Wholesaler: “Hey, I have a smokin’ hot deal for you! It will sell for $125,000 and only needs some carpet and paint. Should cost you around $7,500.”
Investor: “Really? Wow! That’s great. I want it!”
Fast forward 3 months…
Investor: “Mr. Wholesaler, I’m in the third month of this rehab and I’m already at $20,000 and still haven’t even gotten to carpet and paint yet! On top of this, I spoke with a few other people and they looked at me like I was crazy when I told them I planned on selling it for $125,000!”
Wholesaler: “Let me call you right back”
The opening portion of this conversation has happened multiple times with me, and if you are getting into the game on the side of being “the flipper”, buckle up as it is only a matter of time before you get your first phone call or email like this. Now don’t get me wrong, do I think this is a scummy way for a wholesaler to approach another investor? Not at all.
First off, the deal could literally be a “smokin’ hot deal”, so the wholesaler may not be trying to ‘sell you’ at all, just simply telling you how it is. On the other hand, he could be trying to sell you a load of garbage, but even in this case, welcome to the real estate game.
Key point, it is either your money or your investor’s money, so YOU ARE THE EXPERT. This is one of the few areas where I believe being humble and having little arrogance is bad. I don’t mean in the sense of how you present your physical self, but I mean the way you are thinking up in your mind. You can be humble and non-confrontational on the exterior when dealing with a wholesaler, but up in your head internally, your attitude needs to be:
You are trying to screw me. I’m smarter than you. I know this market better than you. I have better resources then you. Bring it!
By no means are 100% of wholesalers trying to ‘screw you’; however, there are plenty of wholesalers out there who try to present themselves as experts but are pushing a slim to none profitable deal to you. Whether it is intentional or genuinely a lack of knowledge on their part and they truly believe it is a good deal, at the end of the day, intentions don’t mean squat, the NUMBERS DO!
The good wholesalers have all these numbers prepared for you (accurately), but YOU ARE THE EXPERT, so you need to do your due diligence and confirm what you are being told. Your method of due diligence can range from checking things out yourself to calling up a few 3rd party agents/contractors and getting their thoughts on things. It doesn’t matter how you confirm the information, what does matter is that YOU DO IT!
Of course all this requires more of your energy at the start. The ideal system would be to have people bring you deals, and for you to be able to simply say, “sounds great, I want it”, but that comes with time. You need to interview wholesalers (via the deals they bring you) and build relationships from there. Once you have done a few deals with someone, your time at the start will begin to decrease more and more as your trust increases more and more due to the solid deals and accurate numbers.
Along with the above, I should make note that if you’ve worked with a wholesaler multiple times, you can back off this attitude as a relationship forms, but if it is your first time dealing with a wholesaler, this is the mindset you need to bring to the table.
I know the real estate gurus love to paint the picture of investing as you sitting on a beach somewhere, sipping your margarita, and then taking a phone call saying “yey or ney”, but real estate is a business, and as is the case with anything in the business world, it all comes down to who is better prepared. Now that you know you don’t get to sit on the beach and sip drinks… REMEMBER…no/none/nada/nip excuses of “well the wholesaler told me this”, or “the wholesaler told me that”… not valid! Neither your wife/husband or your investor wants to hear it! They are trusting you with the money so – Be prepared. Do your due diligence. YOU ARE THE EXPERT!
Photo: Allison Felus