Should I buy from wholesalers as a beginner?

Question

Hello. I am wanting to acquire properties using the BRRRR strategy, and it seems that unless I'm willing or have time to drive for dollars, my best bet would be to find deals through networking and/or wholesalers.

The issue I see with using wholesalers is that it seems like they typically want to turn around a contract quickly using a cash purchase. This normally wouldn't be a problem for a seasoned investor, but for a beginner who may need more time to evaluate the property before closing, I fear that it would turn off a wholesaler when working on deals with me.

How long does it typically take to analyze a wholesale deal? They come and go so fast, that I don't want to make the mistake of buying before I really know whether I can handle the rehab on time and on budget.

Thanks!

Ned Carey · Answer

@Chris Roush Don't rush go at your ow speed. If it doesn't work out, move on to the next one.

A good way to learn is if you loose out on a wholesale deal follow that deal and see what it sells for when it is done. Ideally get to know the investor doing it and learn what you can about the numbers and compare to your assumptions. Do this enough times and you will really learn the market so that you too can move fast.

Jack Inman · Answer

@Chris Roush  John Thedford is offering pretty good advice; the wholesalers that I've dealt with have been shady. Sometimes they swindle the elderly/uninformed to get a house under contract for less than market value, and they give out all kinds of bogus ARV's.

That being said, they do find good deals sometimes. Just don't put any weight in the information that the wholesaler gives you. Hire a good home inspector, make sure the house has clear title, and verify rental rates yourself.

Grant Rothenburger · Answer

@Chris Roush Find a good contractor that you may work with on the rehab, MAKE SURE they have good references.

Find good wholesalers, walk the property with the contractor or contractors, paying them for their time if necessary, get their estimate, make a call on the deal.

Having the funds lined up is another issue, but HML's and PML's exist for that reason.

James Green · Answer

@Chris Roush , the ones I've dealt with are shady, don't know ARVs, wholesale price is really just a slightly lower retail price, don't return phone calls in a timely manner, can't be bothered if they can't get a certain fee. Oh I'm sorry, I thought you asked should you buy from a Realtor! LOL

There are terrible realtors just like there are terrible wholesalers/assigners. If I was you, I would learn how to analyze deals.....which takes time!

Your best bet is probably getting on several wholesalers list and see what is out there that is off market. If you get yourself a proof of funds, then you can go and visit the properties and take a look at them. You don't have to buy, but most wholesalers won't give you the time of day, if you don't have proof of funds, just like a Realtor.

If a deal fits your criteria, then it doesn't matter whom you purchased through.

That being said, most wholesale deals are CASH/Hard, Private money & not traditional bank financing. You can still take my advice about  visiting the properties so you can get a feel of your market place & also see which wholesalers in your market are sending out good properties. You don't need a bank for a seller financed deal, & if you have a 20% down payment, then more than likely you have your money for the assignment fee on one of those type deals.

Due your OWN due diligence on everyone, until you have a dependable team. Having a license doesn't make a person legitimate. Many licensed realtors that I've run into, don't know squat about investing, although they tell you they do. They only know the retail market,..if that. They sell one house to a client with some money, whom wants to be a landlord & they think they know investing.

Be wary, but be wary of everyone because you are a beginner.

John Thedford · Answer

My experience has been poor. Most are not licensed and have no accountability. I got tired of the lies, BS, and ARV garbage. I don't give them the time of day except to report the unlicensed ones in FL. Many have gotten cease and desist letters.

Chris Roush · Answer

When evaluating a wholesale deal, is your realtor typically involved in the process of calculating the ARV? Should I just depend on my own knowledge of my target market and leave the agent out of wholesale deals? These are maybe slightly ignorant questions, but I am still not super familiar with the proper etiquette when working with a real estate agent. I don't want to waste their time doing comps if they are not directly related to the potential deal.

Kevin Dong · Answer

Watching the market closely.  You can’t really run faster if you don’t have enough experience.  Once you know your local market really well you will know if it is a deal instantly.

Should I buy from wholesalers as a beginner?

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