Taking low barrier to entry out, how difficult is wholesaling?

Question

I’ve heard many times before that 90% of wholesalers fail, but I never hear who comprises of these 90% and who comprises of the successful 10%.

Of course flipping, BRRRRing, and rentals have a much higher barrier to entry. You must come up with some type of down payment or be willing to talk to enough sellers to do seller finance (Only 3% of home purchases are seller financed.)

So are these 90% of wholesalers who fail people that don’t have $5k in cash for letters and/or are able to cold call enough people? Are these 90% not wanting to wait for 6 months for their first deal? Are they burning bridges with buyers by giving out bad deals? Is this the 90% or is there something else going on here?

I’m curious because I started a direct mail campaign and started looking at properties. Brandon Turner and my local REIAs constantly have encouraged this practice. Although I have some learning to do in regards to estimating rehab costs, I don’t see how, if I did this for a year, I wouldn’t be successful somehow.

Scott E. · Answer

I don't know where that 90% figure comes from, sounds like a made up number, but it's probably pretty close to accurate.

I've been a developer for 11 years and I've seen a TON of wholesalers come and go over that span of time. There are only a few companies left who are still doing it and doing it right, and they have huge teams with very organized systems in place. Even those companies with teams and systems are having a hard time finding deals, AND they are willing to take flip contracts for very small spread (~$5k)

Sellers are more sophisticated in this market. Often times they know that they will do better going to market versus selling to some random wholesaler. That makes it harder for wholesalers to find deals, and when they do it means they're making less money per deal.