How Do I Avoid This Wholesale Paradox?

Wholesaling
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How Do I Avoid This Wholesale Paradox?

Carl Flint
Rental Property Investor · Los Angeles · Member since 2021 · 125 posts · 64 votes

Hey guys

I have yet to do my first deal. I have 6+ months of research and the “learning phase” under my belt. At this point, I know that in my market I want to start with wholesaling.

I am going on realtor.com and other similar sites and texting/calling 10 agents a day just to say I’m an investor and I am looking for good cash deals.

I firmly believe that as long as you have a good deal then you’ve got something to work with. So, I’m on the hunt for a great deal.

Here’s what I’m afraid of: I don’t want to tarnish my name among the community as someone who talks a big game but can’t close... what if someone brings me a great deal to wholesale but I can’t find a cash buyer?

And conversely, if I go out and start networking with cash buyers as “someone who can wholesale them great deals” before hand to get a base of buyers... how do I avoid becoming known as the guy who can’t deliver when it comes time to deliver a deal?

Does that makes sense? Please help.

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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
5y

@Carl Flint

There are a few people who claim they're able to wholesale deals found on MLS but I have only seen this happen in a very dismal market, certainly not today's market. If you think about it, if a property is listed on MLS, why would a buyer need you're services? Your fee on top of a Realtor's commission? There's no value added.

At best wholesalers may have a role with lower priced property, in bad shape, in dangerous hoods. That is where Realtors have little interest in pursuing. And in reality, a Realtor can’t sell a $30,000 house, earn half of an $1800 commission, and stay in the business. A wholesaler can buy it for $25k and sell for $30k and be good to go.

As for not being able to close, I would suggest that you inform the seller up front that you are selling to flip the property, and won’t be closing if you can’t. Will you lose most deals; probably, but there’s more downside to not being honest upfront with the seller.

Finally, you need to consider how “wholesaling” is regarded today vs how it was regarded in the past. In the past the wholesaler was regarded as a buyer, who would close if the property could be flipped, or would exercise a weasel clause to get out if he couldn’t. Now, a wholesaler is regarded as an unlicensed agent or broker, i.e., someone who’s representing the seller in trying to sell his property. Depending on where you operate, state real estate commissions are beginning to put some teeth in licensing requirements and filing charges against wholesalers operating without a brokers license.

Many newbies think wholesaling represents the ideal solution to (1) no money and (2) no risk. In truth it’s an extraordinarily difficult way to earn a living. The successful wholesalers I know either (1) spend $75,000 or more annually on marketing or (2) wholesale as a by product of a fix n flip operation, like Homevestors.

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  • Edgar U.
    Real Estate Agent · VA · Member since 2008 · 420 posts · 175 votes
    5y

    The best piece of advise that I can give you is that there is more money available to fund good acquisition than there are acquisition out there. Focus on getting great acquisitions, close em, and then market them so you don't have to worry about all the grey area involved with wholesaling. 

    1Reply
  • George Munoz
    Real Estate Agent · Fort Lauderdale, FL · Member since 2018 · 360 posts · 213 votes
    5y
    Originally posted by @Carl Flint:

    Hey guys

    I have yet to do my first deal. I have 6+ months of research and the “learning phase” under my belt. At this point, I know that in my market I want to start with wholesaling.

    I am going on realtor.com and other similar sites and texting/calling 10 agents a day just to say I’m an investor and I am looking for good cash deals.

    I firmly believe that as long as you have a good deal then you’ve got something to work with. So, I’m on the hunt for a great deal.

    Here’s what I’m afraid of: I don’t want to tarnish my name among the community as someone who talks a big game but can’t close... what if someone brings me a great deal to wholesale but I can’t find a cash buyer?

    And conversely, if I go out and start networking with cash buyers as “someone who can wholesale them great deals” before hand to get a base of buyers... how do I avoid becoming known as the guy who can’t deliver when it comes time to deliver a deal?

    Does that makes sense? Please help.

     Read the book FLIP by NICK RUIZ. ( that's wholesale 101)  YOu will find you answer there and a better approach.. 

    Aside from that I Honestly recommend partner up with a wholesale Company  ( already established ) Also with buying power. Not just only wholesale. (Work for them and committed 100%) If you are serious I guarantee you will make money, but not only that you will Learn ALOT.. LEarn to get paid .. And also wont carry to much the liability.. 

    1Reply
  • Carl Flint
    OP
    Rental Property Investor · Los Angeles · Member since 2021 · 125 posts · 64 votes
    5y

    @Bonnie Low fantastic. I like the reverse engineering effect of getting criteria of what your buyers want and then go out and find it.

    1Reply
  • Carl Flint
    OP
    Rental Property Investor · Los Angeles · Member since 2021 · 125 posts · 64 votes
    5y
    Originally posted by @William Morgan:

    I'm a cash buyer. My company normally works in Ventura County, Santa Barbara County, San Luis Obispo County, and Monterey County. But If you have a deal in LA County, you can contact me. We can close if it's priced right.  

    It's rare that we work with wholesalers because most underestimate repairs and overestimate the ARV. In other words, they are perfectly happy seeing us take a loss, were we to rely on them. We consider those folks a threat to our business. Don't do that :)

    Great to hear! So, it sounds like I really need to dig deep and become versed in correctly estimating rehab costs.

    For what it’s worth, quality deals where all parties involved feel like they’ve won are what I’m interested in. This will create a good long game for me. Rather than just a one-and-done dealer.

    1Reply
  • Carl Flint
    OP
    Rental Property Investor · Los Angeles · Member since 2021 · 125 posts · 64 votes
    5y
    Originally posted by @George Munoz:
    Originally posted by @Carl Flint:

    Hey guys

    I have yet to do my first deal. I have 6+ months of research and the “learning phase” under my belt. At this point, I know that in my market I want to start with wholesaling.

    I am going on realtor.com and other similar sites and texting/calling 10 agents a day just to say I’m an investor and I am looking for good cash deals.

    I firmly believe that as long as you have a good deal then you’ve got something to work with. So, I’m on the hunt for a great deal.

    Here’s what I’m afraid of: I don’t want to tarnish my name among the community as someone who talks a big game but can’t close... what if someone brings me a great deal to wholesale but I can’t find a cash buyer?

    And conversely, if I go out and start networking with cash buyers as “someone who can wholesale them great deals” before hand to get a base of buyers... how do I avoid becoming known as the guy who can’t deliver when it comes time to deliver a deal?

    Does that makes sense? Please help.

     Read the book FLIP by NICK RUIZ. ( that's wholesale 101)  YOu will find you answer there and a better approach.. 

    Aside from that I Honestly recommend partner up with a wholesale Company  ( already established ) Also with buying power. Not just only wholesale. (Work for them and committed 100%) If you are serious I guarantee you will make money, but not only that you will Learn ALOT.. LEarn to get paid .. And also wont carry to much the liability.. 

    Wow. You’re a really smart guy. I didn’t even think to work with an already established wholesaler. That’s genius. I’m sure there are some in my area. I will research.

    Also, I ordered Flip by Nick Ruiz. Thanks for the recommendation.

    0Reply
  • Kathy Young
    retired · Huntsville, AL · Member since 2015 · 31 posts · 4 votes
    5y

    @Brian Jaime

    Join your local REIA; it's the best way to network

    and find buyers.

    0Reply
  • Yoann Dorat
    Investor · Boca Raton FL · Member since 2017 · 255 posts · 188 votes
    5y

    Hey @Carl Flint that's a good question, you definitely don't want to put a property under contract and not being able to perform, this is why my advice would be to build your cash buyer list before you go on the hunt for deals. 

    That way you will go to your appointments and lock deals with the peace of mind that you will be able to perform. 

    That being said, if you're expecting agents to bring you "deals" from the MLS to wholesale, it's gonna be a very long wait! Wholesaling is a Marketing and Sales business, you need to go out there, advertise to distressed sellers, and find OFF-MARKET deals, that's the ONLY way to succeed.

    If it's on the MLS, why would an investor work with you instead of an agent? It doesn't make any sense.

    1Reply
  • Carl Flint
    OP
    Rental Property Investor · Los Angeles · Member since 2021 · 125 posts · 64 votes
    5y

    @Yoann Dorat very true. I appreciate your input.

    0Reply
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