The Shocking Truth About Working With Wholesalers

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As a real estate investor, wholesalers are a great source of potential deals for you. Whether you buy and hold, buy and flip or buy, hold then flip, wholesalers have been the source of some my most lucrative house flips.

But working with wholesalers is not as easy as you might think. Sadly, there are no wholesalers waiting outside your door when you go to work in the morning with a list of killer deals for you to grab.

To leverage wholesalers for your flips, buy and holds or whatever kind of real estate investing you do, you have to work it. And you have to work each wholesaler slightly differently than the next.

Although each wholesaler has their own unique personality and way in which they do business, as it turns out, there are really two kinds of wholesalers. But neither of them I deal with in the same way.

One size does NOT fit all wholesalers.

Here we teach you how to deal with each type so you can establish solid ongoing working relationships with a stable of solid wholesalers, but also get a little bit of extra effort out of them – effort which can be the difference between a home run deal and an epic fail

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The 2 Types of Wholesalers

When you want to use wholesalers you basically have two types:

1. Career Wholesalers

These are guys (I’ve never met a female one in my career – so I’m not being gender-biased here) who are seasoned real estate investors who have been wholesaling for some time. They run a serious, no frills business and know what they’re doing. They are not looking to move on to other things – rather, they wholesale real estate as their primary business. In some cases, they dabble in other kinds of real estate investing as well.

With this first group, you just work with them as best you can to build a solid relationship knowing they could be tremendous sources of deals for you. Because these kinds of wholesalers are usually well-financed and are not short on cash, they make take the best deals for themselves. And if they should.

When you’re learning to work with wholesalers, this group may be more challenging to work with at first – but are very good sources of new flips.

2. Ladder Climber Wholesalers

You’ll find that many wholesalers are beginner real estate investors short on cash and are using wholesaling as a means to get into other kinds of real estate investing. This group is either wholesaling for the sole purpose of creating enough cash to do purchases themselves or getting their feet wet in the real estate investing world, choosing to do a lower risk form of investing.

For this second group, you have two choices with them – you can either utilize them to simply get deals or and even better in my opinion is to use them to source deals but also forge mentorship kinds of relationships. I’ve done it both ways and they both work well.

How to Work With The Career Wholesaler

One of the best deals I ever got from  it wasn’t from reciprocity at all. Instead, it was from a seasoned professional wholesaler who, suffice to say…had been around the block a few times.

This wholesaler had been in the business for a many years and it took me some time to get to know him. And it took him some time to get to know like and trust me as well – all of which is typical with the kind of wholesaler.

Here’s how I approached him:

  • Build Rapport: Because they really know what they’re doing, it takes some time to develop a fair bit of rapport with this type of wholesaler. Relationship building often occur in “the meeting after the meeting” after your local REIA meeting – when you’re sharing a few beers and everyone is talking more freely. This wholesaler was sizing me up to see if I was as good and as trustworthy as some of my colleagues apparently had told him.
  • Be Patient: It wasn’t the first month after knowing him that I got the deal – rather, it was after about five months or so of seeing him at meetings, chatting afterwards in the bar and the two of us just generally getting comfortable with each other. These kinds of relationships take time, so don’t get upset or anxious if nothing happens in the first month. For wholesalers who are really good, oftentimes its worth the wait. Real estate investing is a marathon – not a race.
  • Get on “The A List”: With the wholesalers that are seasoned and are doing a lot of business, you’ll find that you may not be able to get on their “list” as an active purchaser or retailer investor for months. This is because they have most likely already their “go to” real estate investors already. Your job is to get on “the A list” and this does take time.
  • Prepare For Rejection: When I first approached this wholesaler on a deal I knew he had, my offer was flat-out rejected. He knew he could get any of his other house flippers to buy it at the price he was asking. In this case, he was asking $60,000. I offered less – round $58,000 and he flat-out rejected my offer. At first, I was upset, but I realized that he probably had a good reason for it and I reworked my numbers to eventually get it.
  • Be Creative and Flexible: Because the offer was $60,000 and no less, I had to get creative. So I tweaked a few things in my projections – still sticking to my 70% Rule and asked around to my contractors to see if I could work some kind of a partnership deal. After about 3 days, I figured out a creative way I could partner with my main contractor – then came back to him and offered him the full $60,000.

He took it, I paid it – and I ended up making over $22,000 net before taxes on the deal.

How Work With The Ladder Climber Wholesaler

In order to learn the real estate investing business, you have to start somewhere. And if you’re short on cash or perhaps a bit risk averse, wholesaling is a great way to get into house flipping. Think of it this way – instead of flipping houses, a wholesaler is flipping contracts.

Because you need no money to get started in wholesaling, it attracts a lot of new real state investors. So you deal with this group way differently than the first group.

I’ve found that taking new wholesalers under my wing and helping them learn the ropes helps me even more than them. So although helping these guys may seem like a selfless act, in full disclosure, it’s not. However, helping someone advance their career while helping your business in the process is a pretty sweet combination.

In fact, the acquisition manager we just hired at our company was a young wholesaler who was looking to move up towards acquisitions when I first met him. He ended up becoming my first house flipping one-on-one coaching student as well. Although I never intended it to work out this way, he is now working with us full-time on my house flipping team to source new house flip opportunities.

That relationship all was built by just being helpful and mentoring him to be successful as a wholesaler – which he still is to this day. As a form of gratitude, even though I never asked him directly, he would then come to me first when he had a deal that interesting.

In the case of our new property acquisition manager, I really didn’t have a “master plan” to mentor him to the point where he would become a part of my team full-time. Instead, it was a natural outcome that we will both now benefit from.

And for these kinds of wholesalers, my approach is completely different:

  • Meet Lots of People: At REIA or any other kind of real estate investing meeting, you’ll meet all kinds of people from real estate agents to hard money guys and many wholesalers. Don’t leave once the formal meeting is over – stick around until the “meeting after the meeting” at the bar or lounge at the hotel where the meeting is.
  • Be Nice to Everyone: At one REIA meeting I attended, a wholesaler came up to me and was really interested in my business. He was young, smart, ambitious and extremely interested in learning the business. I talked to him for 45 minutes at the meeting and then even more after at the meeting after the meeting in the bar. I did a deal with him the next month.
  • Recognize Ambition: In the case of this wholesaler, he was new to the business, but had wholesaled a few homes and I could just tell he was really ambitious. He also worked at a full-time job and was dying to escape the 9 to 5. I loved his energy, his smart questions and I could tell he just had a spirit that would eventually make him super successful. He asked me for his card and I told him to call me any time.
  • Say “Call Me” and Actually Mean It: Everyone gives out their business cards and says: “call me sometime”. Do they always mean it? If you say it, you have to actually mean it. With this guy, I did mean it. Sure enough, a few weeks later he called me and told me about a property he was working on in a town near me and asked me what I thought about it. That was the property we did the deal on.
  • Help First, Then Ask: When I met this wholesaler at this point of time in my house flipping career, I simply didn’t get many calls from people looking for help. He talked to me about how he wanted to wholesale the deal to a rehabber. He had done his homework and knew the numbers including ARV, The 70% Rule and estima.ted rehab costs. He had financial models for the long-term buy and hold investor and scenarios for the house flipper. He knew his stuff, but he wasn’t sure how to structure the deal so he made money. I gave my recommendations over a number of phone calls which would benefit him and the buyer.
  • Teach Them Your Formulas: I divulged to him how I evaluate a property using ARV, MAO, cost of repairs, the 70% Rule and all the other metrics I use. Although he already knew most of them, he didn’t know some of them. He asked me point-blank if I were him; how I would present this wholesale deal to a potential flipper? I taught him that using the formulas, he could get just about any investor interested…including me.
  • Never Turn Away a Good Deal: At the time he approached me, I was already deep into two other deals – so I never even considered buying it myself. but once we worked the figures and formulas, the numbers were so good, I asked him to wholesale the property to me. And of course, he did.
  • It Feels Good to Help: This has nothing to do with real estate investing – but I just liked this guy and really wanted him to succeed. And because the numbers looked so good – I knew we could both make money on this deal. Sometimes, it’s not all about the money.

In this deal, he ended up making just over $5,000 and I made nearly $30,000 net before taxes on the deal.

It was a total win-win-win all around. Everyone made money and everyone benefitted. He made a nice commission, I made a good chunk of change and the new owner got a fabulous place to live.

After that first deal, I ended up doing three more just like it with him.

Wholesalers Conclusion

Wholesalers can be a great for finding good deals, but each type of wholesaler requires a different approach. Don’t deal with both types in the same way, you simply can’t.  But when you’re investing real estate, no matter what kind, your overall approach should be the same. Be honest, be open, build rapport and trust…and when you do all those good things, good things will happen to you as well.

If you come this far, then please leave a comment below! What do you think? Are there any methods YOU use to work well with wholesalers? Put your comment below or just ask me anything at all on wholesaling, house flipping or real estate investing!

About Author

Mike LaCava

Michael LaCava is a full time real estate investor, house flipping coach and the President of Hold Em Realty located in Wareham, MA. He runs the website House Flipping School to teach new real estate investors how to flip houses and is the author of "How to Flip a House in 5 Simple Steps".

25 Comments

  1. Michael, this is my favorite article about getting started in Wholesaling!

    As I look for no equity deals, pretty houses, I talk to Wholesalers for thin deals, 20% or less equity, sellers that need to sell and do not want to use an agent.

    I bring a wholesaler, usually inexperienced, to lunch, and ask him to be a part time acquisition manager for my Lease Purchase Business, and pay him $500 a deal that comes through to fruition. I keep him/her on the right path — 4 B 2 B in good school districts no work needed, little equity.

    So they are basically a finder for us, and I have had some success with wholesalers helping us, along with expired listings and listed sellers.

    Michael, this article is a really important one for people getting into wholesaling, and how to market for RELATIONSHIPS that will get symbiotic results for all concerned.

    Being directable, coachable, and reliable is all any business owner wants in an entrepreneurial employee-partner!

    Best Wishes,

    Brian

    Nice job!

    Brian

    • Thanks Brian. I like that approach you use for your lease purchase business. Less competition from all the investors looking to do flips. Being creative and thinking outside the box is essential and you have done both. Great work as well!

  2. Great info” I’m a little confused about wholesaling, if I become one, find properties for investors and tell them about, what keeps them from just going to that seller without me?

    • Hi Terry – You should get that property under contract so you control it and know one can do that to you. If your new and need some assistance from an investor then ask them. If they undercut you then they would be unethical and you should let them know that if they ever did that to you.
      Hopefully they would only get away with that once with you.

  3. Mike –

    Since I am a full time wholesaler, I found this post particularly interesting. You did a good job of spelling everything out.

    Good wholesalers bring deals to folks that don’t know how to do the marketing involved, can’t do all of the marketing (maybe they have a full time job), or they just don’t want to do the marketing involved to find deals. Rehabbers tell me all the time, “Just bring me a good deal. I am a rehabber, not a marketer. I don’t care how much you make so long as the numbers work for me”.

    Good wholesalers also have to buy the properties “below wholesale” value to allow for their fee.This leads me to the part where you said the wholesaler wouldn’t come down on his price. There is good reason for that; they don’t usually have a lot of wiggle room in the numbers.

    Remember when I said they have to buy the property below wholesale value? What that means for anyone just getting started out there is the wholesaler has worked the same formula you spoke of earlier. They have figured out the repairs associated with this property as if they were going to be the rehabber. After all of that is done, they figure in a fee for themselves.

    Nothing puts a wholesaler off more than a newbie investor that looks at a property a wholesaler is offering and then makes a “stupid offer”; an offer someone would make if they were actually the wholesaler. Most of the time they couldn’t close your deal or any deal. They are bluffers and tire kickers.

    I am lucky that I have some great cash buyers on my list that buy over and over again. They are the first people that let me know when their buying criteria changes so that I can make changes. Those buyers on my list always get the first call.

    Thanks for another great article.

    Sharon

    • I couldn’t agree with you more Sharon. The only time I try to negotiate is if the #’s fall below my formula. The deal I was referring to there was exactly that and not trying to take away from his profit.The funny thing is because he was a long term wholesaler he had back up buyers for sure but I had first crack because it was in my territory. He had $20,000 in there for a wholesale fee that at the time I didn’t know & so he could of for sure moved on the price. The bottom line for his benefit he did not have to because of his other buyers and that was to his advantage. I needed to fill my deal flow so I paid the $60k. It is good to be able to work with your wholesalers & discuss pricing so it works out for both if the #’s get tight but I completely respect the fact if they can get a higher price from another investor. Thank you for being a great wholesaler and doing what you do. I wish there were a lot more of you out there. Thanks for your comments.

  4. Cristina Corredor on

    Mike,

    This article was an eye opening to me. I´m starting in the real estate business as a wholesaler. it´s really interesting to see the other point of view, the investor´s point of view about wholesalers, we can be a great tool and after all is about generating win – win situations. I´ll keep reading your articles, thanks a lot.

    • Welcome Cristina. Think of it as reverse engineering. Just like when I look to acquire properties. I first figure what I could sell it for before an offer so you would need to know what your investors are willing to pay for a property by understanding how they buy then you can effectively buy correctly to assign to them. Best of luck with your wholesaling!

  5. Mike,
    Great article. I considered myself doing well in buying houses. Reading your article made me realized I am just still outside the door of investor’s club. Keep writing, I am learning. thanks.

    Julian

  6. An encouraging article! As an aspiring wholesaler, I’ve been doing a lot of reading and taking notes, and I’m at the stage where I’m ready to go out and do. I attended my first RE meeting over a week ago, gathered business cards and had great conversations. I even asked a few if they mentor or have the interest to. But their response didn’t reflect an interest. Learning isn’t a problem for me, neither is doing the work but I also know that my strength is in hands-on activity. I used to see articles here and there that “downed” the wholesaler but this article is encouraging because I know that I am an asset and would be such to any one I’m working with. If an investor tells me the criteria their interested in, my goal is to find exactly that.

    • Hello Takeya – Rather than ask if they would mentor you try phrasing it differently. Tell them you are in the process of building your buyers list & if they would be interested in buying any deals you bring them. If they say yes which I can’t imagine them saying anything else then let them know you are new in the business and if you could take them out to lunch (your treat) so they can explain to you exactly what they are looking for and where and how they arrive at their prices…….and so on.
      This way it doesn’t sound like so much work for them like mentoring someone can be.
      Explain to them if they help to educate you to assist you in getting the deals you will bring them to them. That should open up more doors for you for sure. Let me know how you make out.

      • Awesome advice Michael! Thank you for sharing; it’s creative. I truly believe in give-and-take relationships and so this would be a good fit, especially as a way of saying thank you for any golden “nuggets” he or she is willing to drop. I will be sure to let you know how this goes 🙂

  7. I find myself in the “Ladder Climber Wholesaler” category and I’ve been pretty lucky to find two “mentors” that have been invaluable to me thus far. It’s really helpful to have an experienced investor (or two) that you can bounce ideas off of and get analysis advice. The best thing is I know they are helping me, but are also doing it to source more deals. To me that is a win-win-win. I win because I get education. They win because they will eventually have deals that I bring them. And I finally win again because I’ll profit on the deals I bring them. Really great article for seasoned investors who are skeptical of working with new investors – thanks Mike!

    • That’s great Brandon & a perfect way to get started. I am doing that exact thing with some wholesalers that have been struggling & we will get a first look at any deals. Love to hear how you make out so keep me posted.
      All the best.

  8. Detrionne Davis on

    Hey Michael,

    I am a new wholesaler; I could be described as the (2nd) type of wholesaler that you described in this article. I have yet to do my first deal, but I am an action taker. I am looking for the type of mentor partnership that you described. Any advise on how can I find this type of mentor?

    Thanks for reading this

    • Hello Detrionne –

      Here is the response I just gave to Takeya above who approached it by asking for a mentor at af REIA meeting but didn’t get a positive response & I suggested – Rather than ask if they would mentor you try phrasing it differently. Tell them you are in the process of building your buyers list & if they would be interested in buying any deals you bring them. If they say yes which I can’t imagine them saying anything else then let them know you are new in the business and if you could take them out to lunch (your treat) so they can explain to you exactly what they are looking for and where and how they arrive at their prices…….and so on.
      This way it doesn’t sound like so much work for them like mentoring someone can be.
      Explain to them if they help to educate you to assist you in getting the deals you will bring them to them. That should open up more doors for you for sure. Let me know how you make out.

  9. Hi, Great information. I am a Realtor here in California, but I am actually interested in becoming a wholesaler. If it’s not too much a hassle, could you contact me via email and chat a little bit more?

  10. joe nasr

    Thats a great article mike,

    As new to the business and looking to get to know more about wholesaling dealers, how they work, how to find them and how to deal with them, i ended up here and i could not be more thankfull.
    I feel that i have more knowledge of how to approach wholesale dealers and hopefully find a reliable one very soon.
    I hope to be able to connect with any of the wholesaling guys that do business in LA area.

    Thank mike again.

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