﻿- I'm gonna be going over five different lies that wholesalers will tell you when you're working
with them on a real estate investment transaction. Now, I don't want to paint a horrible picture and
say all wholesalers are bad, because there are some really good wholesalers. And I'm also gonna
talk about how to work, the best practices when it comes to working with wholesalers and also finding
great deals from wholesalers. I just purchased two deals in the past few months from wholesalers,
so there are definitely ways you can work with them. However, there's also some things
you need to avoid or actually look out for when it comes to working with them. So, number one,
you know, why would someone even wholesale deal to begin with? Well, I actually got started as a
wholesaler in the real estate investing industry. I even wrote a little book about wholesaling,
and if you're new to real estate and real estate investing, you don't have a lot of experience,
you don't have a lot of cash, but maybe you're a hustler, you're out there, you're trying to
find deals, well, a great way to get started in real estate investing is wholesaling, because
you can do marketing you can lock up a property under contract, let's say, for
100,000, and there's tons and tons of investors out there, tons and tons of cash buyers who are
looking for deals just like that, like off-market distressed deals that have some profit margin in
there. And you can assign the rights, you know, if you have it under a contract for 100,000,
maybe you sign the rights for 105, 110. I mean, I've even heard of six figure wholesale deals and
even multi six figure wholesale deals, for that matter. I say the standard's probably maybe 10
to 20,000 but it just depends on the deal, and myself, when I was getting started, I didn't have
the capital to like fix up a house, or in some cases, I didn't even know what I was doing with
the house. I just knew, hey, if these ones sell for 300 and I have it under contract for this
price, it's probably a good deal for somebody. So that's really why you would even wholesale to
begin with, and it's a part of pretty much every single industry out there. Now, one thing to keep
in mind, in different areas, that it is becoming more restrictive with the wholesaling. They're
doing different laws to restrict wholesaling, because a lot of wholesalers, it sounds bad,
are more like unsophisticated investors. There are some very extremely savvy wholesalers,
but wholesaling has kind of gotten a bad reputation over the last few years, just because
there were some investors doing some things that weren't exactly, probably weren't exactly legal
or ethical and various other things. So you should always check your county's regulations on it,
because they're always changing. I know, in some areas, they're requiring wholesalers to get a
license now, and that's gonna lead me to the five different lies that wholesalers will tell
you when you're looking at a wholesale deal. But that being said, it can be a great source,
whether you're an agent or an investor. It's basically free leads from a wholesaler. If you get
signed up on a wholesaler's list, they'll send you off market deals, which, in this market, you know,
buyers are always looking for off-market deals, and this could be a great opportunity
for you to look really good, or even if you're an investor, to purchase them. I purchase deals
from wholesalers all the time. So the first lie that wholesalers will tell you is that
the property only needs a certain amount of work. I mean, pretty much every deal, and I'm gonna go
through a wholesale deal just towards the end of this video, just to show you a perfect example,
but wholesalers will often say, oh, you know, the property only needs $20,000 worth of work,
50,000, even 100,000, and usually they're completely off. That's not to say every wholesale
deal is bad, but the majority don't really put the time and effort to really like do a full
scope of work and say, okay, the roof, electrical, plumbing, bathrooms, paint, everything like that.
Most wholesalers, if you've ever gotten wholesale deals, which I'm sure you have,
they'll take a few photos of the house and they'll say, hey, rehab budget 25K. And what is 25K? You
can spend 25K easily on just the landscaping, a lot of times. I spent like 50K on landscaping
at one house, 'cause there was a lot of junk that I had to remove, and that's a whole nother story.
But the bottom line is you should take every wholesaler's estimate with a grain of salt.
Do your own estimates. Really, I have a scope of work on my website, which you can
download for free, but you really want to map out the full scope of work, and then you want to add
like 10 or 20%. If it's a big rehab in an older house, you definitely want to add 15 or 20% to
your estimated budget, because once you get into a big project there's always things that you're
gonna find. The next lie that wholesalers will tell you is that you can sell the property for
a million dollars or whatever their price is. A lot of times, they might choose one or two comps,
and they might not even be in the same neighborhood. They might be a three level
house. And then the house you're looking to at is a two level, but they'll still throw those
in there. And when you're a brand new investor, that can be very tempting, because I remember
when I was a new investor. Every wholesaler was sending me deals, and I was like, oh, my god, this
is an amazing deal, then this is an amazing deal. This is so good. You gotta buy every house. Like,
what? Like, this is incredible. However, once you really dig into the numbers and really look at
the after-renovated values, oftentimes they're completely incorrect. And don't get me wrong,
there are some very good wholesalers out there that will give you correct numbers,
but there's a lot of wholesalers, whether they're doing it maliciously or not, sometimes they might
just not know, and other times they might kind of inflate it a little bit if it's a hot market.
So you really need to, you need to run your own comps. You need to find like three or four
after-renovated values that can support the price. If there's just one property that's sold
renovated, unless it's exactly the same in the same neighborhood and everything else is the same,
you know, that's really not good enough. The next thing some wholesalers will tell you is that the
price is firm are not negotiable or they have other buyers and partners lined up and whatnot.
And I would say this, look, I'm not trying to bash wholesalers, but there's just a lot of bad
wholesalers out there that will just tell you anything. There's some great wholesalers. You
know, if you're watching this right now and I've worked with you before, I'm not talking
about you. I'm talking about, we all know who the bad wholesalers are out there. And
sometimes they'll just say things that just aren't true, like they might say that there's partners
and that there's other buyers and you kinda have to get a feel for it, but just take anything,
wholesaling is kind of a gray area and there's not much, if really any, regulation over it. There's
no repercussions or anything for wholesalers. I mean, people can talk trash about them in Facebook
groups and online and whatnot, but there's no real penalties. A wholesaler can pretty much run
around and say whatever he wants, or he or she, and there there's no repercussions. So sometimes
wholesalers will just say things that just aren't true at all. If they say they have other people
that are gonna make an offer, you know, that may or may not be true. You have to look at what the
similar properties have sold for. Do they sell quickly in that neighborhood? Look at the days on
market, that type of thing, to really get a feel for it. The numbers really have to work for you,
so don't be pressured if they try to do some high-pressure sales tactic,
whether they're trying to use a sales tactic or not, don't be pressured by that. Make sure
the numbers really work for you. A lot of times, people have told me this when I was first getting
started real estate investing, sometimes the best deal you can do is the one that you don't do.
And I actually had a deal where I got into, it was like a six- or seven- or even eight-month rehab,
and if I had just wholesaled that deal or even not did that deal, or maybe just re-listed it in
as this condition without doing the renovations, I would've made so much more. I would've had no
headache. It would've been so much better. Instead, I got involved with this deal.
It took forever. I spent hundreds of thousands of dollars on the rehab, and I thought the rehab came
out nice, but looking back, I would've just sold it to another investor and, you know,
gone on my way. The next lie wholesalers will tell you is that they are direct with the seller,
basically meaning they're they're like, they have the contract with the seller. And in wholesale,
and a lot of times, you get these weird daisy chains where other people are selling other
people's deals for different prices. And I've found, in real estate, the more someone tries
to convince you of something, the less likely they are. Like, I remember there's companies
like Trustworthy Real Estate and this and that, and it's always the least trustworthy company
you can think of. Or if someone tries to tell you they're the number one this or number one that,
oftentimes, there's some type of catch there. I mean, honestly, people shouldn't even have to
say they're direct with the seller, because if you're wholesaling a deal, you should be direct
with the seller. You shouldn't be doing some daisy chain. There are people that do the daisy chains.
It's funny. I actually had someone try to wholesale me my own deal.
- [Announcer] Uh. - I was partnering with someone and
someone tried to wholesale me the deal I had under contract, which I thought was pretty funny. So
there's these wacky daisy chains and people saying they're direct with seller, but just run your own
numbers and just take everything a wholesaler says with a little bit of a grain of salt. The next
lie that wholesalers will tell you, and this has happened to me directly multiple, multiple times,
I don't know how many times, you will find a great deal. They'll be excited about it. You'll
be excited about it, and they'll even tell you, they'll say you have the deal, or they'll say,
yeah, that works, I'll send over the paperwork. Then a day goes by, then another day goes by,
and you're kind of wondering what's going on, and then you get a message saying,
oh, sorry, we can't do the deal anymore, or something along those lines. And
the deal will just fall apart after you basically had a confirmation. I just had this happen on,
actually, it was a multi-unit property, and the wholesaler said, she said, "Oh, I don't want to do
the deal anymore," I forget the reason, after you already agreed on it. Now, it wasn't in writing,
so it's not like I could really enforce anything besides just say, hey, I'll never work with you
again. You know, if you're gonna give someone your word, you should give somebody your word,
but that just goes back into the gray area of wholesaling, where it's kind of like the Wild
West. It's just like there's deals here and there, flying around, and if you can grab one, it's
good. And I'm about to show you some ways to work with wholesalers, but just be careful when you're
listening to people and what they're saying, and you have to get things in writing for it to be
official. It's like that quote that, I guess it was Reagan that said it, "Trust, but verify."
However, I think with wholesaling, it should be don't trust, and then verify. Like I said,
people are not always trying to screw you over or anything like that, but sometimes there's just,
people might get a little excited and not really know what they're doing, so you always have to
verify everything. Now, I'm about to show you an example wholesale deal, actually from a pretty
well known company, and just how completely off their numbers are, even from a well known company.
But before I do that, 'cause there are ways to work with wholesalers, the best way you
can do is really just build a list of like 20, 30, 40 wholesalers, and you can find this, you
can write down bandit sign numbers, you can look on LinkedIn, you can look in the Facebook groups.
There's usually some top wholesalers in every neighborhood, or every city, for that matter.
And maybe you just spend a day where you just get on every single buyer's list, right?
And you're gonna start getting deals. You're gonna start getting off-market deals. You're gonna get
free off-market deals pretty much every single day, if you sign up for enough lists, and they're
not always gonna be great deals, but maybe you spend five or 10 minutes a day evaluating them,
and if you did that over the course of a month and you get 50 or 60 off-market leads,
you really just need one to make your client really happy or to make you really happy, if
you purchased it as an investment. And despite me basically trashing wholesaling this entire video,
there are some really good wholesalers out there. There are people that can get you really good
off-market deals. Try to build relationships and try to stay in touch with some of these people,
'cause you never know. All it takes is one deal to make a significant profit. All right,
so I'm just gonna show you an example wholesale deal where the numbers just aren't correct, right?
But it still could be a good deal for maybe a retail buyer. There's still some discounts
to be had with wholesaling, and sometimes you get amazing deals. I just bought couple that had over
100K in equity, but, for example, this. We'll look it up real quick. 1628 Mount Eagle Place.
Alexandria townhome/condo, three bedroom, gated community, parquet floors, modest HOA fee of only
$600 per month. So you can buy it, so they want to sell it for 385, which means they probably
have it under contract for maybe 360, 370, maybe 350, 340, maybe even 375, who knows?
And the renovation's only 40K, which, for a condo, yeah. You know, it's two levels,
so we'll have to take a look. And ARV, they're saying it's 500K they can sell it for
and you only have to put in 40,000, okay? So let's see their comps real quick.
So they said 500 is what you could sell it for. This one sold at 480. Wasn't very nice.
This one sold at 487. So there was one that did sell for 500. Usually, what I like to do with
these deals is run my own comps, which you should also do. So the address, 1628 Mount Eagle Place,
I'm gonna put that in here, and because it's a condo, I'm gonna go back. Usually,
I only go back a few months. We'll just go back 300 days. And this was a three bedroom condo.
So it's right there, so, yeah, there should be some good comps here, so let's see.
And when you're doing comps for a condo, you want to have it be in the same complex,
for the most part. You can't look at one condo building over there and then compare it to another
condo building. It's not going to be the same. Yeah, this is a nice area, Park Fairfax. Okay.
So I'm also just going to pull up the property so I know the square footage of it.
All right, so here's the tax record. I always like, you know, you should
trust, or don't trust it and verify, so this is the 1100-square foot model,
three bedrooms, one bath. So it looks like it's just like the other ones that were, not that one,
but there's several that are, yeah. So this model right here is what we're looking for, right? So
they said it would sell for 500K with 40K worth of renovations. So I'm gonna find all these models.
So you really, like, with condos, you really have to compare the same. Even this one, see, this one
has an extra half bath, so I think they might have been using some of those comps. So, right now,
these are the three comps I have, and they were giving me 500 as the after-renovated value.
So this one looks nice, too. I mean, this one looks like it's been updated pretty nicely.
The bathroom could use a little renovations, but nothing crazy,
so I think 500 is kind of a stretch here. This one sold for 470. See if this one was nice.
And they said they had the parquet floors. Yeah, this one's pretty nice, too.
Let's check the bathroom. There's only one bathroom in these places, which is kind of
unfortunate. That is a weird looking bathroom. And then 420, reno 40,000.
Let's look at the photos to see what exactly would cost 40,000. Okay, so we're gonna assume there's
parquet floors under here, so you've gotta paint the entire place. That's about 5,000.
Probably upgrade the bathroom a little bit. Let's call it 10,000. This is also a lower level unit,
so I need to, I think the other ones were as well. You need to do some landscaping,
got a lot of drywall work here, more painting, the windows probably need to be replaced.
Kitchen, yeah, you probably need to replace the cabinets, appliances.
You know, their repair estimate, you might be able to get away with 40K
but I just don't think it's gonna sell for 500. I think it's kind of a stretch. You know,
it's not as bad as some wholesalers that you see that will just give you crazy numbers, but
you can see, like, I'm not using 500K as my after-renovated value. Maybe if I put like
60 or 70K in it, I'd be comfortable if there was enough margin, but this, I don't think it's gonna
sell for 500. I mean, this market's been kind of crazy, so you could speculate and say, yeah,
it might be worth it based on the way things are going, but, typically, you don't want to do that.
So thanks for watching this video, and if you have any questions about working with wholesalers,
drop them in the comment section below. Be sure to check out my other
videos here and also subscribe to the channel, and I'll see you in the next one, bye.