An Investor Analyzes: Is Wholesaling a Good Way to Break Into Real Estate as a Newbie?

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chris feltus

This seems to be a divisive topic that comes up on the Forums quite a bit, and there are good points from both sides of the aisle, but I thought I would weigh in. Note, for full disclosure: Before I flipped houses or acted as a real estate agent, I was a wholesaler, so this topic is somewhat close to my heart. In my opinion beginners can successfully break into wholesaling, but they must be properly prepared to do so. To help frame the right mindset, I created a few questions and talking points below to help you be introspective and analyze if it may be a good fit for you.

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Ready to Get Your Real Estate License?

Should you get your real estate license? In my opinion, yes. It is not legally required to wholesale, but it comes with many benefits. With that being said, are you willing to get yours? Not only will it help you gain more knowledge, but it will allow you to act as an agent for leads that are not well suited for wholesaling — namely, high equity properties that need repairs of some sort. As you will discover after marketing for long enough, a good portion of the leads fall into this category. It’s like trying to fit a square peg through a round hole; it doesn’t fit so don’t try to force it. Instead, offer the seller options and truly cater to their best interest. It’s a win-win and will allow you to close more deals you wouldn’t be able to otherwise. People always love options.

Related: 6 Non-Negotiable Habits of Highly Successful Real Estate Wholesalers

In addition, it will give you direct access to your local MLS. Being able to correctly estimate the ARV of a house is essential, and having accurate data will help you price your offers correctly.

Do Your Research

You will not have everything from A to Z figured out before you complete your first deal. Some of it you will only learn by taking action and tackling the problems as they arise. However, that does not mean that you prematurely start this process and hope for the best. You need to break it down and have a good understanding of what you need to do.

These are real people, families counting on you to perform. Sometimes there is a lot at stake for them. Do not make the mistake of trying to wing the whole process. You will bite off more than you can chew — and if you don’t perform, you can hurt these families in many ways and make this business look like the late night infomercials they see on television.

What does that mean for you? Understand what forms and contracts you will need. Are you willing to put in the time to do this?

Cultivating a Relationship With Buyers

Are you willing to put in the effort to cultivate a relationship with your buyers? I remember the first house I ever wholesaled. I was so nervous when I got my first contract, I couldn’t sleep at night due to anxiety. At the time I didn’t have a direct buyer for the house; I just knew the numbers well enough to know that it was a great deal. People always say get the deal first and the buyers will follow, which is true, but being in this position, especially when you are new, can be nerve wracking. Instead, what I would suggest looking back on it is to start cultivating meaningful relationships from the get-go with potential buyers.

Nowadays I literally have a handful of select buyers that probably buy 95 percent of the deals I lock up. I don’t have to mass blast emails, post on Craigslist or pitch houses in front of a local real estate club. Instead, when I pick up a house with a certain ARV in SW Fort Worth, I know exactly who I am calling after I get the contract. The reason I can do this is I have an ongoing relationship with my buyers. I know I can trust them and even tell them about deals before I get them under contract.

Related: Why I’d Rather Be a Wholesaler Over a Fix & Flipper or Buy & Holder Any Day

How Long Will You Commit to Spending Money Without Deals?

Are you comfortable continuing to spend money when you have no deals or leads? As I have talked about in previous posts, spending money when you are not getting any leads or deals is what separates the wheat from the chaff when it comes to real estate marketing. Too many people get started in this business, build a list and have unrealistic expectations when they send out their mailers. I tell people to have reasonable expectations — on a small to medium-sized budget, I tell people to be prepared to continue mailing for 6 months at least without closing on your first deal. Now, in all likelihood your first closing will likely come sooner than that — but it may not; it may come at 6.5 months or 7 months. There is nothing set in stone.

If you are only going to commit to a few mailings, you might as well go waste your money on something else, like a lottery ticket, because that is essentially what you are doing. You need to have a sustained marketing campaign that touches your list multiple times to convert the leads. Which brings me to my next point.

If you are disappointed by your own answers, that’s ok. Wholesaling can still be for you, but it’s better to have a realistic outlook on what to expect. If it’s not a good fit now, continue working toward it, and it can be in your future. Wholesaling has opened many doors for me in real estate, and that’s why I am so passionate about it.

Investors: What do YOU think? Is wholesaling a good avenue for newbies?

Leave your opinions below!

About Author

Chris Feltus

Chris is an active real estate investor who buys and flips houses in the Dallas real estate market. He enjoys helping others along on their journey. In addition, Chris operates as a licensed Realtor in the Dallas-Fort Worth area.

11 Comments

  1. I agree that in that getting your license before jumping in re. is a good thing as it prepares and teaches you a lot of important stuff, in addition to giving you access to the local MLS.
    Thanks for this post, I think many people looking for their first deal should keep in mind all these things you mentioned here.

  2. Wyatt Borden

    It’s a simple concept but in no way easy. The only reason I would be against a license is if someone wants to be able to do deals all over the country. Other than that, it’s a great idea as what the “gurus” teach is completely legal when one has a license. the thing people need to understand is in order to wholesale, one has to purchase and close on the property before selling it. It can be done with assigning contracts but that process is different and assigning contracts without disclosure the way gurus teach is brokering without a license. When contract assigning, the assigner (me) has equitable interest in the contract not the property. I don’t know of any way to have equitable interest without buying and closing or having a license.

    I say do your due diligence and treat Wholesaling the same way one would treat Rehab and Buy and holds (like a business and not a quick payday)

  3. Brian Stephens

    I’m a newbie who is taking a hard look at wholesaling as a starting point. Thanks for the post, Chris. It hits all the points for me, especially in terms of mindset. The important thing is to set my mind to a business mindset…there will be expenses before profits, marketing takes time and expense before the deals come, business is about people first, numbers second. All of those are important points and are geared toward long term investment.

  4. Carl Hunt

    Hi Chris, I would like your feedback on a property I am considering making a offer on in the Dallas area. The asking price is 75k that will be listed on the MLS soon. I just want to get it under contract and “assign it” to another investor or “buyer” to profit 5k. It is a 2br-2car garage, 1300 sq ft in Pleasant Grove on the corner of Elam Road at Buckner Blvd. I found the property on a Real Estate website by a Real Estate agent from Denver. I have been in contact with her the past 2 weeks. She mentioned this would be a property to “flip”. She is in the Dallas area to show the home while on family business. I willnot rehab the property since I am trying to build reserves for future investments. What would you offer?

  5. Michael Borger

    I always suggest new investors start out wholesaling because it’s a lower risk while they’re still building their education. As they do deals, their education grows along with their confidence and credibility in addition to their bank account. The problem is that too many wholesalers either go right for the million dollar properties or they don’t know how properly discern a true deal from one no buyer will buy. Education first, then action.

  6. Silvica Rosca

    I was nodding my head while reading your post. My partners and I started our wholesaling business earlier this year. We spent 5 months of marketing and money going out before we landed my first deal. Research, persistence in marketing and relationship building are key!

  7. Zachary Clough

    Great post Chris-

    In your marketing campaigns, what type of language are you using to disclose your status as a licensed agent?

    In your contracts, are you using any clauses such as, “Seller understands that Buyer is acting as a principal in the transaction and is not working as a real estate broker representing anyone other than him in the transaction, though he may hold a real estate license.”?

  8. Russell Brazil

    Wholesaling requires many skills….marketing, communication, sales, estimating rehab, estimating arv etc. Becoming a master of so many skills seems like a pretty hard thing to me for a newbie. I would think becoming an agent where you can more easily leverage the power of your social netowork would be an easier way to break into real estate.

  9. anita walter

    all this information has been very helpful . I am brand new to this venture and I want to start with wholesales to build myself up to doing other deals and I think I have a few months to establish some relationships first before I jump in. what are some good things to have done first before doing my first deal without a license a good attorney on my team for sure.

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