Is buying from wholesalers a good idea for landlords?

Wholesaling
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Is buying from wholesalers a good idea for landlords?

John Fuex
Bastrop, TX · Member since 2017 · 2 posts · 1 vote

I got into real estate investing by purchasing two rental properties from a friend who was moving out of state and needed to cash out their investment. Both properties have seen positive cash flow and appreciation every year I have owned them. Because it was a "friend" discount and we used lawyers instead of RE agents I was able to get a hella good deal on the properties which really helped make the numbers work.

So now I'm starting to think about investing in some more properties, but I have no experience buying properties. My only experience is having the seller literally call me and offer me a great deal to buy properties. I've never had to hustle to find a property, and I don't really think I am the personality type to be good at sniffing our deals and doing the legwork to find more properties. 

My Question: I'm wondering if buying through wholesalers is advisable for someone who wants to buy and hold rental properties for the cash flow (vs flipping). Are there any major caveats or advice for using wholesalers in this situation someone can offer?

I've searched for answers on this, but the Internet is full of people talking about BECOMING a wholesaler, which is the opposite of what I am interested in. I want to know how to best leverage them as investors, and what to watch out for.

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JM Payne
Rental Property Investor · Member since 2018 · 207 posts · 225 votes
5y
I've purchased a deal that we hold as a rental from a wholesaler.  Find one that's been in the game for a long time and knows their business, and then treat them fairly and with respect.  In my area, the biggest tell has been whether or not they'll tell you the address.  If I get vague details about the property and bad pictures with no address, then they're new and I have better things to do. 

The guy we work with always has the address ready for me, and he doesn't bother to send me pictures because he knows I'm going to go look at it.  An experienced wholesaler will be able to walk you through the deal just as easily as an agent would.  The other thing I can tell you that sets him apart is the new wholesalers are all on facebook and have bandit signs all over the place.  My guy takes out ads in the paper, so if you see a local classified that says "buying homes," call that guy.  Best of luck!

-jm
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  • JM Payne
    Rental Property Investor · Member since 2018 · 207 posts · 225 votes
    5y
    I've purchased a deal that we hold as a rental from a wholesaler.  Find one that's been in the game for a long time and knows their business, and then treat them fairly and with respect.  In my area, the biggest tell has been whether or not they'll tell you the address.  If I get vague details about the property and bad pictures with no address, then they're new and I have better things to do. 

    The guy we work with always has the address ready for me, and he doesn't bother to send me pictures because he knows I'm going to go look at it.  An experienced wholesaler will be able to walk you through the deal just as easily as an agent would.  The other thing I can tell you that sets him apart is the new wholesalers are all on facebook and have bandit signs all over the place.  My guy takes out ads in the paper, so if you see a local classified that says "buying homes," call that guy.  Best of luck!

    -jm
    3Reply
  • Bryan Devitt
    Contractor · Oxford, MA · Member since 2018 · 807 posts · 745 votes
    5y

    know your weaknesses and hire them out. If that is finding deals, running numbers, doing inspections, whatever. You can either not do anything, do it half back side and lose your shirt or pay people to do it the right way and everyone makes money 

    3Reply
  • Stephen J DavisBusiness Member
    Rental Property Investor · Houston, TX · Member since 2017 · 529 posts · 467 votes
    5y

    Yes is the simple answer. However, just like realtors, do you due diligence. We have bought hundreds of deals from wholesalers over the years. 

    3Reply
  • Mark Sewell
    Investor · Houston, TX · Member since 2017 · 1k+ posts · 871 votes
    5y

    Here is what 'I think' I think on the topic of wholesalers... 90% of them are not worth your time.  The beginners don't know their numbers and what they think is a deal (honestly) is usually not a deal.  The bigger ones, the ones that operate as established businesses, routinely offer marginal-to-bad deals, hoping to offload them onto inexperienced investors.

    Now there is still that silent 10% roaming around out there.  Guys that get it, guys that do it right, they can be found.  They aren't greedy and they are genuinely concerned about the deal getting done, the seller getting their house sold, and many of them, I would guess, are able to backstop the deal themselves if needed.  These people, I suspect, don't advertise and they have a short triple-A proven buyer list, a little local mini-cartel, that they work with.  There is a lot of trust involved and more than a little relationship.  I do think the successful guys run in herds locally.

    So you need to find that one guy that (a) kinda knows what they are doing and (b) sees value in knowing you as a buyer, enough that they are going to charge you a reasonable fee or a reasonable deal that actually pencils out.  

    3Reply
  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    5y

    "My Question: I'm wondering if buying through wholesalers is advisable for someone who wants to buy and hold rental properties for the cash flow (vs flipping). Are there any major caveats or advice for using wholesalers in this situation someone can offer?"

    You need to understand the deal well enough NOT to rely on the WS.  WS are only in it for their slice and they don't care if the seller is getting screwed over or the buyer is getting a good deal or not.  Based on some of the wanna-bes here, I don't think they even understand the basics of investments.

    2Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    5y

    It is possible to buy a deal from wholesalers. Finding a great deal from the Wholeseller is not going to be easy. Not everyone that calls themselves a wholesaler actually have properties to sell at a wholesale price. Just like not everyone that calls themselves an investor has properties to back up that statement. I have a few acquaintances that wholesale primarily and they shoot me out properties from time to time and there’s typically little meat left on the bone.

    1Reply
  • Lydia R.
    Investor · Austin TX · Member since 2016 · 1k+ posts · 2k+ votes
    5y

    @John Fuex If you are looking to buy properties in your area ( Im in ATX so I know where Bastrop is) make sure that you run your own numbers and do your own due diligence. Deals in this metro are hard to come by because its so competitive. If you dont want to source deals yourself then your only option is to buy them from others. Make sure you verify that the deal is actually a deal. Dont sign anything until you are positive about your numbers. Make sure you deposit your earnest money with a title company not directly to the wholesaler. There are a lot of bad deals put there so watch out.

    1Reply
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