What are the positives and negatives of wholesaling?

Question

I have recently been learning about wholesale real estate and creative finance and thought that they were amazing ways to get into real estate without needing large amounts of capital on hand or taking out a high interest loan. That seems to hold true after some significant research, however, I see a trend that labels wholesalers as shady individuals. I of course want to avoid this, and was wondering the best method/ information i needed to avoid this stereotype. And maybe a bigger question i had for the more knowledgeable individuals is: Is the practice of wholesale real estate shady in itself or is it just a lot of the people that it attracts?

David Ramirez · Answer

Work with integrity in anything you do.

Alexandria Harden · Answer

@John Guillory I personally believe that its the way in which you are presenting yourself when you talk directly with the homeowners that gives the "shady" terminology. I think as long as you let them know you are providing services and will get paid for it. I think it becomes hard because of the unknown variables of time toward money output and also keeping up with the laws as they are constantly changing. @Anna Laud was correct anything in real estate is built on the relationships you develop because someone usually has either the product or answers to what you are looking for.

Account Closed · Answer

It's ALL ABOUT NUMBERS. Numbers don't lie, numbers don't pretend, numbers don't care what anyone thinks of you. I personally don't care what some of the folk here thinks of me. I was involved in wholesaling business long time ago (not real estate but consumer goods), and it has taught me A LOT about human nature. There are some good people in business, but there are also nasty, hateful people that will cut your throat for few bucks. Money is what motivates and moves them, and nothing else. They just look after their own good. Disregard them! Just be careful dealing with those types, they are capable of anything for a buck.

But, as I said above, wholesaling is all about NUMBERS. Know your numbers. Do your due diligence. When you look for property think of it as if you were buying it for yourself. Would you , as an investor or flip-flopper, buy it for what you can sell it for? Would HML lend the money to buy and rehab it? If answer is NO then run from it, don't have anything to do with that property but look for another one. If you find a true wholesale deal, the one you would buy and profit from and HML's are ready to finance it, then you know it's worth getting it under the contract and find an investor for. Be good with your numbers, those are: ARV (based on comps), repair costs and MAO which will allow you to squeeze in your cut in the assignment of the contract. If your numbers are right then nothing else matters.

John Guillory · Answer

Thank you Mr. Ramirez and Mr. Eric. I am coming to see that what you said about the numbers is true. That piece of advice was very helpful for me and its been of pretty good use already, even though it has barely been a week.

Anna Laud · Answer

@John Guillory In my experience most wholesalers fail because they don't build the necessary knowledge and network and that takes time and work. Usually wholesaling works best as a side venture while buy/hold is the main focus. Basically a living version of the marshmellow experiment lol.  Here's an interesting thread where I shared more and others did too it can be really helpful about wholesaling basics:

https://www.biggerpockets.com/forums/93/topics/1195986-is-wh...

John Clark · Answer

Got to look at more than just the numbers. Would your grandmother’s parson approve of the overall situation?even honest numbers aren’t enough. As my father was fond of saying: “Figures can’t lie, but liars can figure.”

Natasha Crump · Answer

I totally agree. I know personally some realtors who have client on both sides and make deals according to their pockets, and not in the interest of either party. So, in all business like some are saying. BE HONEST, THE NUMBERS DONT LIE.

Account Closed · Answer

You are welcome, John. @Annie Seuer , who used be a wholesaler and quit doing it, posted on a parallel thread (https://www.biggerpockets.com/forums/93/topics/1194082-5-tips-to-create-a-real-wholesaling-business-and-not-a-chop-shop) that she doesn't think wholesaling can be scaled. She said she was doing good as a wholesaler, knew what she was doing, had trusted buyers she worked with. But apparently it wasn't good enough to justify her staying in this business. I asked her about it, hopefully she will chime in. This is an important factor to consider while getting into wholesaling. If scaling is truly impossible and you hit a ceiling at $80000-$90000 a year (figure I have got by googling "How much wholesalers make"), then it's indeed kind of a dead end a job with only benefit of working remote and making your own schedule, away from corporate world and office politics/nonsense. But as a business model not such a great venture. I am curious what other wholesalers think about it. Is her assessment correct?

Timothy G Dunson · Answer

I'd love to have a chat about this. I'll DM you my number.

What are the positives and negatives of wholesaling?

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