How to Become a Highly Reputable Wholesaler Investors Love to Work With

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In this post-crash era of real estate, the markets are hotter than they’ve ever been. In a good market, everyone wants to ride the wave. During times like these, it’s difficult to find a reputable wholesaler. So let’s discuss how to be the reputable wholesaler every buyer in your market will be looking to do deals with.

Reputation

Your reputation can be a major advantage or a major disadvantage when wholesaling. No matter how small or large your market is, the real estate community is a very small, intimate group. When doing deals consistently, your name begins to become known, and those who are major players know who to work with and who not to work with. Your reputation as a company or as an individual can push you further along your journey or it can limit your growth.

You may think some things are insignificant, but they could hurt your business’s reputation and image. One thing that can be a challenge at times as a wholesaler is estimating the ARV and the rehab cost. Although these two variables are critical in making the decision on price point, they can be manipulated to show an increased or decreased valuation of a property. I bring this up because in competitive markets, investors try and make their deals look better than what they actually are. This can quickly ruin your reputation, and you will be considered the guy/gal who always overestimates the ARV or underestimates the rehab cost.

Related: 4 Ways to Generate New Wholesaling Leads That Actually Work

I was recently talking with a major buyer of mine, and in the conversation, a person’s name came up and my buyer immediately stated, “I unsubscribed from their email list because they always overvalue their properties.” This is unfortunate, but again, if you gain a bad reputation, you will not be in business long.

wholesaling-tools

Deal Analysis

It’s important to focus on deal analysis because, as stated previously, it’s easy to get a bad reputation, and this can come from continuous errors in valuing deals. I’ve witnessed newbies especially making this mistake when getting started. I faced this same challenge, but with continuous practice, I was able to get better at it. I didn’t ruin my reputation by sending bad deals to my buyers. Instead, I would have someone more experienced review my numbers. It’s important to have someone to help you along the way.

It’s vital to know the market you are in and what constitutes a good deal. In many competitive markets, finding the traditional deal structure of 70% of ARV – Repair – Fee = Max Offer is difficult to find, so as the market shifts and swings, you have to be cognizant of where your market is and what you can bring to the marketplace. Being uninformed can create huge mistakes when getting properties under contract. I learned this lesson personally, and I talked about it in a prior post, “How a Lack of Confidence in My Real Estate Calculations Just Cost Me $25k.”

Related: How to Master the Most Important Skill in Wholesaling — Talking With Sellers

Integrity

Discussing integrity may seem obvious, but some investors view the market through the lens of scarcity. This view point of scarcity (there’s not enough deals) can easily break down a person’s moral compass. What a person never imagined they would do tends to become acceptable in their eyes. By keeping your integrity, you will be able to have and keep a good reputation, you will be able to maintain solid buyers, and you will be able still get deals under contract.

honest-wholesale

Conclusion

In this increasing real estate industry, there a lot of newbies entering the marketplace because they believe this is the easiest way to make money. They fail to understand there is a natural progression to being a reputable wholesaler. By taking time to develop your reputation, understanding your market, and using integrity in every decision, you will be able to become the go-to wholesaler for your city. There are those that will have brief success by being crafty and underhanded, but they will not have any longevity. So be the wholesaler with the good reputation who can provide good deals to your buyers, and you will see tremendous success.

Wholesalers: Any tips you’d add to this article?

Let me know how you build a great reputation within your market!

About Author

Marcus Maloney

Marcus Maloney G+ is the Executive Officer of Equity Realty & Investments as well as 3rd Generation Management & Holding LLC, both are family owned and operated real estate investment firms. The firms' goal is to provide affordable solutions in real estate while providing exceptional opportunities for community redevelopment for the residents of Phoenix, Arizona and Chicago, Illinois. You can follow Marcus on Twitter

18 Comments

  1. Justin Lloyd

    I thought this blog was really well written. I can see how it could get easy to flub on the numbers and only look out for #1. With REI I am starting to see it more of an extended family. I am looking forward to learning more, especially on how to value the houses and repair costs. Can’t wait for my first REI meeting in Springfield, Missouri tomorrow.

  2. Andrew Newlon

    Bingo! Every deal we do, we focus on what image it will bring us. There are certainly other wholesalers in our area that have done more deals than us but seem to have a hard time getting rid of their ‘deals’; usually causing them to back out. All our deals are usually under contract or spoke for in less than 12 hours. You have no idea the amount of stress is relieved when we know our buyers take us seriously. Plus, we tend to get bigger fees when we focus on better deals!

    • Marcus Maloney

      Andrew,

      Great point, I notice this in my market as well, other wholesalers send out a lot of properties to their buyers list but I see them slowing reducing the price, or try and renegotiate with the seller, or finally backing out of the deal. Although we may not put out as many properties we know they are gone within minutes and like you said we receive a larger wholesale fee.

      Thanks for you input Andrew very solid point. I talk about this and other topics regarding wholesaling at equityrealestateblog.com

      “Enjoying the Journey”

  3. Mike Dmuchoski

    Marcus,
    You hit the nail on the head. Just had an experience with a local wholesaler that started great as we negotiated a deal, with discussions of a longer term relationship. However after dragging his feet for a few days and communication becoming less and less, the deal fell apart as he went back on our verbal agreement and sold the deal to another.
    This is a tough business and very competitive but I believe there are certain morals you should adhere to. If nothing else, it’s good karma!
    Great article, thanks.

    • Marcus Maloney

      Mike,

      This happens all too often, people do not conduct business with integrity. I’ve seen numerous deals that are marketed by wholesalers that were never closed on because the wholesaler could not perform. We make sure we get the properties at the price we need to market it to our buyers. Others try and lock the property up at a higher price and then can not sell it. A waste of everyone’s time and a disappointment to the seller.

      Thanks for reading and your input. “Enjoying the Journey”

  4. Jeff Walsh

    Thanks for taking the time to write such an excellent article.
    i live in the DC area.
    I would love to find the “70% of ARV – Repair – Fee = Max Offer” deals all of the time.
    The truth is I feel better most of the time helping the person on the other side of the table, (the seller) out of their situation.
    We both win.
    I have seen ARV’s go up 5% per month and go down 5% in this area.
    The only constant is things will change.

    • Marcus Maloney

      Jeff,

      I definitely understand your position, I am in one of the hottest markets in the nation and I am seeing buyers acquire wholesale deals at 80-85% ARV, this does not correlate in most markets. So please do not read this and immediately think this is a national standard. I wholesale in the midwest as well and the market there still supports 70%. So you are right the only constant is change. One should know their market in order to be successful.

      Thanks for you input Jess it was very valuable.

      “Enjoying the Journey”

    • Marcus Maloney

      Robert,

      Those are great questions, a good wholesaler if they have been in the business for a while should be able to give you a rough estimate on the rehab cost. We normally estimate our rehab cost between $15 to $30 sqft on the rehab. Naturally if the place is trashed you will go with $30 sqft so the formula would be: ARV x .70 – ($30 x sqft) – wholesale fee = MAO. I hope I didn’t make it too confusing. To make it simple again multiply the $15-$30 per sqft and you will have a reliable rehab cost. As far as the contractor in this industry its hard to refer a good contract for a few reasons: 1. if he/she is really good they are constantly busy so you may not be able to get them so you can loose time on your rehab. 2. Contractor referrals are questionable because they can be flaky (not all) and then you will vouch for someone who can diminish your credibility.

      “Enjoying the Journey”

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