Wholesalers

If you are anything like me, completely unable to sell anything, you need other people on your team that can provide you with the deals that you need for your investing. In Real Estate these people are often times referred to as Wholesalers.

Their job/role in the investment business is to find a motivated seller and negotiate a large discount from fair market value (this is where I completely suck). Once the property is put under contract, the wholesaler quickly sell to another investor, either a landlord who will keep the property as a rental unit or a flipper who will renovate and sell retail to a homeowner.

Being a wholesaler is a great way to get started investing in Real Estate, it is a lot of work but you can make a great profit without risking a whole lot of your own money or credit. The problem for me (and I am sure other investors as well) is that since it is easy to get started in wholesaling, a lot of people do it and not all of them are qualified to be a good wholesaler.

As an example, my criteria for buying a property to flip is pretty simple, I want the property to be 65% of market value minus repairs, so if the house is worth 100K and needs 25K in repairs to sell quickly, I need to buy the house for no more then 40K (65% of 100K is 65K-25K in repairs=40K), that is a huge discount from the fair market value and not many wholesalers understand this.

What is most common is that the wholesalers are greatly underestimating the cost of repairs. I get daily several deals where someone is trying to sell me a house like the one above for 80K, great deal right, you can buy it with 20% equity right of the bat...

Well, what about closing costs, inspection, utilities, appraisal and a minimum of 10K for paint, flooring and other touch-ups? Best case on a deal like the one above I would break even, worst case I am loosing 15-20K.

Now this post is not to rack down on all the wholesalers out there, they are needed and most of them do a really good job in finding deals, take this post more as education if you are new to wholesaling, talk to a flipper and ask if you can tag along when they estimate the repairs, this way you can learn for free what investors are looking for.

Once a flipper finds a good wholesaler, they usually hold on to them and both sides can become very successful.