Wholesaling in a recession

[Patrick Philip]

Let's say the economy goes down. How does this affect the wholesale business (of single family homes)? If the economy turns down, then more people would be facing foreclosure and desperate to sell their homes, right?

Could a recession actually HELP the wholesaling industry?

Has anyone experienced this firsthand?

[Michael Hayworth]

That's wishful thinking. 

One of the reasons wholesaling is booming is that there's a million or more people in the U.S. wanting to be real estate investors, and in many cases, buying up mediocre deals. Wholesaling is relatively easy money right now, just like being a headhunter was during the tech boom or a real estate agent was before the 2008 crash (and that's easy money again right now, of course).

When a crash happens, a lot of the wannabe investors will find their funding has dried up (or they've lost their jobs, or don't feel secure enough to live with the risk of REI). There will be fewer people buying, and less of a market for wholesalers.

Inevitably, a crash weeds out the weak. Strong, established, well-funded wholesalers will have some down years, but will survive. Same with real estate investors. They'll struggle for awhile, but end up with a better market position. It won't be fun, and lots of people will lose money. But that's how markets work.