The Harsh Truth About Wholesaling Newbies Need to Know

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Wholesaling sounds like a dream to many. The mere possibility of earning a quick buck for a minimal amount of work seems absolutely amazing. Therefore, it is completely understandable that so many people buy into this gig after having been blasted with a series of enticing messages, one after another. So I am here today to help you to get face-to-face with reality and fully uncover all the truths surrounding wholesaling because, as with many things in life, there is no an “easy” way to achieving mastery in this niche.

Here we go.

wholesale-buyers-list

Related: Newbies: Considering Wholesaling to Break into Real Estate? STOP! And Read This.

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Don’t Believe It’s Easy

The first point is you have to be extremely cautious of the kind of advice you are taking into consideration. In the complicated world of investments and anything real estate-related, there is absolutely no doubt that wholesaling can be one of the hardest areas to successfully master. Because of this, I would suggest that if anyone ever tells you that wholesaling is a brilliant place to first tap into the world of real estate investing, then there are only two possibilities:

  1. They are being irrational.
  2. They are flat-out lying to your face.

Well, regardless of which one it is, don’t buy into the hype! Wholesaling is definitely not a place for newbies and is certainly a not-so-flashy place to begin coming up with some easy cash. This is simply because if you plan on being a wholesaler, you have got to be as well educated in the world of real estate as your potential buyers — and you shouldn’t ever undermine them because they could be absolute pros. From being well versed in rehab costs surrounding properties to being familiar with all the local rules and regulations, you need to be capable of doing the math in your sleep and being able to understand what you can/can’t do with the property. 

While none of this is impossible, all this requires experience if it is to be done successfully. Otherwise, you might just find yourself in a terrible situation where you can’t keep up your end of the bargain.

work-with-wholesalers

It’s NOT Passive

Not to mention, unlike buy and hold investing, the income involved in wholesaling is actually anything but passive. Its is completely active and hands on. Remember, this is simply because once you stop wholesaling, your flow of income will come to an abrupt halt. So if you say that you wish to earn income passively yet you go out to begin wholesaling, this can seriously be likened to me saying that I want to be debt-free and still continue to borrow loans from the bank.

Related: Why Assigning Contracts Is One of the Worst Business Models for Real Estate Wholesalers

But if you do decide to get started in the industry by wholesaling, do not get discouraged by this bit of insight. Make sure to properly educate yourself beforehand, and I would recommend partnering with someone who has plenty of deals under their belt.

Investors: What do you think about this assessment?

Let me know with a comment!

About Author

Sterling White

Sterling White started in the real estate industry at a early age back in 2009. The company he co-founded Holdfolio is a real estate crowdfunding platform based in the Indianapolis market. Before founding Holdfolio Sterling and partner Jacob Blackett were involved in the purchasing and selling of 100+ single family homes nationwide. In his free-time he trains for a World Record

33 Comments

  1. Terry Martin-Back

    Thanks for posting this. During many of my real estate investment workshops, I poke a lot of fun at the idea of being a wholesaler without money. To many have bought into the hype after attending a “Get rich quick” seminar without having to work hard, which many of the experienced will agree, does not exist.

  2. Kim Martin

    I have not done wholesaling yet because I know the buyers would chew me up and spit me out. I really like your idea of partnering with someone – and splitting the profits. Not having to walk through the first few deals alone – would be worth every penny. I really appreciate the honesty of your post.

  3. John Barnette

    My presumption is also that wholesaling success would be dependent on the marketop area/type and conditions. In SF Bay area you are not going to find many sellers willingly sell at a steep wholesale discount. Nearly all residential property is selling within 10 days with multiple offers. It is just too strong of a seller’s market. Maybe I am missing something as a Realtor as well. How about any others on here from other hot hot hot markets?

    • Luis Barahona

      Hi John,

      I think that you are right for a subset of homes and homeowners. Homes that are well maintained will likely sell quickly, thus, eliminating the need for the seller to sell below ARV. Likewise, homeowners who are willing and able to prep the house to put on the market will not take below ARV.

      However, I believe that there are distressed buys in both bear and bull markets. Perhaps the homeowner is out of state and doesn’t want to fly home, etc. Maybe a homeowner doesn’t have money to make repairs and wants to get out of the house. Perhaps a couple who is divorcing doesn’t have time to prep the house.

      Your assumption that it works better in sellers/flatter markets is likely true. However, I plan to get my first deals out of the way and become knowledgeable now so that when the sellers market comes I can absolutely kill it.

      Where in the Bay are you

  4. Tyler Chartrand

    That’s a pretty blanket statement “the large majority of wholesalers make little if any money” not really conducive to growing. I am a wholesaler and I love it. I use someone else’s funding so when a deal comes through It is quick cash in my pocket. Any form of making large amounts of money will have stiff competition but to not look at wholesaling as a strategy to build capital is really shortsighted.

  5. William Robison

    Another significant point to consider is that wholesaling without cash is illegal in some states. For example, in Missouri, you can be a wholesaler, but you MUST have funds in the bank to be able to close a contract. You may still be able to assign the contract, but you must be able to close on the contract that you have written. Otherwise, the real estate commission deems that person as acting as a Realtor, probably without a license, which subjects them to charges for acting as an agent without a license.

  6. What, you are saying I cannot get rich laying on the beach using the latest “virtual” wholesale system while my VAs and other team members do all the work? And all of this with little or none of my own money too? Man, you are bursting a lot of bubbles here Sterling 🙁

    Sarcasm aside, I think is a must read for a lot of naive wholesaler wannabes. Another good article Sterling.

  7. david bokman

    So many newbies trying to get into REI and wholesaling is amazing. I think most people need to understand that it requires many skills sets including sales and marketing. Without those skills it’s next to impossible to be able to wholesale for long term success. Glad to see more articles like this….newbies need to understand this is not something that is just going to work overnight.

  8. Chris Yorke

    There is a lot here I agree with. It certainly is NOT easy. The thought occurs to me that there are too many wholesalers out there. The only reason I am in this is that I fell for the lies of so-called gurus about how easy it is. I sweated away for many months without making a dollar, learning, looking at webinars, buying courses. I regret spending good money on Zac Childress to get the advice to continue doing what I was already doing. I really began to become disillusioned last year when I saw an incredible invite from a certain Preston Ely selling (you guessed it) another course in how to become a ‘guru’ yourself. No track record, no problem. My inbox is full of stuff from one luminary or another aimed at one thing: lightening my bank account.

  9. Lisa Bryant

    I think that one big mistake, that people make when they discover a good thing…(HOW TO MAKE MONEY), they jump, too fast! Use wisdom, research and stop making quick decisions, because of the $ sign.
    Think of yourself as always being a student. It will humble you and save you from much. RE is a big business, which in itself is risky. No matter the strategy. Stay in your lane, what works for you, may not be the same for someone else.

  10. Tae Seung Kim

    This is absolutely true. It’s not as easy as the gurus make it seem to be. Although it’s not impossible either; it does take a lot of time and consistency.

    I started my wholesaling process actively few weeks ago after reading about it many times. I sent my first direct marketing (postcard) targeting properties that look like dilapidated and old conditioned. I got few calls but none of them were REALLY motivated to sell. I had to narrow down and quickly use the best of my time by screening callers to see whether they were mildly motivated to sell or REALLY serious about selling. Although I did direct them to my website as preferable communication, I get calls (most of them not serious).

  11. Madison Adams

    Great post Sterling. Wholesaling is a big part of my business but it takes consistency, hard work, and thick skin. I worked in my Dad’s real estate office (he flipped houses) in the summers before the crash, it still didn’t prepare me for what I dealt with my first year of wholesaling. I think there is no better teacher than experience. My advice to wholesalers is to go harass somebody that is CURRENTLY doing deals, read the books they tell you to read, listen to the podcasts, sift through the info on these forums, and when you get a qualified lead get them to help you close the deal and split the profits. It will be the best education you can get. Cash buyers hate dealing with most wholesalers but mine love me because I make them money.

  12. James Banks III

    Great post Sterling,I to am a newbie looking to get started into REI by doing what I was told is the entry-level REI-wholesaling. I tried to partner up with a seasoned investor to “get schooled” by him while doing deals. But nothing ever took off for us. So I guess my only other option is to seek out another experienced REIer who we can partner up with and do some deals

  13. Michael Williams

    Wholesaling is not easy without money so that is why i have been educating myself on all things real estate for the last 18 months. But I agree it is a numbers game. All of the top sellers in my area started their wholesaling business with DIRECT MAIL marketing. This makes sense because it correlates with this being a numbers game. I am partnering with a friend that has access to hundreds of 90 day late leads every month. Since I understand it’s a numbers game and I have been out of work for 3 months, with no income, due to injury; I think it is the perfect time to go full time into real estate. She has the leads I have the knowledge…a match made in RE heaven. I will have plenty of properties next month for any buyers in the Atlanta area or investors out of town wanting to buy in the Atlanta Market.

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