What is the hardest part of wholesaling?

[Jeff McDermott]

I am giving a speech to a group of investors/new wholesales and I wanted to get some case studies from outside sources.

I never found that finding deals or finding money was the hard part it was having to stress about if the end buyer was going to close or not.

What are your thoughts on this topic, what is the hardest part of wholesaling for you?

[Dev Horn]

FINDING MOTIVATED SELLERS is THE challenge for wholesalers.

This is a marketing challenge.  I always say, you may be able to  buy a house with no money, but you can't buy advertising with no money.  Successful wholesalers are really marketing people and contract negotiators.   Most marketing is pay to play.  Wholesalers will NOT build their business with free posts on Craigslist.

So, assuming they can pay for advertising, the issue becomes, what does it cost to generate a deal?  If I do a marketing campaign - AdWords or direct mail etc - my cost per lead could easily be $100.  The average wholesaler can close (get under contract) 1 deal out of 20 leads.  So their cost per DEAL is 20 x $100 or $2,000.

If they flip the house to a cash buyer for a $3,000 assignment fee, they'll say "I made $3,000 on that flip!".  Nope.  They made $3,000 revenue - $2,000 marketing cost = $1,000 profit.  All that work for $1,000.  Quickly they find that it's a crappy job and if they stop marketing the whole thing STOPS.

Now, there are some markets where wholesalers can make much larger assignment fees.  I know guys that can get $20K+ assignment fees in their market.  Well, I'd spend $2000 ALL DAY LONG to generate deals with $20K assignment fees.

The reality is, most wholesalers are much closer to $2K than $20K on their assignment fees.  The first key is to understand your cost per lead and cost per deal so you know if you have a profitable business.  The second key is to do more than just wholesaling - do the flips, get licensed and list properties, etc.  Wholesaling alone if often not a viable business in many markets.