My area of investment is buy and hold, and I think in some ways that makes me perfect to discuss some of the do’s and don’ts regarding wholesaling. After all, I am quite possibly the model buyer for many wholesale deals, so I can tell you at least what I am looking for. And from what I’ve heard from many other end buyers looking for good deals, my advice is pretty standard.
Unfortunately, there are a sizeable number of wholesalers who are all but intolerable to work with. I get email after email with overpriced, rundown, sorry excuses for properties in the worst parts of town. Occasionally, a deal looks good on paper and I make my way out there only to realize the property is bulldozer bait. One lead I got mentioned the estimated rehab was $27,000. All I needed to do was reverse the first two numbers as my estimate came to $72,000 after I walked through it. Sometimes I will get the same property, at different prices (all above market) from multiple wholesalers. Some trash just goes round and round until either someone actually buys it, or more likely, everyone just gives up trying to sell it.
That being said, there are some very good wholesalers who I really enjoy working with. I just bought a 3-1 ranch for $24,000 from a wholesaler whom I consider to be one of the best. I had lunch with him after we closed and he told me he was cutting down his buyer’s list to just the few who he knew could really close. This made it so 1) he could trust each buyer so he knew the deals would actually close and 2) the buyer knew they were actually getting a good deal. After all, if I get the same email as 100 other potential buyers, how is this an advantage to me? What is better about that than just skimming through the MLS?
I think there’s a fair amount of bad advice floating around telling new investors they can simply get properties under contract and wholesale them for an easy $10,000 profit. However, wholesaling is not easy at all. In many ways, it’s harder than flipping or buy and hold because you need to get a big enough margin for both you and the end investor.
So don’t focus so much on the buyer’s list. No end buyer wants to be the one who buys a property off a mass email to 100 people. The natural thing to think is “why didn’t any of the other people on this email list buy it?” Instead, focus on the deal.
If you buy a property with a big enough margin, you should be able to put in on Craigslist and get it under contract for a decent profit that very day. And if you have five to ten good buyers, you can just keep going back to them time and time again without wasting your time on building an endless list of wannabe investors whom you can spam with bad deals.
If you focus on the buying side instead of the selling side, the selling will fall into place quite naturally. You can just go through a quick progression; send the property out to your key buyers. If none of them want it, then go ahead and send it out to the rest of your buyers list. If still no luck, then post it on Craigslist. If still no one is buying it, that should be a clue that you need to find better deals.
Remember, if you have a great deal under contract, it doesn’t matter how big your buyer’s list is. And if you have a terrible deal under contract, it still doesn’t matter how big your buyer’s list is.
It’s all about getting great deals. There is no way around that, so embrace it and go find those great deals!