Rare finding good Chicago General Contractor, Wholetail instead?

Question

Hey BP Nation,

Hope all of you are doing well.

I have been looking for a reliable General Contractor in the Chicago area for some time with no luck. It makes sense that the good ones are just too busy in this market. GCs are starting to charge money just to walk through a property.

I'm considering just Wholetailing my flips (paint, flooring, necessary fixes required by conventional loans, etc.). Faster, less costly, and the profit would be good enough.

What do you think about Wholetailing in this market? What are some of the Pros and Cons? Is it just as simple as putting a lipstick on a pig?

I just can't think of many drawbacks with Wholetailing. I think Wholetailing doesn't make sense for older homes (Plaster with no vents, knob and tube, etc.). Also, homes that are just a total disasters (combinations of a bad roof, bad HVAC, bad siding, extreme mold, etc.).

Anybody want to make a book about Wholetailing? I think there's a demand for it.

Please share your thoughts. Thanks!

Crystal Smith · Answer

I think Wholetailing is property dependent. Where I've seen it work is when a the seller guts a property, leaving a clean canvass. Then sells it at a reasonable cost for the next person to make some money after renovating then selling or renovating & refinancing.  Where I have seen it fail is putting lipstick on a pig then attempting to sell it at an unreasonable price.

Mike B. · Answer

@Daniel Guerra not only is it more risk to go to rehab, if you consider annualized returns the numbers can be outrageous for the quick mls sales.

I will note that I expect every property I close on to go to rehab. Make sure you have the ability to see it through and that you’re prepared for worst case scenarios.

Crystal Smith · Answer

I don't consider what you're describing; putting lipstick on a pig for a retail buyer, as wholetailing. It's just a flip.  I realize it's semantics but we've always considered wholetailing as something that as done to flip to another investor, not a retail client.

Mike B. · Answer

@Daniel Guerra every property I purchase is immediately listed on the mls for a quick payday. If it doesn’t sell for the price I want, I pull it down, give it a light rehab and put it back out to the retail market. Feel free to reach out if you have any questions or need resources in this space.

Owen Dashner · Answer

Wholetailing is my favorite disposition of all, and it is one of the best to use in a hot market.  Retail flips are time consuming, a PITA to coordinate multiple contractors, you have to go to the property a bunch of times, and there is a lot more risk involved.  I would much rather sell as-is on a wholetail than do a flip, unless the profit margin makes a compelling case to do the work to the property. Sometimes we get smoking deals on properties because they have a material defect that the seller doesn't know how to fix or can't afford (foundation issues, black mold, hoarding, etc.). We will typically fix the material defect, clean it out and clean it really well, then list it as-is.  There can be big margins in those types of deals.When there becomes a lot more supply on the market and buyers can afford to be more picky, that's when retail flips make more sense.

Daniel Guerra · Answer

@Mike B. I like your strategy. Fastest way to make a profit on a property with less risk. Almost like wholesaling, but the difference is that it hits the MLS (many more buyers). Downfall is that the profit is not as great as compared to either wholetail or fully rehab for top dollar but more risk involved.

Daniel Guerra · Answer

@Owen Dashner I agree with you a ton. Retail flipping has added risks. What type of work do you usually do in a wholetail deal? Pretty much just paint, flooring, and anything major just to get the traditional loan approved?

When you fix the major material defect in a home, do you still sell the home to a traditional buyer?

Thanks in advance.

Daniel Guerra · Answer

@Crystal Smith I guess gutting out a home and selling to a CASH buyer is a form of Wholetailing. I would call this Wholetailing to an Investor. Your basically Wholesaling to an Investor on market. I personally would not even touch anything with the home if I attempted to sell on the market to a CASH buyer. Doesn't make sense to waste money doing anything to it to get rid of the property.

You did mention that putting lipstick on a pig is a no go at an unreasonable price. I agree with you. I think putting lipstick on a pig at a reasonable price is the Goal. You add paint, flooring, etc., and fix the necessary items that will fail inspection. The Goal is to sell to a retail buyer at a discounted price. I noticed there's a ton of buyers out there looking for a home but can't afford the high cost of a fixed up home. Instead, Wholetailing to a retail buyer seems to be a great option. Of course, you need to find a great deal off market, do the small rehab, then sell at a discounted price to a retail buyer that's getting a typical loan (FHA, conventional, etc.).

Rare finding good Chicago General Contractor, Wholetail instead?

Most Popular Reply