Flippers and Wholesalers... Good or Bad?
A couple of years ago, flipping became illegal. This type of flipping of course refers to when someone would buy a property, and then have their "buddy appraiser" appraise the house for far more than it was worth in order to sell the property to some poor schmuck who didn't know any better. With the lending that was in place a few years ago, you can see why it was made illegal and how it must have contributed to the foreclosure problem/recession that we are now facing today.
That being said, plenty of legal flipping still goes on until this day. Some flippers/wholesalers are good, and some you need to get as far away from as possible. Here are some do's and dont's to remember when dealing with flippers or wholesalers.
1. Do they have an office or professional environment?
If a flipper or wholesaler has a professional office with a professional team, those are signs that they are in it for the long haul. The guy trying to sell you a house out of his beat up car could probably care less if you are successful on the deal or not. They just want as much money now and that's it.
2. Where do the comparable sold properties and values come from?
A little plug for myself here, all members of my team are licensed real estate agents and all of our comps come from mls. That means that we are showing you exactly what was sold recently on the market with descriptions and true values. Comps should be recent and come from the same subdivision. Texas is a non-disclosure state so the ONLY means to comp a house and get a realistic value is to use the mls or get with a professional agent/appraiser. There is so much to be taken into consideration when comping a house that it should really only be done by a real estate professional or appraiser.
3. Do they just want to add you to their distribution list?
If you speak with someone that just wants to add you to their email list, then that is probably a person that you want to aviod. The guy that is calling you to tell you about the deal is probably more involved in the entire project. This is the guy that you want to be buying your houses from. He is the guy that cares if you are successful, he is on his phone networking to get you the best contractors, foundation bids, exit strategy, etc...
4. How much should a flipper or wholesaler make on a deal?
Average fees range from about 3k to 10k. I think that a fair rule of thumb is 25% of what the investor that is buying the house and doing the rehab should make. If the investor is going to make 20k on a deal, then the wholesaler should get 5k. That's pretty standard. We are currently closing and average of 22 properties per month, most being wholesale deals and our average fee is between 5k and 6k.
5. How Networked is the wholesaler/company that you bought the house from?
If the person you bought the house from can give you a list of contractors and their specialties, that is going to be a plus for you. These houses need to be repaired and the part time investor probably wouldn't even know where to start looking for an investor friendly contractor. You want to make sure that you have honest contractors giving you bids that are actually going to do the work correctly and on time. One of the best ways to find out if you have a good contractor is to check on their previous work. A good contractor should be able to give you references. A heavily networked wholesaler can help you aviod costly problems.
A good wholesaler can help you with initial financing, refinancing, general contractors, foundation bids, handymen, comparables, exit strategy, etc.
6. How knowledgeable is the wholesaler?
Knowledge. If I was ranking these, this would be number 1. This business comes down to knowledge and experience. I work a very tight niche in this Dallas market and I am still learning everyday. I know a lot about this business, but the most beautiful part about my job is my team and my network. If I don't have the answer, there is a co-worker, attorney, investor, or someone that has already been there done that that can answer that question for me. The more knowledge that you can gain, the more successful you will be.
I provide a one stop shop for single family real estate investing. Please contact me if you would like to network and learn more.
That being said, plenty of legal flipping still goes on until this day. Some flippers/wholesalers are good, and some you need to get as far away from as possible. Here are some do's and dont's to remember when dealing with flippers or wholesalers.
1. Do they have an office or professional environment?
If a flipper or wholesaler has a professional office with a professional team, those are signs that they are in it for the long haul. The guy trying to sell you a house out of his beat up car could probably care less if you are successful on the deal or not. They just want as much money now and that's it.
2. Where do the comparable sold properties and values come from?
A little plug for myself here, all members of my team are licensed real estate agents and all of our comps come from mls. That means that we are showing you exactly what was sold recently on the market with descriptions and true values. Comps should be recent and come from the same subdivision. Texas is a non-disclosure state so the ONLY means to comp a house and get a realistic value is to use the mls or get with a professional agent/appraiser. There is so much to be taken into consideration when comping a house that it should really only be done by a real estate professional or appraiser.
3. Do they just want to add you to their distribution list?
If you speak with someone that just wants to add you to their email list, then that is probably a person that you want to aviod. The guy that is calling you to tell you about the deal is probably more involved in the entire project. This is the guy that you want to be buying your houses from. He is the guy that cares if you are successful, he is on his phone networking to get you the best contractors, foundation bids, exit strategy, etc...
4. How much should a flipper or wholesaler make on a deal?
Average fees range from about 3k to 10k. I think that a fair rule of thumb is 25% of what the investor that is buying the house and doing the rehab should make. If the investor is going to make 20k on a deal, then the wholesaler should get 5k. That's pretty standard. We are currently closing and average of 22 properties per month, most being wholesale deals and our average fee is between 5k and 6k.
5. How Networked is the wholesaler/company that you bought the house from?
If the person you bought the house from can give you a list of contractors and their specialties, that is going to be a plus for you. These houses need to be repaired and the part time investor probably wouldn't even know where to start looking for an investor friendly contractor. You want to make sure that you have honest contractors giving you bids that are actually going to do the work correctly and on time. One of the best ways to find out if you have a good contractor is to check on their previous work. A good contractor should be able to give you references. A heavily networked wholesaler can help you aviod costly problems.
A good wholesaler can help you with initial financing, refinancing, general contractors, foundation bids, handymen, comparables, exit strategy, etc.
6. How knowledgeable is the wholesaler?
Knowledge. If I was ranking these, this would be number 1. This business comes down to knowledge and experience. I work a very tight niche in this Dallas market and I am still learning everyday. I know a lot about this business, but the most beautiful part about my job is my team and my network. If I don't have the answer, there is a co-worker, attorney, investor, or someone that has already been there done that that can answer that question for me. The more knowledge that you can gain, the more successful you will be.
I provide a one stop shop for single family real estate investing. Please contact me if you would like to network and learn more.
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