How Wholesaling Changes (and How it Stays the Same)

I’m doing a 1-day class on how to build a $10k a month wholesaling for Cincinnati REIA on June 24^th in Cincinnati. It’s just $99 for members ($129 for non-members), and you can register HERE.

Wholesaling real estate seems like a pretty straightforward strategy.

After all, what could be easier to understand than “find a great deal, find a buyer for it, get paid, move on”?

As such, you’d think it would change very little over time. In fact, you’d THINK that this would be a manual that could be written once, reprinted every year, and never, ever become stale or outdated.

Don’t I wish.

The reality, as I’ve come to discover over the course of nearly 20 years in the wholesaling profession, is that wholesaling is the bellwether of the real estate market as a whole. It’s a lot easier to tell what’s happening in the local real estate market by asking a high-volume wholesaler than it is by watching the news, or reading Realtor® Association press releases, or even by attending meetings of your local real estate investors’ association.

Real estate entrepreneurs—by which I mean retailers, landlords, lease/option aficionados, note buyers, and so on—have their collective ears closer to the ground than any other set of professionals in the residential real estate field. They are more aware of what THEIR customers—tenants, home buyers, and home owners—want, or need, or are challenged by, than anyone. Since every vacancy, every sale, every workout is crucial to the financial health of the small residential real estate investor, they tend to be almost hyper-sensitive to what’s happening in their area and in the economic climate. And they’re not always right about what they believe, but as a whole, they make business decisions based upon what they see, hear, and experience around them on a day to day basis.

Since these people are our customers, the decisions they make—to buy or not buy in a particular neighborhood, to increase or decrease their rehab estimates based on what buyers want at the moment or Section 8 demands this year, to extend or pull back on their predicted holding times (and thus the predicted holding costs) based on how long it’s taking to get loans approved under some new federal law, to pay more or less for  a property as a percentage of its after-repaired value based on the number of deals available—directly affect the decisions WE make about where to look for properties, what to offer, how to price them, and how long to expect to take to sell them.

Wholesalers know, long before the “official word” comes out from Case-Shiller or the NAR or USA Today, how real estate investors, landlords, and even homeowners and tenants are feeling about the local real estate market. And by “know”, I mean our bank accounts are directly impacted, positively or negatively, by “the housing numbers” in every sense of the term. We “know” what’s happening on a nearly block-by-block level in our farm areas, because we get direct feedback, on an ongoing basis, about every property we try to contract for, and every property we try to sell.

The last 10 years has been an extreme—and sometimes painful—demonstration of this fact. As the market has swung from “frothy” to moribund to crazy hot again, and those of us who’ve lived through it have learned that in order to thrive, we have to be ready and able to switch our general focus from finding deals to finding buyers and back again, as the number of one grows and the other shrinks. We have to be prepared to assist our buyers in finding financing when banks pull back from providing it. We have to be ready to take advantage of hot opportunities and just as ready to move on when they’re over (remember short sales?).

As I look back on my wholesaling career, and on the various iterations of this course, it’s almost laughable how much the rock-solid “rules” of wholesaling have changed over time. For instance, the first sentence of the “How to Find Buyers” chapter of the 2005 edition began,

“Selling your deal is the easiest part of the wholesaling process. No, seriously, it is.”

In the 2009 edition, the first paragraph reads:

“Some of you probably flipped to this chapter before reading any of the rest of the manual, just to see what I’d say about the availability of buyers in today’s post-bubble real estate market. Here’s what I have to say: despite all the doom-and-gloom in the news, there are still plenty of serious cash buyers out there for any and all of the wholesale deals that you’re likely to sell this year.”

And in the most recent edition, it says:

“If there’s one thing we’ve learned about the real estate market in the past decade, it’s that it ebbs and flows. In some years, there’s lots of inventory and few buyers for it. In some years, there are more buyers for great deals than there are great deals for them. The important thing for you to know as a wholesaler is that there are always buyers for great deals. Who those buyers are, and what they consider a great deal, is what changes. That’s why it’s your job to stay in touch with who’s buying in your market, and what their goals are, and what attracts them to deals, and how to best provide them with those deals.”

There’s more to it than just the real estate and finance markets, of course; technology has absolutely changed our business, as has government regulation that affects both our business and that of our customers.

So while the basic framework of “find a motivated seller, evaluate the deal, put it under contract, find a buyer, get it to closing” has never changed, those little devils that hang out in the details have changed faster than ever before in the past decade. It’s become obvious to anyone that’s actually IN the wholesaling business  that making real money, consistently, requires not only drive and willingness to do the work it takes to bring deals together, but also a body on knowledge the allows us to change our strategies as the market, or new technology, or new demands by an ever-expanding regulatory system, demands.

The good news is, everything you add to this body of knowledge will benefit you. The real estate market is cyclical, and the strategy you learn today and discard tomorrow because it no longer works will almost certainly come back around again in 2 years or 5 years or 10 years—and you’ll be ready for it, because it’s a resource that’s already in your toolbag. The strategies I used to find deals in the hot market of 2003-2007, then completely gave up on when bank-owned properties were cheap and widely available, have served me very well in the bounce market that started in 2012. All the focus I put on finding and educating buyers in 2008-2011 wasn’t wasted: it kept me in business during a time when many of my existing customers (and most of my competition) folded, and I have a pool of experience on which to draw the next time the market stumbles, which it will.

The bad news is, you’re not going to get all of that knowledge in a weekend, and you’re not going to get it all from a seminar. Any seminar. Or software. Or ‘system’. I don’t care what the guru said on the webinar—you’re not going to get rich automatically, or build a 7 figure wholesale business instantly. If you want to make the really big bucks, you have to really understand the business. And to REALLY understand it, you have to DO it.

Yes, you’re going to get enough to do deals in today’s market by learning and applying what’s in this course. I’m going to teach you what you need to know to get checks, stay out of trouble, and shorten your learning curve immensely.

But you’re only going to get what you need to grow your business, and stay in business, and thrive with every turn of the market, by staying in touch with what’s happening around you. And this means DOING—actually making offers, talking to potential buyers, joining and attending your local real estate association, cross training, networking, leaning on mentors who are actively in the business, and paying attention to what you see and hear around you.

This course is a crucial first step in the building of that knowledge. In this revision, I’ve included strategies for “hot” markets and cold ones; strategies that work today and strategies that have been supplanted by newer, easier technologies; advice about how to handle changing markets, and, of course, all the core skills and resources you need to wholesale in any market.

Welcome to the world of wholesaling real estate.