Is wholesaling the best entry into real estate investing?

Question

After reading some post on wholesaling it appears to be a mix of opinions as expected. However, I was wondering if wholesaling is worth the effort. If one could find a private money lender to finance a fix and flip wouldn't that be a more profitable way to go? The market everywhere seems saturated with wholesalers and makes it impossible to find good deals. I am new to real estate investing did a lot of research on different methods to acquire real estate and found that wholesaling was the entry point in which most people start due to lack of funds. I would like to hear how many of the seasoned investors started and why they chose that path.

Thanks

Russell

Lucas Machado · Answer

@Russell Pinnock Private money lender 99% will require some downpayment. If you have that, then a fix-and-flip could be your best bet in terms of total profits. Since you noted lack of funds, I think you would need an equity partner-mentor-profit share scenario to accomplish a fix-and-flip. I wouldn't spend much time searching for a lender for 100% of purchase/repairs unless you have family members : )Have you considered getting your real estate license? Not much procedural difference between wholesale and functioning as a realtor. Of course, it's different but at the core you are the "middle man" between the current and future homeowner. If you need to build capital, sure, you could do it with wholesaling but getting your license is not hard.Also, research doesn't equate to understanding how an actual transaction will function from start to finish. I'm not saying don't read a book - but experience is the real teacher. With a license you can ease yourself into understanding actual local transactions, get some cash in your pocket, and then consider other avenues.

Michael Carbonare · Answer

@Chardae Jones No. A lease option and sub-to are very different strategies. And a lease option may or may not involve seller financing. That's up to the seller and whether or not they are offering financing.

Chardae Jones · Answer

@Michael Carbonare Thank you for the valuable insight. I hope I can get another question answered.... What are all the forms of lease options? Are you speaking of strategies like--seller financing, sub-2??? Thank you

Michael Carbonare · Answer

@Chardae Jones First, let me emphasize that I said easier, not easy. If anyone tells you this is an easy business, a get-rich-quick scheme, hold on to your wallet. I also want to repeat that I know several real estate investors who wholesale quite successfully. But they've been at this business for quite some time and are well established. Very tough for the new-kid-on-the-block to compete with these folks.With that out of the way, the turning point for me when I was struggling to get going was learning about lease options in all their various forms. If you know what you're doing they are relatively easy to understand, (and for the homeowner to understand. . .not a small concern); they are very low risk; and they require minimal out-of-pocket capital to do deals. N00bie nirvana, smart real estate.

Chardae Jones · Answer

@Michael Carbonare Hello, I wholesale real estate and agree with your above statement-- it is difficult to find properties .40 on the dollar--consistently. What easier way to make money in real estate do you speak of? Please advise.Thank youChardae

Russell Pinnock · Answer

Thank you Lucas and Jorge for thoughts.

Michael Carbonare · Answer

Wholesaling seems to be the hot strategy these days being pushed by the bevy of get-rich-quick gurus. It's BS. Let me say I know a few successful wholesalers, but it isn't the walk in the park that is being pedaled as the way to real estate riches. A local investor friend sends out 10,000, (yes, 10,000), pieces of mail each month to find his deals. He does very well, but can the new kid on the block compete with this? Not likely.I've been in this biz for about 25 years, and I still find it difficult to consistently find deals for .40 on the dollar, which is what wholesaling is all about. So as a new investor, do you think you will find these deals? And if you do, they are junkers in war zones. Not my idea of fun times. There are easier ways to make it in real estate.

Jorge Ruiz · Answer

@Russell Pinnock I attempted to wholesale for 2 years in Los Angeles. This market too seems saturated with wholesalers. Since I was only mailing about 100 or so letters a month it didn't quite work out. From what I've read and heard on the podcast successful wholesalers are mailing upwards of 2,000 letters a month which I didn't have the capital to do since I was funding my campaign with my full-time job's paycheck. I have now turned my attention in using my 401K withdrawal to create a partnership and am looking to invest out of state. Best of luck on your real estate endeavors.Best,Jorge