Help finding active wholesalers

[Eli Edwards]

I am hitting a roadblock in finding deals... I have been on New Western's deal list as well as another bigger local company and everytime I underwrite these deals there is very very minimal left on the bone let alone contingency funds for going over budget on the flip... Does anyone have any contacts they wouldnt mind sharing that can add me to their buyers list?

[Don Konipol]

Quote from @Eli Edwards:

I am hitting a roadblock in finding deals... I have been on New Western's deal list as well as another bigger local company and everytime I underwrite these deals there is very very minimal left on the bone let alone contingency funds for going over budget on the flip... Does anyone have any contacts they wouldnt mind sharing that can add me to their buyers list?

Welcome to the club!  No matter whether you are looking at commercial or residential property, the deals that “pencil out” at OFFERING price are few and far between these days.  

Look, we’d all like to search the internet, find a deal for sale, analyze the property as having a great cash flow at current interest rates, with lots of upside potential in a gentrifying market.  Problem is it doesn’t exist as a “public” offering.  

So, as an investor you have three paths to follow to try to “capture” the rare property that meets the above characteristics. 

1. Contact potential sellers who are not actively seeking to sell their real estate holdings.  Since most people who are not actively seeking a sale are not motivated to sell at anything other than a top of the line price, this is going to be a numbers game of x thousands of contacts for every potentially doable deal.  That’s why the successful wholesalers and flippers I know spend $10,000 and more MONTHLY on marketing.  

2. Use your superior knowledge, experience and analytical ability to spot something in a property being offered for sale that everyone else has missed.  This requires a dedicated effort sourcing and analyzing hundreds of deals to find the one or two worth pursuing.  Further, it probably would also require the ability to “reposition” the property to have the below market value you seek.

3. Use negotiation to lower the price from the “no go” asking price to a “go” lowerpurchase price.  Again, large commitment of time, patience, and ability needed.

The amateur of “semi pro” investor should realize that the professional investors (such as myself) spend ALL DAY EVERY DAY doing the above.  We have education in real estate principles, real estate law and real estate finance.  We have used every strategy, technique and tactic that the gurus teach as their own.  So, the chances of someone trying to find the TRUE below market deal in their “spare time” is not great.  40 years ago you could. But times have changed. 

So, what does this leave the part time investor?  Actually, they’re in pretty good shape.  See, the majority of profit in real estate is NOT made by below market purchases.  While the rare “killing” can be done, the vast majority of deals, even ones by professionals, are done within market pricing parameters.  

Real estate wealth is built through long term price appreciation, property becomes (usually) more valuable over time, especially if purchased in areas that have either gone through development or redevelopment.  As rental rates increase, cash flow becomes strongly positive.  Real estate purchase using reasonable leverage, at todays interest rates, will build up equity through amortization.  Finally, even as the landlords cash flow increases, depreciation should keep a major portion tax deferred. 

Here's an example of what I'm speaking of. While I often "trade" properties, a friend of mine is a buy and hold guy. He purchased a SFR from me in 1979 for $55,000 with $5,000 down. Through the years he enjoyed positive cash flow with the last ten years cash flowing at about $17,500 annually. The house is worth at "quick sale" about $360,000. So, setting aside the cash flow he enjoyed for the last 40 years, he has a profit of $305,000. If he had negotiated a bargain price of say $40,000 on the purchase, his profit would be $375,000 instead of $360,000. The vast majority of wealth accumulation is through appreciation, cash flow after rents increase, and amortization.