Trying to understand "wholesaling"

[Rob K.]

I usually avoid any thread that falls under the “wholesaling” category because it always seems like a bunch of nonsensical posts from wannabe “investors” who have never done a deal. Half the people make it sound like you’re going to walk in with nothing to your name, make a deal with someone for half what the property is worth, and then flip it to a cash buyer and make thousands for having nothing invested. It just sounds too good to be true.

Any “wholesale” deal that I’ve done has involved me making a deal to buy a property, going to closing with my own cash, purchasing the property (as I agreed to do), and then re-selling it to another person. I’ve never made a deal with someone to buy their property (with my fingers crossed behind my back), and then gone out and tried to find a buyer so I could make the deal happen. When I tell someone that I will buy their property, I follow through. It’s not a maybe.

There was a real estate agent in my area that used to do a ton of business and then he disappeared. It was like he fell through a trap door. After many months, he contacted my friend with a “killer deal” on a ten-unit apartment building. It turns out that he was trying to do a no money wholesale deal and make $40K on the transaction. My friend told me that if he did buy the building, he would “cut this bottom feeder out of the deal” and go directly to the owner. I agreed that I would do the same thing and get it for a cheaper price.

Is there some late night guru out there preaching this wholesaling with no money nonsense? Do these deals actually go through? If so, it would seem to me that it would just be a starting point. Once you did some deals and banked some cash, you would get better deals by making solid offers.

Can anyone who’s done deals (other than the kind I have done) post on here and walk me through all of the steps. I’m curious how it all works (or doesn’t work).

Does the seller know that you’re not the end buyer? If so, why would they deal with you? Are you lying to the seller and saying that you’re the buyer, only to try and find an actual buyer? If so, what if you don’t find one?

I’m not trying to pick on wholesalers. It’s just that the ones I read about seem like “all flash, no cash” or as they say in Texas, “big hat, no cattle”. The whole thing seems very dubious. Maybe someone can explain it better.