What are the Potential Risks to Wholesaling?
Accountant · Chicago, IL · Member since 2019 · 41 posts · 14 votes
I have started looking into wholesaling as a means to helping me fast track my savings goal and help get experience within real estate investing. I understand that wholesaling gives people with little money, extra time, and drive to be able to opportunity to enter the business of real estate investing. From what I have been learning so far, it seems very possible to do at a young age, but what are some of the potential risks of wholesaling a property? When would a wholesaler become liable within a transaction. For example, when wholesaling, once a property gets under contract, who pays for contractors and title searches and other due diligence expenses? Any additional information on the topic would be absolutely great! Thanks.
I'd suggest teaming up with someone who knows what they are doing and can see around corners to avoid lawsuits, wasting seller's time and wasting your time on deals that may not work. Also, I feel like there is a myth that someone can make tons of money wholesaling just by dabbling, putting in maybe 5 hrs, 10 hrs, a week. It's a full-time job, it's the same as saying you want to open a restaurant. So if you already have a full time job, kids, etc, then it may not be something you realisticaly have time to do. If you only have, let's say, 20 hrs a week to put towards it, then even more, you may want to team up with someone who can find a role for you where you can do something with the small amount of time you have.
First thing I'd say is make sure you have all your paperwork vetted by a local real estate attorney.
In general, the investor you are assigning the contract to is the one who pays for contractors and all other due diligence items. I have seen some wholesalers who do spend on their own dime in hiring a 3rd party inspector to provide a home inspection report on the property for investors, but beyond that not much else.
Make sure you are abiding by legal methods in contacting sellers. IE abide by Do Not Call lists, do not door knock on properties that state "no soliciting" etc..
I'd suggest teaming up with someone who knows what they are doing and can see around corners to avoid lawsuits, wasting seller's time and wasting your time on deals that may not work. Also, I feel like there is a myth that someone can make tons of money wholesaling just by dabbling, putting in maybe 5 hrs, 10 hrs, a week. It's a full-time job, it's the same as saying you want to open a restaurant. So if you already have a full time job, kids, etc, then it may not be something you realisticaly have time to do. If you only have, let's say, 20 hrs a week to put towards it, then even more, you may want to team up with someone who can find a role for you where you can do something with the small amount of time you have.
Agree 100% with @Bryant Brislin.
As I've said in a previous post, wholesaling is not an entry-level to investing in real estate. I transitioned my flipping business to a wholesaling business because the model suits me better for scaling the way I want but that doesn't mean is an easy business to get into. I would say most people give up because they get sold on the idea of wholesaling as a hustle and making millions.
I'd suggest teaming up with someone who knows what they are doing and can see around corners to avoid lawsuits, wasting seller's time and wasting your time on deals that may not work. Also, I feel like there is a myth that someone can make tons of money wholesaling just by dabbling, putting in maybe 5 hrs, 10 hrs, a week. It's a full-time job, it's the same as saying you want to open a restaurant. So if you already have a full time job, kids, etc, then it may not be something you realisticaly have time to do. If you only have, let's say, 20 hrs a week to put towards it, then even more, you may want to team up with someone who can find a role for you where you can do something with the small amount of time you have.
Agree 100% with @Bryant Brislin.
As I've said in a previous post, wholesaling is not an entry-level to investing in real estate. I transitioned my flipping business to a wholesaling business because the model suits me better for scaling the way I want but that doesn't mean is an easy business to get into. I would say most people give up because they get sold on the idea of wholesaling as a hustle and making millions.
Firstly, congratulations on running your own real estate investing business! I'm sure you have worked extremely hard to get to the position you are in today. I hope that someday I will be running my own real estate investing business as well. I never looked at wholesaling as a million dollar cash machine that would allow me to be able to retire in 5 years or anything even close to that. I was hoping I would be able to put in extra hours after work and during down-times with my full-time job, so that I would be able to make an extra 5-10K which, in turn, would help me save quicker towards my first down-payment on a house hack. I appreciate your feedback and wish you the best!
@Nathan Witte of course, and happy to talk some time if you need tips.
I have started looking into wholesaling as a means to helping me fast track my savings goal and help get experience within real estate investing. I understand that wholesaling gives people with little money, extra time, and drive to be able to opportunity to enter the business of real estate investing. From what I have been learning so far, it seems very possible to do at a young age, but what are some of the potential risks of wholesaling a property? When would a wholesaler become liable within a transaction. For example, when wholesaling, once a property gets under contract, who pays for contractors and title searches and other due diligence expenses? Any additional information on the topic would be absolutely great! Thanks.
Risks none if you have a proper contract leaving you an out,
Agree 100% with @Bryant Brislin.
As I've said in a previous post, wholesaling is not an entry-level to investing in real estate. I transitioned my flipping business to a wholesaling business because the model suits me better for scaling the way I want but that doesn't mean is an easy business to get into. I would say most people give up because they get sold on the idea of wholesaling as a hustle and making millions.
Firstly, congratulations on running your own real estate investing business! I'm sure you have worked extremely hard to get to the position you are in today. I hope that someday I will be running my own real estate investing business as well. I never looked at wholesaling as a million dollar cash machine that would allow me to be able to retire in 5 years or anything even close to that. I was hoping I would be able to put in extra hours after work and during down-times with my full-time job, so that I would be able to make an extra 5-10K which, in turn, would help me save quicker towards my first down-payment on a house hack. I appreciate your feedback and wish you the best!
Same to you! Sorry if my post sounded rude; maybe I should have said it differently. I'm just being fully transparent because it takes a while to achieve consistent results, and people often enter the business with unrealistic expectations and then give up.