Wholesaling is it good or bad ?

Question

I am very new to real estate investing. I have seen many ADS and forums about wholesaling ?

What is wholesaling ? Is it illegal ? Is it the same as a broker ?  Why do some criticize wholesaling and others praise ? Does FSBO’s have something to do with wholesaling ?

I am just learning somethings doing my research as I go !

Thank you

Jerry Puckett · Answer

Hello Account Closed,

BP must be kind of slow today. Ordinarily a question like this works it's way into a full scale anti wholesaling / wholesaler bashing thread very quickly. The one response so far contains quite a lot of misinformation. When you are reading this thread back, look over to the right, there is a box called "Related Resources" where your questions have been asked and answered previously:

Also, at the bottom of the page, you will see a number of related discussions. Dive in and read up. Wholesaling while very very simple, is not exactly easy and it has been discussed many, many, times. There are Podcast's and blog articles galore also.

Dive in, do some research, then send out some colleague requests and talk to someone who is doing what you want to do....not just talking about talking about it. That's the power and beauty of BP....you can actually talk to folks who are already doing it.

Patrick Ellis · Answer

Annette, you're likely to get a bunch of responses to this one. Some pro-wholesaling and some against it. The wholesalers and the folks who provide a service around the wholesaling business will all be Pro-wholesaling. While the investors that have gotten screwed on deals will obviously be Anti-wholesaling.

Wholesaling is a way for an individual to basically broker a real estate transaction without being licensed. Depending on the state, it is borderline legal. It started out harmlessly enough,where wholesalers were finding properties, usually distressed, and marking them up comparable to a real estate commissions and selling them to investors who would invest their own money, sweat equity, and time to turn the property for a profit. That's back when it was more simple and the name "wholesaler" didn't have the same connotation as root canal or colonoscopy.  Today, things are a bit different.

So, while conceptually wholesaling can be a good thing. You know...the whole helping people on both ends of the deal...thing. It can also be a bad thing when you try to out profit the folks investing their money, time, sweat and tears, into a property. Some may say that capitalism for ya.  But other may say it's just bad business.  I've purchased properties from several wholesalers, both big and small. So, I speak from experience on this matter. I prefer to deal with smaller wholesalers as they are not quite as "profit driven" and tend to be more honest with there estimations on things like ARVs and rehab costs.  I hope you become one of those wholesalers.

Hope this helps. Good luck to you as you move forward.

Patrick

Scott Johnson · Answer

@Annette Hardge you can Wholesale FSBOs as well. Turn on a keyword alert for “wholesale” here in the forums as well and you’ll find some good information coming down the pipeline.

Scott Johnson · Answer

@Jerry Puckett, exactly what I was thinking! I’m waiting to see what happens after it’s up for a bit longer.

Wholesaling varies by state. Find a local mentor who can help you and show you the ropes. It helps to learn from mistakes they’ve made, so you don’t repeat them.

Just be very up front and honest with the seller about what you’re doing. I don’t go as far as to tell my sellers how much I’m making, but my buyers really don’t care how much they’re paying as an assignment fee, as long as the deal as a whole is a good one for them.

Just stay legal and use a strong contract. It’s a fun game and you’re able to help others while helping yourself!

Michael Lewis Lee · Answer

Hello Annette!  Wholesaling is legal but made to sound good to do by people that are most interested by taking your money.  I don't know how long you've been on the Internet but it is full of crooks fighting on taking advantage of you.  You can tend to do whatever on the Internet but it is not very well policed.  The one thing they won't tell you is that you have to lie or withhold what you are really doing and there are back-stabbers in wholesaling that try to cheat you from their experience.  Sure you can do that without any money but to do it right you need to have marketing expenses to do it right.

There is no licensing involved in wholesaling and its not necessarily bad but it is more difficult than what others say from finding one and then trying to find a buyer.  Most often you have to withhold what you are really doing.  They sometimes have to withhold your mission and budget for two different closing because some owners get ticked off when they finding out about your profit.  You are better off finding a title company or Attorney that will do that and have two consecutive closings.

Some Owners are OK with you making money and can know what's going on for real and require you to let the Buyer close the deal directly and have only one closing.  That is mainly up to you to tell the Owner what's really going on based on your opinion.  To do this is how you were raised and or can be a liar.  Some people can do that and others can't.

I think it might be better and easier to ask the owner if they will finance your deal in lieu of being a wholesaler.  I have been involved with real estate sales and construction for about 30 years around Dallas, Texas.  Most types of real estate is difficult, it's just they way you choose to go and if you have saved money to help with the way you need to go.

You can also get 0% credit cards to help you get started as long as you are disciplined to get it paid on time and how confident you are.  It's like the job of being an effective real estate Agent.  Just go with a niche that makes you feel confident.  You will succeed eventually if you never quit.  You need a buyers list that have the desire to do what you do.

There also is what he calls is Reverse Wholesaling where you find buyers and they tell you what to look for and you call them when you find it.  This way you do not have to find a buyer because you know who to call whenever you find a deal.

Good luck to you!

Wholesaling is it good or bad ?

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