Market Like a Wholesaler, Balance Rehabs/Flips like a _________?

Question

Was just reading through Will Barnard's sticky post on wholesaling and one poster in the thread asked something like, "if Wholesalers are finding such good deals, why do they need to wholesale them? Why not buy them all?"

For all the RE marketing ninjas out there, I'd assume the response would be that deal flow is greater than capacity/desire to execute the rehabs/flips. Why turn the marketing off if the deals can be wholesaled, right?

I haven't gotten to the point where I have this blessed problem of too many deals, but assuming it can be done (and that I'll get there eventually), what are some strategies for balancing the keep vs. wholesale decision?

Bonus points if you fill in the blank in the title :)

Drew Clements · Answer

Thanks for sharing your experience, @Ryland Taniguchi. I like your point on learning the elements essential for wholesaling before "risking your own capital" in flips. Sound advice!

Brent Coombs · Answer

@Drew Clements, Market Like a Wholesaler, Balance Rehabs/Flips like a Buy-to-Hold Investor. "Why not buy them all"? Cheers...

Ryland Taniguchi · Answer

I started in rentals in 2000 when you could do 80/20 stated income loans. Used the equity in my rentals to start flipping since 2004. In hindsight, I wish I started as a wholesaler to learn ARV and construction estimating before risking my own equity.

As a flipper, I decided to try wholesaling in 2015. I find it to be sometimes easier to find a JV funding partner or gap funder (for the hard money downpayment) than the equal amount of work to assign a contract (even with a buyers list with 14,000 buyers).

When you flip, you're always juggling cash, finding deals and contractors. Ask flippers doing more than 150 flips a year and they say this juggling act never goes away. Sometimes you have too many balls juggling and just need to wholesale. Sometimes the numbers pencil out for a flip but you have a bad vibe for the property or it's too far away.

Many reasons to wholesale but after trying to flip and wholesale, I am finding that the desire to flip more properties trumps my ability to wholesale flip deals. But I am finding other niches to wholesale including rental properties to landlords and land to developers.

Drew Clements · Answer

Thanks for the questions, @Mike Sedlacek

Some people have a "Big Why" that get's them started - I'd probably say that I have a big "Why Not?"...

My professional work up to this point has been in marketing, so wholesaling feels very comfortable to me - I also love to get my hands dirty (just finished rehabbing both units in my duplex and have it listed to sell), so flipping appeals to me. I like real estate because I find fulfillment in creating tangible value and like the wealth-building potential to provide for my family's needs.

So why not build a business focused on wholesaling, yet keep the best deals for flips/holds? That's what really inspired my original question - has anyone else done this and where do they find the balance between the two efforts?

"What are your goals for the next 10 years?" I think getting started is more important... once I get some perspective, I'll forecast and 10x it :)

"What is your business plan?" Focus maniacally on wholesaling... dominate. Then expand to flipping once I have a war chest built up. Vertically integrate with buy & holds + property management as I scale up.

"What is your retirement plan?" Build the system, step away, be a service missionary with my wife and kids (e.g. bring clean water systems to third-world villages, disaster relief, etc.)

"You have to have a reason and then a plan to go with it, a road map so to speak." I think any reason is a good reason... and minimal action-based plans are probably better than over-thinking it. I feel like I have enough of a starting point to start from - I'll figure it out as I go. Not ignoring the future, just not worrying about figuring it out right now - I'll figure out step two as part of step one.

Thanks again for getting my wheels turning, though!

Mike Sedlacek · Answer

What is your reason for investing in real estate? Some people don't like rehabs and would rather pull in $5,000  monthly wholesaling than lifting a hammer. Some people love getting thier hands dirty. What are your goals for the next 10 years? What is your business plan? What is your retirement plan? Where will you be 10 years from now?  How did you decide, when you started,  what path  you will be taking?  You can wholesale part time, fix and flip part time and, fix and hold for long term. You have to have a reason and then a plan to go with it, a road map so to speak.

Drew Clements · Answer

Wise words, @J  Scott, but easier said than done. You're spot on with that approach, but determining the outcome (accurately factoring in the profit potential and required time) clearly involves some significant experience - not the kind of thing I should attempt to plan for. So I'd suppose it would really be a matter of doing both, gaining experience, and then doing the evaluation as constraints are met (at which point it would be straightforward, having experience).

"All truths are easy to understand once they are discovered; the point is to discover them." - Galileo Galilei

I guess what I'm asking, mostly out of curiosity, is what the profile of some "tuned" models out there look like? Essentially what the big picture is so I can expand my perspectives (unfortunately I don't know enough to be more specific - LOL!)

J Scott · Answer

Every project is a trade-off -- time/effort for money.  Run the scenarios for wholesaling versus rehabbing and determine what the profit potential is for each.  Then determine how much time each would take.

Once you know the time investment and the monetary return for each scenario, you should be able to determine which is the right direction...