Went bankrupt trying to wholesale, here's my sage advice

[Keith Goodwine]

As the title says, I went bankrupt trying to enter wholesaling.  

Full disclosure - Part of it was deteriorating mental health and desperation.  I was manic and reckless.

Another part of it was unrealistic expectations set by REI coaches, success stories, and REI groups. I heard nothing but pie-in-the-sky income disclosures, "escaping the rat race," and independent wealth using "other people's money." When I hear commercials for REI students, I hear the same buzzwords - wealth, other people's money, easy, perfect market, etc. It's the same thing I believed myself.

I wanted to share my sage advice for avoiding the same outcome.

DON'T get into wholesaling if you are bad with money.  If you have outstanding credit card debt that isn't paid off each month, or a car loan that rivals rent prices (or both in my case), don't get into wholesaling.  You won't make it.  Your financial situation isn't one that will last.  Even if your credit score is great, your bank account probably isn't, and that's what counts.  Cash is king, as they say.
DO get started into wholesaling if you are able to plan, budget, and schedule expenses appropriately.  If you are relatively debt-free (minus a mortgage), if you plan large expenses several weeks or months ahead of time, and can control your business expenditures, you are much more likely to succeed.

DON'T start wholesaling without regular full-time employment.
DO start wholesaling if you have a back-up plan.  Self-employment is risky, even if you've been in business a while.

DON'T go into wholesaling if you aren't good at sales. This is about as hardcore of sales as it gets. Listening to Zig Ziglar or (god forbid) Grant Cardone isn't enough. You need to be a natural salesperson.
DO take some sales training classes, or get a job in sales. Starting in sales with someone else's business is much better than starting in sales with your own business.  If you don't like sales, don't wholesale!

DON'T believe you can get into wholesaling for little money.
DON'T go into debt to wholesale. Ever.
DON'T get started in wholesaling without a large amount of cash for marketing expenses.  Plan to use this money for a year.  Your cash isn't any good if it's all spent within the first month.  (I spent $3,000 in 3 weeks.)
DO use cash set aside, and budget when and how you will spend it.  I recommend starting with $10,000, and spending this over 6 months to a year.

DON'T use ListSource for mailings.  The number of returned mailings was all just money pissed away on both the mailing list and the card/postage.
DON'T blast zip codes.
DO pay a professional direct mail marketing company.  They might cost a little more than doing it yourself, but the return on investment will be much higher.  They can also target zip codes for hot areas, not just blanketing a zip code and sending to the first 1000 addresses on the list.

DON'T expect return on your mailings the first, second, or third time around.  If ever.
DO plan for about a 0.1-0.5% response rate.  Meaning if you send out 1000 mailings, you might get 10-50 phone calls.  Maybe less, maybe more.

DON'T rely on mailings alone.
DO put out bandit signs with your company name and logo.  Brand recognition is huge.  People need to see you everywhere to take you seriously.

DON'T think everyone will accept your offer because you're such a good salesman, or because your offer is high enough, or because the person needs cash.
DO realize everyone that accepts a wholesale offer is likely a senior citizen, or a person in a very desperate situation.  Maybe that's not the only people who sell to wholesalers, but primarily I dealt with senior citizens, and tried to convince them to sell their perfectly fine house for 40% below market value.  I felt like that crossed an ethical line for me that I did not see before.  I felt like I was operating a scam.

DON'T expect to succeed.
DO think about this like multi-level marketing.  98% of people who do MLM never make a single penny from it.  Some even go broke or bankrupt trying to prepare for sales that never materialize.  

DON'T buy the hype. There's all sorts of advocates and motivational speakers for MLM and REI both who try to convince you that hard work and a positive attitude are a sure path to dreams, wealth, and riches. The book "Think and Grow Rich" is the penultimate source of this. It's all based in existentialism, cosmic justice, karma, luck, superstition, etc. Just because you spend money doesn't mean it's a wise investment. It won't magically come back to you because "that's the way of the universe." The universe is infinitely larger than you.
DO have a positive mindset, but trust that your budgets and plans are the lifeblood of your business.

DON'T do this alone.
DO have business partners. Do go to REI meetings. Birddog for another investor for a while. Trying to do it all on your own, based on your own internet education, isn't a formula for success in much of anything.

...and that's all I got to say about that.