Author Topic: Wholesaling - thoughts?  (Read 5204 times)

IowaStache

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Wholesaling - thoughts?
« on: August 11, 2014, 08:06:07 AM »
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« Last Edit: June 10, 2016, 09:00:30 AM by IowaStache »

iris lily

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Re: Wholesaling - thoughts?
« Reply #1 on: August 11, 2014, 08:21:56 AM »
Flippers aren't going to work with you, you are the middle man. Why would a flipper buy a house if you've already sucked profit out of it? Buying a house at a distressed price is the role of a flipper. And even if you think you can make $1,000 - $5,000 from a deal, that's cutting it VERY close. In a real estate deal profits are not that finely estimated.

What value are you adding to the deal, anyway? I mean, what role are you playing if the real estate agent is already marketing and promoting the property and negotiating with sellers?

About the recommended books: use your library's interlibrary loan service to borrow these books. the people here on the MMM site know what they are talking about and if they've recommended title, those are the ones you should read.


iris lily

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Re: Wholesaling - thoughts?
« Reply #2 on: August 11, 2014, 09:43:13 AM »
Thanks for this explanation.

I live in a neighborhood that was full of flips, and I knew flippers during the boom 2000 - 2007. All of the flippers found their own deals, either direct from owners, from the banks on foreclosed properties (hardly any of those) or on the real estate market. My neighborhood was in the top 3 in appreciation, out of several hundred in this metro area and we watched (and even bought some real estate) during this time. We know real estate agents and contractors and people who made money in the boom.

...and I am telling you: this role of "wholesaler" even back in the mad world of 2005 real estate, did not exist. You are from Iowa and are not in one of the crazy markets like San Franciso, New York, San Diego, etc. Perhaps in those markets there is room for a "wholesaler" to take a cut, I don't know what goes on there. But in the heartland this would not work.

This role of "wholesaler" seems to be doing only part of the work of a real estate listing agent, just part of it--not the entire range of service. As a seller I can't figure out what's in it for me to work with you, a wholesaler: you don't have wide exposure to the marketplace of buyers through real estate listing network, you don't have experience in marketing hundreds of properties, you don't have experience in my neighborhood,  you can't guide me to an appropriate price since you don't have the experience of previous named items. And then, you tie up my property in a option that keeps me from selling it to someone with ready cash.

Why wouldn't I just sell directly to a flipper? You think flippers don't have the same skills that you have? Those skills are a major part of doing the flip, finding the property.

Another Reader

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Re: Wholesaling - thoughts?
« Reply #3 on: August 11, 2014, 11:50:47 AM »
For some perspective, I own a number of rentals and I get 5 to 10 solicitations a week from people that have obviously read the books or taken an expensive guru class recently.  I'm an "out of state" owner, so I must be a landlord that can't wait to get rid of the house and will take any offer.  My favorites are the ones with return addresses that are apartments in less than the best areas.  Yet these people want to make me a fair CASH offer right now!

I know people that did some wholesaling during the crash and made a decent living for a couple of years.  Mostly these folks had to go into the bad neighborhoods and try to get into the properties through an unlocked door or window to determine if there was money to be made.  When the lenders were overwhelmed, they were more willing to take lowball offers on houses in bad neighborhoods and accept contract assignments.  Banks no longer allow contract assignments and foreclosures sell for retail prices, often through on-line auctions.  I now see short sales marketed on the auction sites.

Distressed sellers get pitched by many, many people that get the information from services or public sources.  These days, most sellers are cutting deals with the bank or there are 5 or 6 short sale agents ready to help.  The 15 day stuff is BS.  A short sale agent will get an offer in to stop the sale.  Probate lists are generally worked heavily as well.  Agents that specialize in working with estates market to the probate lists.  Most real deals are made by people that know the neighborhoods and spend a lot of time researching the houses that are falling into disrepair.  It's a full time job with a lot of dead ends.

Edited to add: There are some people that have fulltime businesses buying and either flipping or holding for rentals that are still doing well in the current improved market.  They have well oiled marketing machines and generally work in slower or "normal" markets in the Midwest or other less competitive areas.  Some of them post regularly over at Bigger Pockets.  Reading their posts will help you understand how this business works.

Joining your local REIA is a good idea.  Chatting with some of your fellow attendees will give you an idea if your plan has any chance of success.
« Last Edit: August 11, 2014, 12:02:30 PM by Another Reader »

Another Reader

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Re: Wholesaling - thoughts?
« Reply #4 on: August 11, 2014, 12:07:31 PM »
You would be well served to read the books on the recommended list and to attend meetings of your local REIA.  Finding investors that are actively buying and selling and working with them would be the best way to get involved.  This is not a weekend side gig where you call a few distressed sellers, sign one up, and call an investor buyer on the way to the kids' soccer game.  Bigger Pockets is a good resource for the information you need to understand the business.

Another Reader

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Re: Wholesaling - thoughts?
« Reply #5 on: August 11, 2014, 08:56:00 PM »
Being a buy and hold landlord is possible, especially if you delegate the management.  Wholesaling, no, not based on the folks I know that do that.

waltworks

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Re: Wholesaling - thoughts?
« Reply #6 on: August 11, 2014, 10:05:09 PM »
If your day job is great and pays well, just keep on trucking, don't spend much, and buy index funds.

I mean, if some great rental gets dropped in your lap, great. But I wouldn't spend a bunch of time and effort doing what will become a second job trying to side-hustle real estate deals. Working a few extra hours a week at your normal job would be much more profitable, probably.

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escolegrove

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Re: Wholesaling - thoughts?
« Reply #7 on: August 11, 2014, 11:24:45 PM »
Check out biggerpockets.com there are many successful wholesalers on this site. Along with tons of other of investors.

waltworks

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Re: Wholesaling - thoughts?
« Reply #8 on: August 12, 2014, 10:49:01 AM »
Multi unit folks will usually look for 2%, because multi-unit low end stuff is a huge PITA - lots of vacancy and eviction overhead, lots of tenants that damage stuff, conflicts between tenants, etc, etc. Generally you will be on the hook for all utilities as well (as opposed to SFH where generally the tenant will pay gas/electric/water/etc) unless all those 1 bed units has it's own meter for everything (not likely).

Expenses are *usually* going to be higher for multifamily though not always so that's probably why nobody has jumped on it. Of course it might also be trashed or have some other problems not disclosed in the listing.

IMO that one is worth a look, though. Haggle a bit, raise a few rents a little, and you could hit the 2% rule.

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Another Reader

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Re: Wholesaling - thoughts?
« Reply #9 on: August 12, 2014, 11:01:02 AM »
If the duplex is on a separate parcel, it could be financed with a conventional loan.  The seven units will require a commercial loan.  The terms and rates are not as favorable.

waltworks

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Re: Wholesaling - thoughts?
« Reply #10 on: August 12, 2014, 11:56:56 AM »
As AR pointed out, normal SF financing (ie gov't cheese) isn't generally available for this kind of property so you'd need (probably) a considerably bigger DP as well as accept a much higher interest rate from a private lender/investor. This kind of deal makes the most sense (IMO) for someone who can pay cash and sometimes that means you can snatch stuff for cheap since there aren't cash buyers with $200k in their pockets in every market.

I can't even imagining having to manage a bunch of $350/mo units. That is straight up slumlord territory. Profitable if you can handle it, but jeez, personally - no thanks.

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arebelspy

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Re: Wholesaling - thoughts?
« Reply #11 on: August 31, 2014, 02:02:39 AM »
Wholesaling is work.

It is a real estate job.  It is not real estate investing.  (Similar to being a Realtor - selling someone else a property is not investing in real estate.)

That being said, it can be a good way to learn some good stuff that will apply to real estate investing (such as comping a property).

It is work though, and the key thing to making it work is marketing.  You have to find distressed, motivated, and/or flexible sellers.  The service you are providing is finding them and connecting them to a buyer that solves their problem.

You are not adding value trying to "wholesale" a property off the MLS.

It's an okay side-gig, or even main job, that takes a lot of work.  It doesn't necessarily get you into flips/rentals any more than being an agent does.  A real estate job and real estate investing are two different things, with some small overlap of skill sets.
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Blindsquirrel

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Re: Wholesaling - thoughts?
« Reply #12 on: September 03, 2014, 08:17:39 PM »
 There is certainly a market for it, we have bought houses from 2 different wholesalers and both have been stellar deals for us,one rented at $900 a mo and we have 30k in it, the other were fixed and sold in 4 mo for 35K profit. I am on a number of mailing lists. It is a ton of work but the market is there. I have no problem if the wholesaler makes 5k if the deal is what I want and there is plenty of meat left on the bone as it were. Some wholesalers are high as kites in pricing so I do not buy from them. It sounds like a boat load of work but if you want to, you can make some serious cash doing so. I prefer to buy and rent out for the passive income or flip for very good ROI. If a wholesaler calls or emails me a deal, i could not really care if they make some cash on the deal. They provide a useful service in my opinion.

Sdsailing

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Re: Wholesaling - thoughts?
« Reply #13 on: September 03, 2014, 08:24:33 PM »

Be wary of the biggerpockets website. Many of the people are selling "schemes" and bad deals.  A significant percentage of the posts give off an internet marketing site vibe.

GoPackGo

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Re: Wholesaling - thoughts?
« Reply #14 on: September 06, 2014, 08:44:43 AM »
Wholesaling is work.

It is a real estate job.  It is not real estate investing.  (Similar to being a Realtor - selling someone else a property is not investing in real estate.)

That being said, it can be a good way to learn some good stuff that will apply to real estate investing (such as comping a property).

It is work though, and the key thing to making it work is marketing.  You have to find distressed, motivated, and/or flexible sellers.  The service you are providing is finding them and connecting them to a buyer that solves their problem.

You are not adding value trying to "wholesale" a property off the MLS.

It's an okay side-gig, or even main job, that takes a lot of work.  It doesn't necessarily get you into flips/rentals any more than being an agent does.  A real estate job and real estate investing are two different things, with some small overlap of skill sets.

What he said^^

From what I've read through books and a lot of biggerpockets as well the reality is you can make money but you have to set a commitment to 6-9 months (not just "I'll try this") just to start getting a deal flow (through networking, marketing). Not like the gurus say in "30 days make 30k". You have to be willing to set aside a marketing budget and be ready to hit a lot of dead ends. That said I think there is a "need" for good wholesalers that know their numbers to acquire the property at the right price and at the same time present these numbers to show investors the profit they can make in a detailed and accurate way. That's where the "value" comes in for a wholesaler.