Is Wholesaling Over Saturated? (Michigan/Detroit)

[Tom W.]

I'm considering starting a serious wholesaling campaign shortly, but I'm starting to get the feeling that the wholesaling market is a bit over saturated. I'm in Southeast Michigan (Detroit area) and am on multiple wholesalers lists and it feels like most of the properties wholesalers send me are for lack of a better word, trash, almost priced at retail. This leads me to believe that the market may be over saturated with wholesalers. Any thoughts?

[Travis Biziorek]

Oh, Tom. Where do I begin?!

I'm a cash buyer in Detroit. I've purchased 4 properties in the last 3 months. 

I HATE wholesalers. Like legit detest them.

Most of the hate is for the reasons you say. They bring terrible, ****** deals that are priced at, or even worse, than retail stuff. Of my 4 deals I've done, 3 of them have come from the MLS. The one that was off-market came from a very reputable broker/investor that's here locally. It's what every wholesale deal should aspire to be.

But yes, 99% of "wholesalers" are people that want to get into real estate but have no money. They believe that they can make big bucks wholesaling houses to investors, so they go out and find anything they can get their hands on. It's attractive because there's basically zero barrier to entry. 99% of these guys fail because it's just not that easy.

I walked through a house with a guy trying to wholesale a property for $55,000. I knew it was overpriced, but I was still learning the market and decided to check it out anyway. He was young and this was his first deal. I was catching stuff that needed fixing in the house that he wasn't even aware of. Amazing.

As we're walking it I looked at him and said, "There is zero chance I'd buy this house, even for a price that I think is fair". So he wanted to know what I'd buy it for even if I was willing to do the rehab work it required. I told him, "Maybe $20-$25k". He nodded in silence.

So I asked, "You know I'm not buying this house, so tell me... what are you under contract for?" He says, "$25,000".

So this guy is sitting here trying to sell a $25,000 house for a $30,000 profit. This isn't uncommon with these new guys... trying to make big bucks on one or two deals. They have it backwards.

What he should have been doing was negotiating with the owner to get the house under contract for $15k and flip it to me for $20k. He makes $5k and makes it fast. He's on to the next deal. How many of those could he do in a month? Instead, he sat on this house for months, wasting his time. He never ended up selling it and the owner is going to "fix it up herself" (probably just let it continue to degrade).

So yes, the wholesaler market is over saturated. It will always be that way because there's no barrier to entry. Find a house and an owner that wants to sell, and agree to buy it from them. Then try and flip it. It's easy. But it actually isn't.

There will always be a market for GOOD wholesalers. If you want to find deals like the one I did the other week, all you need to do is find serious buyers and you'll sell them the next day. The hard part is going to be finding attractive deals. I'm happy to pay a reasonable wholesale fee for that effort.