Bad wholesalers. What complaints do YOU have?

Question

Linda Weygant · Answer

Here's what I'm noticing just based on reading Bigger Pockets.

People are reading that they can wholesale without having any money.  It seems like many, many people are seeing wholesaling as *THE* way to get into real estate investing.  It seems like many of these folks have never owned a home themselves and it seems equally likely that their parents did not either.  As such, we get the following questions:

~What does PITI mean?

~How can I get a mortgage with no money down, no credit score and no job?

~What is earnest money?

I'm not criticizing this, but there's a lack of even the most basic knowledge from these folks and, as much as I would like to help educate them, the sheer volume is just daunting and unless I'm in just the right mood, I keep scrolling.

Then we get these types of questions:

~If I don't have access to the MLS, how can I determine a good offer price?

~If I don't have access to the MLS, how can I determine ARV?

Great questions, actually.  But if you didn't know how to get around what is probably the biggest stumbling block in your line of work, why did you enter it?  Not knowing how to use your county assessor's website or other websites that will give you selling history just seems bind bogglingly silly.  But this comes from just an overall lack of knowledge about real estate.  If you've never paid property taxes before, how would you know the bill comes from the County Treasurer or Assessor?

Then we get my favorite:

~How do I determine repair costs? **

This one makes me smack my forehead every time.  How do you estimate something like this if you've never so much as lifted a hammer in your life?

I feel it's comparable to me deciding to become a doctor and asking questions about How do I draw blood?  What's a thermometer?

Now don't get me wrong, I'm not saying that real estate should be an exclusive industry where only a certain elite can get in.  But I am saying that people should keep their day jobs while they get an education.

There's gotta be a class out there that teaches some of this very basic stuff.

What I do admire is the folks that realize they are in over their heads and start searching for a mentor.  Unfortunately, the mentor to prospective student ratio is incredibly low.

_____________

** by the way - here's how I recommend getting familiar with repair costs.  Hang out at Home Depot.  Go to every single workshop they have that you can possibly attend.  Learn the steps to tiling.  Learn the steps to replacing a kitchen faucet.  Learn the steps to swapping out a dishwasher (I also wrote a true but not very serious post about it) here: http://www.biggerpockets.com/forums/84/topics/1926...)

Learn about everything you possibly can.  Plus, the classes are fun and you may pick up a useful skill you'll need later and make a valuable friend.

Once you understand the materials that go into something, go browse the store and look at the costs of those materials.  Spend some time in the lumber area, pricing out things like studs, plywood, wallboard, etc.  Spend some time in tiling and look at the price per square foot for the tile, the backerboard and the cost of the mud and the other tools.  Look at the price of wood flooring.  If you're there during the week when it's not so busy, talk to some of the folks in the orange aprons and ask them about what they think labor costs might be on something.  Sometimes you'll even find a contractor in there shopping for stuff.  Strike up a conversation if you have the time.  I got into a great conversation with a guy once about proper installation of something or other.  I got a great education on the different types of screws, what they're good for, when to use nails vs screws, where to place fasteners, when to use braces and brackets.  Good times.

The problem is, if you don't understand the components to a project, you'll never be able to estimate a costs.  A kitchen remodel isn't something you just spitball.  It's the sum of floors, cabinets, countertops, plumbing, sink, fixtures, backsplashes, appliances, lighting and paint.  When you break it down into its component pieces, it isn't quite so overwhelming.

Crystal Smith · Answer

• Location, location, location- They have done their homework on choosing good locations
• Team- They usually aren't working by themselves.  They've established relationships w/ inspectors, realtors, general contractors, handymen, attorney.....  Especially useful if you're buying from a far.  
• Comparables- Provided reliable comparables.  The really good wholesalers either had a real estate license or they established a relationship w/ a realtor & paid the realtor for the comparables needed for a marketing package.  
• Renovation costs- Whether for a buy and hold or a flip the unique quality of the wholesalers we've purchased from is they either held properties themselves or they were flippers, who just happened to wholesale some of the deals they had under contract.  So they knew their renovation numbers better than most.  There may have been 1 or 2 people we've purchased from that didn't hold any property or have any flips under their belt, but they had developed a strong team to make a deal work & would make the team available to you; i.e get a bid from a contractor to verify the renovation costs if you didn't have your own contractor.  
• Finance- All had developed relationships with finance sources, private, hard money, bank.....  & they made those resources available.  When I say relationships I mean you could drop their name w/ a money source & doors opened up
• Contracts & Property Control- The good wholesalers understood how to control a properly control a property with or without a real estate license.   They had relationships w/ legal counsel, title companies, transactional financing if needed....

Bottom line is the good ones do their homework,  study the market, establish relationships & systems to support their business, then they execute.

Darrell Jones · Answer

@Chris  Gonzales I'm a wholesaler myself and from my experience one of your biggest qualities overall is being an asset to the buy & Hold Investor or Rehab & Flip investor.  Some of those who desire to be a wholesaler have this misconception that they can go out there find any kind of property put it under contract assign it to an end buyer and make quick cash.

Truth is our end buyers are looking for good deals, and it helps to have the numbers figured out, i.e comps, after repair cost (ARV) rehab cost, holding cost, cape rate, amount they could get for rent.  You don't want to just throw random numbers at your end buyer because more than likely they're going to do their own due diligence and see if it's truly a good deal or not.   Furthermore if you are one of those shady wholesalers who think they can get over by fudging numbers on a property, you have opened yourself up to creating a bad name for yourself and put yourself in the position to lose out on building great relationships with investors and creating an extra source of income in the future.  Wholesalers must want to develop great relationships and become that go-to guy/lady for investors who are looking for deals but don't have the time to do so themselves.

Wholesaling is an outstanding way to start out in real estate but it's not for everyone.  It sounds lucrative and easy, coming from the "Gurus" of Real estate but it takes a lot of hard work dedication, hustle, and learning curves along the way.  But once you get that first deal and get the ball rolling then you know that it was all worth it.  Good luck!!!!

Linda Weygant · Answer

On another forum here, earlier today, I saw a wholesaler say (paraphrasing)

They were looking for some piece of information or advice.  When somebody questioned whether or not they could do the deal, they essentially said

"I don't care.  I'd rather get it under contract and try my hardest to get one of my buyers to take it (their only exit strategy) and then use one of my escape clauses to get out if my buyers don't want it, rather than not try at all.  If I don't get it, somebody else will"

On the one hand, you have to admire that tenacity.  On the other hand, I really feel bad for their seller.  Wholesalers who have no ability or intent to close the deal on their own don't do anything good for the profession in general.  They'd rather tie up the property than allow somebody else to handle the transaction property.

Richard C. · Answer

Slightly more detailed answer:

I don't really care how you interact with your buyers, who are presumably mostly investors/landlords and probably know more about real estate than you do.

I care about how you interact with sellers, and the larger community.

Don't lie to people.  Don't tell someone desperate to avoid foreclosure that you are buying their house, unless you have the means to actually buy it.  Don't try to steer people away from listing a house with a realtor by claiming it cannot be listed because it requires repairs.  Don't leave yourself an "out" in the form of an inspection or some other clause.  Don't send prospective buyers tramping through your sellers' home and claim they are your "partners."  Don't clutter the streets with illegal advertising.  Don't, in short, engage in business practices that are on balance less ethical than those of my local drug dealer.  (That is not hyperbole, by the way, I am dead serious.  That guy seldom lies and keeps up his end of the bargain.)

Tell the truth. Follow the law.  Act ethically.  And when you do all of those things, you will find that the only way to make money in wholesaling is to go big, with a really substantial marketing budget, a reputation for professionalism, and a work schedule that makes what you are doing pretty clearly "a job" not "investment.".

And when that happens, if you lack the resources to go big, you will do one of two things.  You will either move on to some other get-rich-quick scheme,  or you will just get your damn license, like you should have in the first place.

Chris Gonzales · Answer

Account Closed very well put, that's the type thing I'm looking to hear, and not just for me, but for anyone looking to get into wholesaling. I want this to be a post where those looking to get into the business, as well as those already doing it can go and see what investors are really looking for in a wholesaler, and I think you hit on the topic well. I think I've got a good grasp on the role wholesalers play, which is as I see it, that they are the ones who go out and deal with the motivated sellers, they should go out and create great deals through negotiation with sellers and getting houses under solid contracts at great prices that are based on quality research and due diligence. From many of the complaints I hear, it's as if some people don't realize that wholesalers are in the business of selling deals, not houses, and the quality of that deal is where the real money can be made. Feel free to correct me if I'm wrong in any area of that!

Chris Gonzales · Answer

@Linda Weygant, @Adrienne G., I'll be honest I've just simply never come across the term in the studying I've done over the past couple of months, literally this is the first place I've ever seen PITI anywhere, books, forums, articles, ect., though I have understood the concept of it, just never knew the term itself. I'm not one to ask what a term means though, that's what Google is for. Thanks for the input everyone. @Richard C. I feel an almost uncomfortable aggression when I read your post, it shows your passion on the topic and is exactly what I was looking for, very much appreciated! (love the drug dealer reference by the way). @Jesal Patel, that is a good point about the lack of effort involved when the wholesaler's money isn't necessarily at risk, thanks!

Linda Weygant · Answer

Yep:

http://www.biggerpockets.com/forums/12/topics/108179-what-does-pi-and-piti-mean

Adrienne G. · Answer

@Linda Weygantpeople really ask what's PITI? WOW.

I started becoming interested in real estate back in 2005-2006. I took the GA real estate course but never sat for the exam. I purchased my home in 2008. Over the years I have obsessively watched DIY shows on DIY and HGTV. I attend workshops and recently started taking workshops at Lowes and Home Depot. Now I'm about to finish up my real estate license class so I can sit for the exam (this time).

That said, I am jumping into real estate investing and wholesaling has been on my mind. But I do not feel ready yet to actually do wholesaling. So I am looking for a mentor to let me tag along on a few deals to get the gist. I can read BP and books all day and listen to every podcast. But I know that in order to really learn I have to do it (or rather tag along with successful wholesalers on a few jobs) so I can get the gist. The problem I've found is I keep running into gurus who want to charge thousands of dollars for a class in wholesaling when I really just want to do it.

My other fear has been making sure I don't do anything to violate any laws or prevent me from getting my license by doing something illegal or wrong in wholesaling. I care about ethics and legalities.

So some of us want to start wholesaling and want to "just do it" as has been offered here. But I don't want to "just do it" and get caught up. Sorry to take the thread off in another direction. But thank you for sharing your Don'ts to Wholesaling. It helps me further understand boundaries not to cross.

Bad wholesalers. What complaints do YOU have?

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