Which comes first the Flipper or the Wholsale?

Question

Now first things first this is more just to get insight and everyone’s opinion, I understand it comes down to the individual. Now that we have that out of the way, which do you believe someone should do first get the insights and knowledge of a flip by wholesaling deals and saving money or learn hands on what a flip takes and take that into wholesaling to broaden their areas of investing? I was reading a few forums and seen some people learn either way especially in regards of Dave Ramsey and he him self against leveraging. I personally would like to start out flipping houses to build capital but have heard a podcast on hear by a guy In Chicago who did bother. So please give your thoughts and I appreciate the time and effort spent.

Tom Shallcross · Answer

Was going to basically give the same reply as @Jonathan Greene. Flipping is insanely capital-intensive. It's borderline comical to review the monthly transactions from my account I run my flips out of.

Yes you can look to flip a house or wholesale a deal to get your feet wet and grow, that's all good and you will learn so do go ahead and get started. But the common narration that "I'll just do a few flips/wholesales and boom I'll have enough money for a down payment for that xx unit building" is so much more complicated than advertised.

I would pull you thought-process up a level and look to master deal acquisition. If you can find a way to create legit deal flow, you'll figure out the disposition strategy (wholesale, list, flip, rent...etc). The biggest bottleneck with any of these strategies is typically deal flow, so if you can figure out deal flow you will find exits, partners, money...etc.

Jonathan Greene · Answer

You can't do either if you don't have capital to start, especially not flipping. First-time flippers who use hard money are paying 12-14% on the loan and most first-time flips take twice as long and cost twice as much as inexperienced investors think so the payoff is negative or limited for most. I don't like either really, but it depends on what others have said - what is your experience and knowledge base? Who are your contacts? What capital do you have to deploy? Have you made local investor and contractor connections? Do you know repair costs on your own? These questions might help.

Jonathan Klemm · Answer

@Gustavo Perez Jr - I think it really depends on your current resources and available capital.  If you are going to flip it's an extensive amount of work, but the payout SHOULD be bigger.  It is simply more risk for more reward.

Ideally, once you have all the systems in place you take the best deals to flip and then wholesale the ones that don't have as much meat on the bone or are higher risk.

Either way, both wholesaling and flipping are challenging and I would consider them a very active form of investing.  Find someone who knows what they are doing and learn from them, that's what i did and continue to do.

Also, reminder in Chicago & Illinois you can only technically "wholesale" one deal per year before you need your re license.

Rob Hayes · Answer

This is an incredibly difficult question in my opinion.   I'm going to mirror everyone else's response in that it really depends on so many variables.   Assuming that you have no experience and very limited capital, I suppose I would recommend that you start with wholesaling.  Finding deals in this market is really tough...but if you can find a "good deal" you won't have ANY issues finding an investor to do the deal.  The good news is that there's only 3.5 months left in the year.  So.... basically in the next 4 months you can wholesale 2 deals no questions asked.   And you will learn A LOT in 4 months!!!   Good luck and we're here to help!

Matthew Crivelli · Answer

I think it depends on the deals you find. If you're finding houses that need total gut outs, I would advise against taking the project on to start out. Even seasoned flippers run into unexpected expenses. If your finding properties that need light rehab and have nice returns, maybe take a shot on it.

Remember, if you are going to finance a first flip you can expect to have 20% down + closing costs + money to start the rehab + reserves. In total I would say you need 30%+ of the purchase price. If you think you think "well I'll just flip a $50,000 house, it will be cheaper", remember that 98% of lenders will not touch a property under 100k.

Should you start out with flipping? Depends on your financial situation and the deal at hand.

Crystal Smith · Answer

In my opinion- You can't get knowledge of a flip from wholesaling. Flipping requires management of money, people (contractors, subcontractors, realtors, inspectors, lawyers,.....) estimating renovation costs, days on market,.....  Then waiting nervously for the property to sell. You can't get that knowledge wholesaling deals.  We wholesaled deals because either we had too many projects underway and picked up another one that we just decided to sell or assign our contract to someone else.

Ben Nelson · Answer

Wholesaling is a great place to start. It helps you build capital for flips, but it also more importantly forces you to really know value. If you can’t wholesale it, your numbers are wrong. If you can, it means you provided enough value for the flipper to take on the risk. You make some money while not taking on the additional risk, which is even higher if you’ve never done a rehab before. Then, ask whoever you wholesale it to if you can shadow the project a bit so you can learn that piece of the business before you jump into a remodel project yourself.

Which comes first the Flipper or the Wholsale?

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