Are There any Successfull Stories on Wholsaling?

Question

I am a newbee, my husband has been rehabbing properties at every stage for more then fifteen years. I have decided to get into wholesaling (to build capital for flipping) but have seen a lot of bashing by the investors........ Is anyone happy with wholesalers or is this just a bad idea??

A lot of the flippers seem to be cocky about the wholesalers making mistakes....

Angelia Kinston · Answer

Hi @Tanesha Mills I am a wholesaler in Northern Virginia, MD, DC area and I don't know if it is necessarily bashing, I just think it's a miscommunication. When wholesalers are crunching numbers, they have to know their audience. Is it for flipping purposes or rental purposes because that makes a huge difference in the financial output. Also, when calculating repair costs, you have to add a disclaimer to your marketing because you may have a contractor look at a house and give you estimates based on cheaper quality materials, appliances, or finishes, while your end buyer may spend twice as much to have it look the way he or she wants. It's a matter of preference and every situation is different. I have not had any issues with my cash buyers because I have my contractor give me a mid range estimate and I explain all of that when I market the property. I hope this helps some. Good luck!

Account Closed · Answer

Well said Christopher. I would say that 99.99% of the people that call themselves "Wholesalers" are not REI's but really "Bird Dogs".

Tanesha Mills · Answer

This has given me some hope and I am very grateful you shared this with me. I also took the liberty of checking out simplewholesaling.com and have signed up for the EBOOK.

I really want to start right away! so I'm hoping I can put this information to use and start by the end of the month.

Brett Snodgrass · Answer

@Tanesha Mills

It's funny I actually wrote a BiggerPockets blog post about your very question:

https://www.biggerpockets.com/renewsblog/2015/09/1...

The reason so many other investors talk trash on wholesalers, is that a lot of them do business pretty unethically.

If you do it well though, it can be a great business and great real estate investing strategy.

Let me know your thoughts on the blog post! Cheers!

Tanesha Mills · Answer

Right Scott send as though some think that we're to do there job as well, thanks for the help with this.

Tanesha Mills · Answer

Noted.... I'm defiantly going to do it the right way and I do understand that it is based on honest and true information.

Tanesha Mills · Answer

Yes this helps I am taking notes and putting into action

Scott Nolan · Answer

It is definitely the buyer's job to perform due diligence and calculate their own repair costs before buying. Any flipper who relies on a wholesaler's estimate without calculating their own deserves what they get. What the wholesaler gives you is only his or her own approximation of repair costs. And lets face it, true repair costs can be difficult to estimate.

I think where wholesalers get a bad reputation is when they produce thin deals with very clearly inaccurate estimates. The flippers aren't complaining so much about getting stuck with a bad deal (because the good ones have done their own due diligence and avoided the bad deals) but that so much of their time is wasted with amateur wholesalers trying to talk to them about deals that just really aren't deals.

By the way, these poor deals are also a hazard for wholesalers. I'm a wholesaler in Northern Virginia and I get a lot of calls from other "wholesalers" trying to pawn off thin deals. "Hustle" is great, but it needs to be tied to knowledge and judgment.

So, in the end, wholesalers are like anyone else (including house flippers) - there are good ones and bad ones and the reputation of the bad ones tars both good and bad. But you will find that many or even most successful house flippers have located one or two good wholesalers and buy the majority of their inventory from these folks. They've found who they can trust and the two develop a close business relationship. As a result, they less frequently  deal with others. So the good wholesalers often pair off with a small number of buyers and the poor ones remain free in the market along with the new ones. The result is a reputation that's worse than it should be.

Bottom line: Yes there are many successful (and respectable!) wholesalers.

Jim Viens · Answer

If you want a wholesaling success story I posted how I got my first two deals closed here: https://www.biggerpockets.com/forums/223/topics/24...

In both cases it was about helping people with problems AND getting a good deal for a rehabber by being honest and up-front with all parties. When I talk with a seller I let them know that I will be finding someone who will do the actual rehab...when talking with buyers I let them know right away that I'm wholesaling the property. As far as the legal issues go, it varies greatly from state to state. Typically if you present the deal as a contract for sale and not a property for sale then you are safe. It also helps if you do what's often referred to as "reverse wholesaling" where you get your cash buyers lined up along with what they're looking for then when you get a property under contract you know exactly who to call to offload it without having to really do any marketing at all (which is where regulators tend to bust wholesalers.)

Hope all that helps!