Dabbling to purchase from Wholesalers - exp investors chime-in

[Nick Shri]

Hi BPers

I am venturing to buy from wholesalers.

My goal is to BRRRR.

My question -

How do I perform due diligence - what are the catches, pitfalls I need to keep an eye on?

How do you negotiate with a wholesaler?

I am seeing wholesalers mention non-refundable EMD, does that mean I need to have a GC/inspector look at the property before I my offer is accepted? How does this work?

I am open to a mentor to show me OOS BRRRR..

[Grant Sylvester]

Hi Nick! Great question. I'll provide a few thoughts from the wholesaler's point of view and I'm sure other individuals will comment from the investor perspective.

Due Diligence - I highly encourage all "end buyers" to perform their due diligence with a GC or Contractor at the property in question. Do NOT take the wholesaler's information on estimated rehab cost into consideration when running your numbers. I would also "interview" the wholesaler (I say this lightly) ask them questions, "How long have you done this?" "How soon does the seller need to sell?" "What are your expectations for the earnest money?" "What title company do you use? Can we use mine?"... A wholesaler that is actively doing deals and providing value to investors will vet any buyer out in advance before sending them information, to ensure that the end buyer is the actual end buyer and not another wholesaler who is daisy-chaining deals.

Negotiations - In my limited experience Nick, there isn't a ton of negotiation on wholesale deals between the wholesaler and end buyer if it's a "good deal" and the wholesaler has options. On the flip side, if you run your numbers and determine that the wholesaler is asking too much, present your information to the wholesaler and ask if they would accept your offer. If their asking price is too high, eventually they will have to renegotiate with the seller and that could put you in a place to get the property. I would also follow up with the wholesaler to see if they found a buyer for the deal.

Non-refundable EMD - Yes! Typically, the wholesaler will facilitate an "open house" and provide a window of opportunity for you and GC/Contractor to view the property and assess the number of repairs needed to execute your exit strategy of choice. The EMD of course is to protect the wholesaler and is used as a means to filter out those who can perform and close on the deal vs those that are not able to perform.

Hope this helps!