Whether or not to utilize wholesalers & Other methods of deal sourcing when scaling

[Tony Pellettieri]

When looking for properties to invest in, should an investor rely on wholesalers to present deals to them?

We typically do not rely on many of our opportunities coming from wholesalers, but that's not to say we're not occasionally interested in something they have to offer.

In addition to scouring our farm area while we drive around to and from our properties, and looking at aged(100 day+) listings and new low priced distressed condition listings on the MLS, which is where many of our deals come from, we reach out to local agents in the area we're looking to invest and let them know we pay cash. We let them know what kind of properties we're looking for and if they come across something or someone brings them something we may be interested in, to let us know FIRST.

In return for doing so, we agree to any of the following.

1. If the seller would agree to sell us the property prior to it being listed, at an agreed upon price using a closing/title agency to complete the transaction, we will pay the realtor a finders fee.

2. If the seller would like to use an/that agent, we will let the agent also represent us so he/she may earn a dual commission for representing both us and the seller. If our plans are to sell the property in a short period of time, we may also agree to let that agent list the property for us when we go to sell it so they may make a round trip on their commissions.

When a business is trying to grow, we've found that finding more potential deals is often times a company's most important mission and can also be the single most difficult challenge.

Utilizing wholesalers is an easy way to find opportunities, simply because they find the opportunities for you. Because it's so easy, many investors utilize this as their primary source of deal sourcing. With that being said, depending on the wholesaler, the deals they bring you can vary...

They can bring you good/great deals. They make money, you make money, or lots of money.

They can bring you bad deals discuised as good deals. They make money, you dont make money, if you take the deal.

They can bring you what were good deals, that are no longer good deals. They focus on making too much money.

They can bring you bad deals. This often happens because they are not deal makers. Many wholesalers have not practiced the product they're selling enough to become effective at deciphering between what is a good deal and what is not.

Nothing against wholesalers, and honestly we will likely start our own off market deal sourcing campaigns, but to us the chances of a wholesaler bringing us a deal that is a better deal than we can find/source after they've charged their fee to make it worth their time for finding the deal, It's not a deal we're interested in.

On the flip side, every once in a while, a wholesaler underestimates a deal's potental, sometimes more often than not, due to their limited understanding of what makes a deal a great deal.

We're always open to looking at deals to see if maybe they missed something. If so, they still get paid, we get a deal, and we both make money.

[Bryant Brislin]

Any buyer who is experienced can look at deal and know what the ARV actually is and what the repairs actually are, so the repairs and ARV provided by the wholesaler are immaterial. If you actually like the deal, just let the wholesaler know what number works for you and that you're a buyer if they can get it at that number. To say "that's too high" and not give the number that does work for you, isn't productive. Yes, there are are some bad wholesalers out there, usually the young guys who will do anything to get a deal done, but in general wholesalers are just trying to make a living like everyone else, and we know that no matter what price we present a deal at, a buyer will automatically say it's too high and will grind no matter what, even if it's just a little bit. We've also had buyers who grind on price and we work hard to get it to them there, and they turn around and flip it themselves to someone in their network. It's a delicate dance, but I can tell you it's not easy sourcing deals, and by the time we bring it to buyers we've usually put in a lot of work to get it to that point. If you truly like the house just let them know the number that works for you!