Posted 4 months ago

What is the Wholetail Strategy?

What is a Wholetail?

As I said in my last blog, wholesaling is the art of finding an under market value property and assigning/selling the contract to an investor. Now what is a wholetail? It has a very similar name and it is a similar strategy but it also has its differences.

The name wholetail is a compound word made up of the whole in wholesale and the tail in retail. So wholetailing is the art of finding an under market value deal - just like in wholesaling - but instead of assigning the contract to an investor you’re going to close on the property and sell it for retail value.

Why is this a good strategy? The reason it’s a good strategy to use is because in wholesaling you’re finding a deal for an investor but since they’re an investor they’re not emotional about the property. If the numbers don't work then the investor won’t purchase the deal. Whereas on the retail market people are very emotional, it's usually the biggest purchase of their lives, it’s very scary and people tend to fall in love with the deal which causes people to overpay. In a wholetail there are 3 people involved, the original seller, you as the deal finder and the end buyer.

Let's go through the numbers on a basic wholetail.

You as the investor are going to find the deal and for example let's say you agree on a price of $400k. Before you lock it up you want to look at what properties are selling for in as-is condition. Lets say those properties are selling for $500k in as-is condition. You can now lock the property up for $400k, close on it (which will cost you anywhere between $15k-30k) and sell it at the $500k sale price.

Here are the numbers

$500k - sale price

-$20k - 4% realtor costs

-$30k - closing costs + holding costs

-$400k - purchase price

$50k - Profit

The benefit to this strategy is that you’re not going to have to hold onto the property for so long (which will make you incur more costs). You don’t need to hire a contractor to do the work to the property, manage him, worry about budgets, timelines, etc. It's a quick and easy process as long as there is a retail buyer for the property.