselves. The "win" for the wholesaler is helping the seller solve their problem, providing the buyer with a profitable deal, and then earning a fee for their efforts. The "win" for the buyer is that they are getting a deal that they likely would not have found on their own and that they will make a profit on.
It's good to keep in mind that these "wins" for a wholesaler and a buyer can and will vary on a case-to-case basis. I have seen experienced investors purchase property from wholesalers where I'm looking at the numbers like "There's no way that they're making any money here." and I have come to find that the reason is.. they don't plan on making any money on it! They plan on just having that project to keep their crews busy until the next profitable project. So the buyer's "win" in these cases wasn't buying a deal with great margins, but buying a "good enough" deal in a competitive market to keep their crews employed.
For a wholesaler to be effective, the formula will always be the same.. Solve the seller's problem and provide a deal to your network that they are also able to profit on. If the deals you are providing to your network do not have great spreads (ARV-Purchase Price), you will not have many return customers. As for YOUR "win", that's for you to decide. Are you mainly interested right now in building relationships and your network? Do you plan on spending thousands of dollars on marketing to find these deals or will you be dedicating hours upon hours of your time to Driving For Dollars? Or a combination of both? Or somewhere in the middle? How do you value your time? Would you be happy assigning a property for a $6k fee or do you need to assign it for $20k to compensate yourself for your time and pay for your marketing?
My suggestion would be talking with RE investors in your market and asking each of them who they believe to be THE BEST wholesaler in your market and then learn as much as you can from that wholesaler. Since you're only 20, you have plenty of time ahead of you. If you don't have a lot of expenses (rent/mortgage/kids/cars/etc.) find any way possible to get on that wholesaler's team, even if it's strictly commission on acquisitions... the experience that you can gain in just a year or two of working for a high-volume wholesaler could be invaluable for you. Added bonuses are that you can make sure that you enjoy it, make sure that you are good at it before getting yourself into any situations, and can make a nice living off of it!
The amount of your win is inversely proportional to the combined wins of the seller and buyer. The wholesalers that give wins to the other two parties work for significantly less than a realtor's commission would cost and make their money on lots and lots of volume.