In this episode, I discuss wholesaling and why I feel it might be the most difficult form of real estate investing. A lot of people say that wholesaling is a good place to start your real estate investing career. I tend to disagree and I’m going to tell you why in this episode.
I have a lot of new real estate investors tell me that they’re nervous about flipping houses and they don’t know if they can handle being a landlord, so they are going to start with wholesaling. They read a book or a blog post or went to a seminar where someone made it seem like wholesaling is the easiest thing to do. Here’s a list of some of the reasons why you have been told wholesaling is a good place to start as a new investor:
- It doesn’t require any experience.
- It doesn’t require any rehab knowledge.
- It doesn’t require you to have any money.
- It doesn’t require you to have any experience selling houses.
- It’s easy.
In my opinion, none of these things are true, but this is what people will tell you when they’re trying to convince you that wholesaling is a good place for new real estate investors to start. In my opinion, wholesaling might be the hardest form of real estate investing, because you have to know a lot more than you would imagine. While I agree that some investors start off wholesaling and are able to make a go of it, it isn’t necessarily the easiest way to become a really successful wholesaler.
In my experience a wholesaler needs to be able to do the following:
- Find and be able to accurately evaluate deals that allow both them and the investor to make money.
- Be able to accurately estimate rehab costs.
- Be able to put together a package showcasing a property and its investment value.
- Have a good list of active real estate investors who are able to buy properties quickly.
Almost all of these are the exact same skill set that you need to be a fix-and-flip investor or even a buy-and-hold investor. Like I said, the difference between a wholesaler and say a fix-and-flip investor is that a wholesaler needs to find deals that are good enough for the fix-and-flip investor to make his desired profit and the wholesaler to make money too. So the deal has to be even better than what a fix-and-flip investor could find for themselves. Additionally, fix-and-flip investors do not need a list of other investors that can quickly flip the house too.
I am not saying any of this to deter someone from being a wholesaler, all I’m suggesting is that you go into it with your eyes wide open, not under the illusion that you won’t need any skills, money, or knowledge of rehab. You will have a very difficult time gaining credibility amongst experienced investors if your information is inaccurate, or your deals don’t have enough room in them for everyone to make money.
I want to say this as well: I think wholesaling is awesome! I really do. I just get worried sometimes when new real estate investors act like it’s the easiest thing in the world. A really good experienced wholesaler will tell you that they need to have as much or more knowledge of real estate investing than any other type of investor.
Now get out there and wholesale some properties!