Truths about wholesaling especially for newbies

[Don Konipol]

Without providing a lot of negative feedback to basically unknowledgeable newbies who are attracted to “wholesaling” by the hype on YouTube videos, I have come up with a list of wholesaling “truths” that everyone contemplating wholesaling should be aware of

1 - wholesaling real estate, as the term is currently used, is not INVESTING.  It is a job, or a business. So you won’t “begin your real estate investing career” by wholesaling.

2 - VIRTUAL wholesaling is merely wholesaling property while doing all the work online.  It’s not a different arena, it’s merely a more difficult and less  likely to be successful method of wholesaling

3 - wholesaling is not an easy way to earn a buck.  The wholesaler needs to find and get under contract a property at significantly less than market price, and sell to a buyer at a higher price, with enough profit to cover the transactional costs, cost of his time, and profit.  

4 - Despite (suspect) testimony to the contrary, it would be exceedingly difficult to find and contract for purchase any property already made available for purchase publicly. The reason is so obvious I won't waste space by repeating it. This wholesaling off of "MLS" is absurd.

5 - successful wholesaling entails knowledge of property values, and usually requires knowledge of construction procedures, defects, and costs as well.  This may indeed require significant education either formally, or by  experience.  The gurus advice to have a contractor provide a “free” estimate for every property contemplated is completely unworkable. 

6 - The VAST Majority of wholesalers never make even one deal.  The majority of those that do earn less than minimum wage on their time spent

7 - Yes, there are wholesalers who are very successful, earning 6 figures, and up to 7 figures annually.   The ones I know (1) spend $10,000 - $100,000 monthly on marketing (2) have 10+ years experience (3) have a full business organization (4) have reputations they fight to achieve and maintain and (5) have significant capital to complete a deal if they find themselves unable to flip the contract to an end buyer before closing date.

8 - The all purpose “weasel” clause may lead to liability for contract fraud if the wholesaler never had any intent to close if he couldn’t find an end buyer, or if the wholesaler never had the money of capacity to fulfill the contract

9 - Of you tie a property up as a wholesaler and do not inform the seller of your intention to close only if you can resell at a higher price, you may inadvertently cause irreversible harm to the seller leading to foreclosure, loss of credit capacity, etc.

10 - Dependent on the State in question, wholesaling done in a. Particular way may be illegal without the wholesaler being in possession of a real estate broker license.