Is finding wholesale property the best way to go?

Question

I have been researching and saving money for well over 2 years now and I feel like I'm at the point where I'm ready to really find the right property and make a purchase.

I'm planning on using the property to rent out for cash flow also.

I'm wondering how I need to go about finding wholesale houses and with these houses what should i expect in terms of repair? I live in Austin,TX so if you are familiar with the area I would love to hear some insight into the market out here.

Thanks!!!

Lamar Cannon · Answer

Aaron Mazzrillo Being a wholesaler & flipper myself, I truly agree with you about buying from a reputable wholesaler.  In terms of crappy deals, I think wholesalers (the ones I know and myself) find deals that our buyers want.  Most wholesalers have a buyer's list full of different types of investors (developers, flippers, other wholesalers, buy and hold investors, etc) The deal may look great to one investor and horrible to another because they have differing exits & strategies.  Believe it or not there are investors who buy at 80-90% in certain areas and cash flow the properties really well.

Not to say there are not crappy deals that get put under contract & sent out, but I think most have the right intention (or at least the one who are around for more than a couple months).

Personally, I've sent out deals that 1/2 my buyers think is a crappy one, while the other 1/2 are in a frenzy over it.

Wholesaling is a good way to get a quick check, but if dishonesty and inflated numbers are the path taken to get that check, the wholesaler's RE career is doomed.  I prefer to get quick checks over and over and over, which is one of the smallest reasons I choose to act with integrity at every step of the way.

If you ever need properties in Austin, Texas call me and I'll take care of you and refer you to other wholesalers that will do the same!

Lamar

Aaron Mazzrillo · Answer

I got started in this business by buying from a reputable wholesaler. The key word there is reputable! Of course, I still got handed a few really crappy deals. Not all deals are good deals especially from wholesalers. They typically only have marketing costs for skin in the game and are just looking for a quick check. Many new investors think they can jump in as wholesalers because they believe it takes no cash, no knowledge, and is the fastest way to a pay day. I see at least a "deal" a week come across my desk from a "wholesaler" and it is typically north of 80% of ARV.

TAYLOR BRANNEN · Answer

My income from my regular job is more than enough and I mistakingly said pre-qual instead of pre-approval. I have submitted all my information to the banks and I'm good to go.

I will check out the rental forum and look into the expenses more like you suggest. Also thanks for your comment on REOs if I need more than 20k I can get my hands on 20 more pretty easily if the deal looks right.

We'll see and I'm going to go check out that rental forum.

Thanks.

Joshua Dorkin · Answer

TAYLOR BRANNEN - I'd say that you should look for any source of deals that you can.  If that's finding wholesalers who have a grip on the property or if it is a property on the MLS, it doesn't matter as long as the numbers work.

As for what you can expect in terms of repairs, that is going to be different on every single deal, so there's no simple answer to that one.

I'll let the rest of the group chime in, but I saw this one sitting around with no replies and wanted to make sure to jump in and kick off the conversation for you.

Ricardo Baker · Answer

Going thru a wholesaler is a way to go as long as the numbers work out. There are plenty of deals out there for buy and hold.

Lamar Cannon · Answer

Did you find what you were looking for?

Lamar Cannon · Answer

TAYLOR BRANNEN

Jon Holdman · Answer

You will need income to qualify for the loan, too.  Generally, the rental income won't be counted until you have two tax returns showing the rental income.  A pre qualification is not very useful.  You need an actual pre-approval where a lender has reviewed all your paperwork and given you an approval letter.

I'm not familiar with Austin, so I don't know what you can buy there.  Do some reading in the rental property forum about the realities of rental property.  Don't fall for the "cash flow= rent - PITI" myth.  You have many more expenses than just taxes and insurance.

REOs are a good option.  They will consistently need some work, though.  If you do a straight purchase you'll probably need 25% down plus money for rehab.  Not sure you can do that for $20K in Austin.  It would be a challenge here.

TAYLOR BRANNEN · Answer

Thanks for all of your replys, originally I was looking at getting a condo but I couldnt make the number work. I did some more looking and a lot of people were saying that wholesaling may be a good idea, which is what promted this post. When looking at these properties what are important things I should look for to make sure I'm getting a good deal?

Should I be looking at condos, single-family homes, or multi-family. Are Foreclosures and REOs good investments for someone starting out?

Also,

Jon I have about 20k cash that I can put down on a property and I'm solid on credit 750+ I have my pre-qual I'm just trying to find the right place. I'd rather take a year and find the right place than find the wrong place in a week.

Jon Holdman · Answer

I tend to find wholesale deals aren't especially interesting.  You can't assume just because the deal is coming from a wholesaler that its automatically a good deal.  Learn your market find an area that works for you and look for deals any way you can.

By far the majority of properties are listed on the MLS.  If you're in a strong buying position - have enough cash for a 25%+ down payment, cash for rehab, strong income and credit, and have a pre-approved loan - you can find deals right on the MLS.  Ask other landlords in your area that are purchasing property for referrals for agents.  Find an agent that's used to working with investors.  There are a number of investors here on BiggerPockets from Austin.  Look for properties, make offers, don't get discouraged by rejections, and you'll find a deal.  If, along the way, a wholesaler brings you a deal you know is good, buy that.

Is finding wholesale property the best way to go?

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