Wholesaling in NYC (Brooklyn)

[Ian Forde]

Hi everyone! 

I started a company in Brooklyn, NY in order to do wholesale deals on residential properties. After speaking to various lawyers, I was told that sellers will expect me to put anywhere from 5-10% down on a property. This threw me off because from everything that I have read, wholesaling is a low cost way to get into the real estate game. I was told no one will ever agree to a $10 - $100 deposit and basically I need to be putting down 100k on a million dollar property just to make a few thousand (LOL). 

As you imagined, I am slightly discouraged. Please let me know if there is a way that I can successfully wholesale in NYC PLEASE! 

[Don Konipol]

Originally posted by @Ian Forde:

Hi everyone! 

I started a company in Brooklyn, NY in order to do wholesale deals on residential properties. After speaking to various lawyers, I was told that sellers will expect me to put anywhere from 5-10% down on a property. This threw me off because from everything that I have read, wholesaling is a low cost way to get into the real estate game. I was told no one will ever agree to a $10 - $100 deposit and basically I need to be putting down 100k on a million dollar property just to make a few thousand (LOL). 

As you imagined, I am slightly discouraged. Please let me know if there is a way that I can successfully wholesale in NYC PLEASE! 

I'm afraid you've chosen one of the markets most difficult for a wholesale business. New York City has always had large earnest money deposit expectations, largely because the supply of properties is limited, demand high, prices high, and brokers very aggressive. In places where buyers are few, properties are plentiful, and sellers get a little desperate, the $100 or $1000 EMD is a possibility. Not in Brooklyn. Some more bad news; sellers will expect you to be able to provide (1) proof of funds for down payment and (2) proof of financing approval for obtaining a mortgage to buy the property.

So, many wholesalers will tell the seller up front that they can't close themselves and will be marketing the property to the end buyer.  This being the case, why would the seller tie up the property with the wholesaler rather than list with a broker?  The answer is either the wholesaler has a well know reputation for getting deals done fast, or the property is for one reason or another not of interest to the brokerage community.  

There are few people successful enough wholesaling to make it a full time business.  The people I have seen who do it full time either (1) have very little personal overhead and live a minimalist lifestyle or (2) do it as a sidebar to fix n flip or (3) spend a LOT of money on marketing, promotion, advertising, systems, CRM, networking, education, and business development.  

IMO its not what many people who sell mentorship claim, a way for people with no business skills, no experience, little knowledge and no capital to make a lot of money. Most will quit before they ever complete a transaction, some will complete a few transactions, make a little money and learn a whole lot; a VERY few will be able to create a full time income.