More money in Traditional Real Estate or Wholesaling?

Question

Hey gang,

So this is sort of a tough question, or a loaded question, or whatever we call it, because of all the variables. But here's my present situation and I thought some with experience on both sides could weigh in.

I'm a licensed agent, just signed on with a broker, and also started marketing for the wholesale business about 6 weeks ago (no deals yet, but lots of leads and learned a lot). I'm torn between where I should be putting my time and money, however. Should I be going after traditional real estate deals (since there are lots and lots more of them available, even with a low inventory), or keep pouring everything into my wholesale marketing budget? Or should I continue to do both (the plan right now) on a lower budget?

I'm sure people in both categories will talk about wild success going both routes, but my intuition was to the effect that it's much harder to find a 'deal' than it is to find someone who wants to list their house for top dollar on the MLS (while I certainly do not assume this is easy), but I only have so much time and money, trying to not only create a marketing budget but build systems around both of these businesses. I don't know if it falls into the 'jack of all trades, master of none' category...

And to be fair, I did start marketing only a month ago, so their might be a little 'shiny object' thing going on, but I'm just trying to be a careful and effective short and long term planner. Either way, all roads lead to actually investing in real estate, but I'm trying these avenues to build up some cash, as well as get exposure and networking, etc, etc etc.

Thanks in advance,

Best,

JTM

Jay Hinrichs · Answer

really depends on what part of the country your in..

in low value areas wholesaling the property is probably more productive on an income level..

If your in Higher end markets I suspect brokering for one who wants to put in the time energy and build a career is far better.

What I see here on BP Is I suspect 95% of those that jump on here and say they are investor / wholesalers will not get past the first year if that.

Whereas a real estate career if worked at is something you can do for a lifetime.. and if gets far easier as time goe's on.. I know its treated me well all these years and has led me to some pretty incredible financial adventures that wholesaling simply could not do.

But if I lived in some of the rust belt markets or other markets were there are literally more homes than people to put in them. .I equate that as nothing more than being a used car salesmen.. price points are the same. style is the same.. once your done your done.

Where real estate gets good is 10 to 15 years into it ALL of your business should come from referrals.. this simply will not happen in wholesaling.. wholesaling your just as good as the last sucker you talked into selling their house to you undermarket  :)

Rich Hupper · Answer

Working as a buyers / sellers agent or wholesaler is a lot of work. Buyers agents also spend a lot of time nurturing relationships and building trust with retail buyers. Buyers agents run around showing homes usually listed on a MLS. This is because the agent will not have to collect their fee from their buyer. They co broke with a seller agent. The seller agent usually gets a listing at 4 5 or 6 percent and shares some of that commission with a cooperating buyers agent.

Now a seller's agent spend lots of money and time working their spheres of influence, doing business by referral, sending out marketing materials to possible sellers, organizing events to find sellers, cold calling, and many other things to find homes to list. Some of these seller ( listing ) agents do a very good job for their client where they handle everything. Some listing agents try to find buyers so they do not have to co broke with a buyer agent on the MLS. However many seller agents are lazy and list a property on the MLS and hope eventually a buyer agent will bring them a bona fide buyer.

Both buyer and seller agents spend a lot of time nurturing relationships. It becomes easy when you find a rehabber or builder who only uses you to list their property. However they often rely on you to find them offline deals. This then comes back to marketing.

Wholesaling is all about marketing. You need to get your lists and mail mail mail.

So what I would do is do both. Because you are licensed you can help people in a multitude of ways.

I spend most of my time looking for property with lots of equity and has zero curb appeal.  I then figure out who owns it, where they live, and how to get in touch with them ( door knock, cold call, mail ).

As a broker I can list it on the MLS, wholesale it to an investor, find a retail buyer for it, buy it subject to an existing loan, help them short sale it, etc...

John Thedford · Answer

Both are tough. You have an advantage of being licensed so there is a lot you can do that unlicensed brokers cannot. Working as an agent can be very time consuming. Once you get listings, the other agents are your "sales force" working to sell them. You may not have that luxury working on assignments. I started buying and holding rentals four years ago. I am to the point I don't have to work. That was my strategy and now my only intent is increasing monthly income by acquiring more. I have friends that are agents that are ALWAYS busy doing open houses, showing properties, chasing listings, etc. They MUST do that to survive. Buy rentals. It is a LOT easier and you will eventually find yourself in a position where you watch others that MUST work while you have a lot of freedom to do other things.

Michael Henry · Answer

Josh,

I would say both as well, both can be lucrative also. Figure out what area you are most passionate about and pursue that. Also, there are thousands of folks that do what we do what differentiates you from the next guy (rhetorical)? And constantly ask yourself this and how to improve.

Thanks,

MH

Pratik P. · Answer

Although I disagree with John about the unlicensed brokering thing,  I think he's absolutely right about rentals.  If financial freedom is what you're looking for,  I would strongly consider building your rental portfolio as soon as possible.  I personally am looking to assign deals to my rehab partners for short term income but close on the really good deals myself and rent them after rehab.

John Thedford · Answer

@Joshua Martin

LOL...I don't have alerts for the unlicensed brokering crowd:)I did think your post is a good topic for licensees to consider.

Joshua Martin · Answer

Thanks for the input everyone, and great insights. I was waiting for you to weigh in @John Thedford, thinking any topic with 'wholesaling' will pop up in your alerts ;)

And I guess what I'm going to continue doing is both. Sending out my second mailing on all my probate leads (just finalized yesterday), and I'll keep at it, but due to budgeting I might have to stick with postcards straight through instead of using some other slightly more expensive pieces.

As far as working as a traditional agent that's where I'm putting a lot of energy at the moment and will continue to. Basically my plan is to run the businesses in different areas. I'll continue to market for wholesale deals in Milwaukee county, while I'm going to start some old school marketing, door knocking and chasing FSBOs, in the lake country area. Like you said, @Jay Hinrichs, there's a lot of low value properties in certain areas here, specifically Milwaukee county, but the suburban areas could be a gold mine for an agent, and I know several that do very well.

And these are both cash strategies for me, where my money will go as soon as I'm making it is into rental properties, and I currently have different savings categories, with one being the down payment for a first property (assuming I don't find a convenient sub2 or seller finance before that).

Thanks again everyone, and happy investing!

Best,

JTM

Brent Coombs · Answer

I reckon Realtors SHOULD also do what unlicensed Wholesalers do anyway. That way, you develop a more extensive list of all types of Buyers/Investors as well as find more Properties and their freshly-convinced Sellers in every niche - by giving those Sellers MULTIPLE options! Cheers...

Pratik P. · Answer

I don't know much about being an agent and listing properties but from a business perspective,  wholesaling is something you could automate and scale up.  Being an agent isn't really scalable since you HAVE to be there or money doesn't come in.  I'm sure you can make a lot of money doing either though.

More money in Traditional Real Estate or Wholesaling?

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