Could wholesaling become extinct?

Question

OK to start out with we all know that wholesaling is one of the easiest and less risky part of investing and that's why most beginners start here. Just the other day i over heard some news from CNN,Forbes,Wall street Journal,and one of my favorite real estate gurus Preston Ely, witch stated that numerous large corporations and ceo's  have set aside billions of dolors to plan on buying up millions of foreclosed properties in very large bulk in one swoop across the US with in the next 12-24 months. That could be devastating to all the mom and pop investors!  Distressed properties will become scarce and possibly cause a large amount of investors to go out of business. So could wholesaling become extinct? What do you think?

Richard C. · Answer

That is funny, because your website does not seem focussed on buying properties, but rather on selling seats to a "wholesaling seminar."

So yeah, the guy who wants to make money convincing people they can be wholesalers says that wannabe wholesalers should ignore the naysayers and jump in. What a shock that is, eh?

Steve Vaughan · Answer

I am not a wholesaler primarily but I would strongly argue against the idea that being a QUALITY wholesaler as 'easy'.  If any one niche encompasses the need to be good at all aspects of lead generating, negotiating, rehab and value estimating, having contacts, contracts, a desire and ability to solve all types of problems, it's a quality wholesaler.

In my opinion, the hedge funds have already bought what they are going to for the most part.  They will wait for this cycle to conclude.  Wholesalers aren't going anywhere.  Real estate agents may be a different argument!

Bill Gulley · Answer

LOL, Nick, Gerald is new here.

No, not really, IMO. Wholesaling is NOT the easiest place to start and it is NOT without risk, no, there is hardly any financial risk, but most aren't aware of the liability they bring upon themselves by trying to wholesale with guru tactics.

By the time someone learns enough to be a good wholesaler, chances are, they won't be wholesaling.

One trick ponies don't do well in this circus. Learn real estate!

Wholesaling is going to die on the vine as most know it, that's because most try to do it unethically and illegally, but that's well covered ob BP. Change the methods and it can be done properly.

As to our beloved billionaires, please, bring it on! Try to buy it all, I want your money! LOL

That rumor has been floating around for five years, where are they?

It's harder than you think, money isn't the answer, skill, local knowledge and timing play a part that will be hard to do from Wall Street.

Two years ago, I looked into buying all the REO a couple banks would take in. The issue is the unknown, unknown, buying all at book value, taking the bank out cleanly is a high financial and market risk. Paying less can be done, as consideration for taking it all, but how much less? It's a role of the dice unless you know the mean recovery amount of portfolios over different markets. And in that are economic conditions of the unknown, how many trash the place out of madness? Banks are in a much better position to litigate such acts, if you buy it, you don't have the legal avenues available to banks as a property being their collateral. All said, it's not a good model in many markets, like mine.

All in all, if some bunch does come to your market area and scoops up all the empties, shame on you for being a one trick pony, so, learn real estate! :)

Jason Dillard · Answer

That's a good point. However, I don't try to make a profit selling seminars.  The room cost more than what the attendees pay.  I'm actually teaching newbies how to wholesale deals and my hope is that they will call me first.

Jason Dillard · Answer

Are you kidding me? I buy a couple of deals a month from wholesalers.  The hedge funds aren't going to find the deals that wholesalers do with their marketing.  The add the motivated seller sees, just at the right time, will produce the best deals. When I see posts that put down wholesalers, it just makes me laugh.  How am I paying six figures a year to wholesaler's, if it's dying?

If you're a potential wholesaler, don't pay any attention to the naysayers. There is someone in your market just like me, that would love to pay your assignment fee, to get the deals that only you are willing to do the work and spend the money to find.

Jay Hinrichs · Answer

@Gerald W mcgee  that's old news and it already happened.. Kind of like that scene from Austin powers... that I like so much.

Hedge funds started with cheaper stuff realized it was very difficult to manage and moved up in asset class much of what they buy are not the target of wholesalers as there is not enough spread to an end buy and hold or flipper..

@Stuart  Birdsong  hedge funds bought about 100,000 or some SFR's  but they of course also do what you suggest... big owners are Blackstone, Colony , 4 rents in Irvine that's not the exact name but something like it... plus there are many many smaller private equity groups still buying.. these are the 10 to 50 million dollar size companies.

Richard C. · Answer

That's the lesson?!?!

Jesus.

Well, good luck to you.

Richard C. · Answer

And by the way, we do not "all know" any such thing. Because it isn't true.

The expected return on investment of a direct mail campaign is almost certainly lower than that of paying for a licensing class. Especially at the lower end. People who have a couple thousand dollars to their name and spend it trying to wholesale are suckers at best. Chances are extremely high they will get zero deals. I bet the expected ROI from buying 1000 lottery tickets is higher than the expected ROI of a $1000 direct mail campaign.

I'm entirely serious.

The easiest and lowest risk route is to get a license.

Jay Hinrichs · Answer

@Gerald W mcgee  I think the bigger threat to those that try to wholesale houses without buying them and or that don't purely assign contracts is the states cracking down on unlicensed activities as we are seeing in Ohio  and Florida etc .. especially those wholesalers that try to tie up listed properties and fail to perform... the RE agents get pretty miffed with this activity and it will only take a few to start filing complaints

Stuart Birdsong · Answer

Generally speaking Hedge Funds, corporations and large capital groups purchase default notes, in bulk, at a discounted percentage of the value of the note. Then either take over servicing the note at the set interest rate, or sell it for profit. In addition, they are not big fans of Single Family properties from a buy and hold perspective. More importantly, they are not flippers. Just a thought!

Could wholesaling become extinct?

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