What Is a Wholesaler & How Do They Work?

Intro: 0:01
You're listening to the flip houses like a girl podcast where we educate, empower, and celebrate everyday women who are facing their fears, juggling family and business, embracing their awesomeness and wholeheartedly chasing their dream of flipping houses. Each episode delivers honest to goodness tools, tips and strategies you can implement today to get closer to your first or next successful house flip . Here's your spiky-haired breakfast taco loving host house flipping coach, Debbie DeBerry.

Debbie DeBerry: : 0:39
Hey you guys, what's going on today? I hope that whatever you're up to, it's an easy day and it's fun and enjoyable. Uh, here in Austin today, it's cold and dreary and wet. And honestly I'm digging it. It's nice to have a change of seats in . It's been hot and humid for months and every summer I ask myself how I can even do it again. So I don't know. I've got visions of a cooler climate in my life on a more regular basis, maybe in about a decade when my son's out of school, but until then, it's hot, humid summer days in Austin. All right, so what's been going on in my world? Well, this is the week of Halloween, meaning it's my son's most favorite time of year. Yup . Halloween even beats out Christmas. This kid has always loved to wear costumes and in fact for probably a solid two to two and a half years of his life from about 18 months to three and a half or four when he started actually going to a pre K. so when he was in preschool, he would went to what I call a hippie preschool, which basically they're just barefoot all day and running around outside, which I loved. And he wore a costume pretty much every day of his life. He wore a costume, iron man, Spiderman , captain America, pirate, you name it. The kid was in a costume and I always marveled at him because he got so much attention from it and he handled the attention really well. And it always, it always kind of took me aback because a lot of adults, you know, we get older and we don't really want the attention on ourselves anymore and we don't handle attention very well. You know, we deflect, somebody pays us a compliment and we shrug it off. We deflect it. And as kids we didn't do that. And so I used to love watching my son accept compliments from people and just, yeah, matter of fact like, yeah, thanks. I'm glad you liked my costume or your yeah, it is a cool costume. You're right. And as adults we just don't do that. Anyway. Anyway, Halloween is his favorite holiday and he is dressing up in a kind of a little group theme with his best friend and his best friend's sister. So they are all doing a doctor who theme, which frankly isn't really interesting to my son but he's just doing it because he gets to dress up and he gets to dress up with his best friend. So he is super happy and excited. So I hope you guys have some fun Halloween plans and enjoy some family time. So additionally we are pretty much at the end or really close to the end of our follow that flipped project. So we are starting our fifth full week of renovation work and finishing out the space. So they are working on painting the exterior, well not today because of the weather, but they were working on it yesterday. So hopefully today and tomorrow while it's raining, they're going to be on the inside working on punch list items, which I know is their least favorite. But for me I think they're the most important because I see the details and I know other people see the details. Maybe not to the extent that I do on my own project, but I know if something's missing or if something's not done right and it just doesn't feel good. So hopefully they're working on that today. Alright , before we get into today's episode, I want to read a listener's review. Thank you so much you guys for leaving these ratings and reviews. It really makes this whole thing totally worth it. It makes, it means to me that I'm actually maybe making a tiny difference and that's awesome. So I hope to have a bigger impact and you can help me do so. Either you are getting value out of these podcasts. If you would please leave a rating and a review. It really does help me reach more likeminded women like you, and if I can instill in one more person that they absolutely can flip houses for a living and have an incredible life and so much fun doing it. That's the dream. Okay. All right . This review is from cat stacks two to three. The title of it is super inspiring. As I was driving back from Louisiana to Texas, I decided about looking into where to get started flipping houses and came across Debbie's podcast. Five episodes later. I'm on the ball with her first five steps. She's super motivating and I hope to go to one of her events soon in Austin. Great podcast. Yes, please come to one of our events. So I just started hosting a monthly meetup in Austin. Let's see, November will be our second one. So earlier in October was our first meetup. It's all about flipping houses. There are lots of groups that meet about real estate investing in general. We are talking all about flipping houses. Every single monthly meeting is exactly that. All about flipping houses. All right. So I hope that you get to come to one of our meetings too. That'd be awesome. Thank you so much for taking the time to leave that review. It means so much to me. I'm grateful. Thank you. Alright , so today's episode is all about wholesalers. It's come up a few times in our Facebook group recently. So I thought that would be the perfect topic for this week's episode. So we're going to talk about it. What exactly a wholesaler is, what they do, how you find them, how you work with them and so on. Okay. So what a wholesaler is, is basically they tie up a property, okay. They put a property under contract and then they either assign that contract to somebody else who actually is going to close on the deal and do the renovation work or they do a double closing and I'll tell you what the differences are. So they will either do what's called a double closing or an assignment. Okay. If they do an assignment, you will know what they are paying for the house because basically what they're doing is they have a contract with the property owner. They have a contract to purchase the house with the, with the property owner and then with you or whoever the end investor is, they will have an assignment document. Okay. So that assignment will say for a fee of whatever, $5,000 they are assigning their rights in the contract with the property seller over to you. So they're assigning the contract to you. So everything that they've agreed to in the contract you are taking on as the end purchaser. So you absolutely must see their contract with the property owner because you are going to be the one responsible for fulfilling all of the promises in that contract. Okay. So you don't just want to know the sales price, you got to know all of the details. Okay. So that is an assignment. They have the property under contract, they assign that contract over to you. They're out of the picture, they get paid at closing. So when you go fund or when you go sign the closing documents and the transaction gets funded, the title company then cuts a check to that wholesaler. Okay. The second way to do it is by using a double closing. So what that means is they have a contract with the property owner. Okay? Just like before they have a contract with the property owner, they also then, if you are the end investor, they also have a separate contract with you. So in the contract with the property owner, they're the buyer in the contract with you, they are the seller. So there are two contracts. So you never really know what they've paid for the property because that contract is not, you are not privy to any of the information in that contract because you're not a part of that contract. You are only a part of the contract with them. So you're the buyer, they're the seller. All right? Most wholesalers operate this way. Most do double closings. Now, not every title company will do these. So you usually have to use whichever title company the wholesaler dictates. So what will happen is on the same day, the wholesaler will close on their purchase contract with the seller and they will close on their sale contract with you that same day. All right, so it's a double closing. There's really no difference to you. The only difference is you don't know what the wholesaler is paying. Whereas with the assignment you do because you're taking over the contract, doesn't matter if the numbers make sense. It doesn't matter what they're paying. Okay, so what's the benefit in working with a wholesaler? If they are big players, that means they are spending dollars and if they are spending big marketing dollars, they are generating more leads. If they're generating more leads, you have the potential to get more deals. Okay. Many people use wholesalers because they don't want to do that piece. They don't want to do the lead generation. They don't want to spend marketing dollars. They don't want to then qualify the seller. They don't want to then go meet the seller and walk the property. They don't want to then try to determine a price to offer the seller. They don't want to do all of that negotiating with the seller. Really. They just want a deal and they're happy to pay the wholesaler whatever it is they're making. If the numbers make sense. Personally, I love working with wholesalers. I am happy to let them go do that piece because frankly I don't want to, that's not how I want to be spending my time, which is why my business doesn't focus on wholesaling properties. Now, that said, I absolutely use wholesaling as an alternative exit strategy. If I come across a deal that I do put under contract and I don't necessarily want to do the project, maybe I'm spread out already, maybe I've got too many projects going on. Maybe it's in an area of town, I'd really don't focus in and I don't really want to flip in that area. Whatever it is, I'll put a property under contract and then assign it to someone else and make a few grand, but it's definitely not my focus. It does . It doesn't bring me joy. What brings me joy is loving the heck out of these houses that are in disrepair or just need to be refreshed. That's my joy. I don't want to spend my time going in meeting with you know, 20 sellers a week. It's just not what makes me happy. So, and guess what, I'm a grown up and I get to choose what I focus on. So I'm happy to work with wholesalers. It's honestly how I get the majority of my deals. If I don't get it straight from the seller, then I'm using wholesalers and so with the numbers make sense. Great. I'm all in that said, there are some things to watch for. Okay. Because when a wholesaler sends out a deal, it is not uncommon to see that they have undercut the repairs needed, meaning the house actually needs 60 grand worth of work and they've stated 40 grand. Okay. On top of that, it is not uncommon for them to inflate the ARV or the after repair value, what the house will be worth once it's renovated. So their repair estimate is low and their projected ARV is high. So you just have to watch those things in how, how do you know that those things are off? Well, first of all, you've got to be practicing coming up with repair estimates or you better be walking properties and you better be walking properties with the contractor that you're going to potentially use, which is why one of the first five steps is lining up contractors. Guys, there's a reason there is a method to my madness. I'm not just randomly throwing things out there. You've got to be walking properties with contractors. Otherwise you're just guessing at what the repairs are going to be. If you have experience estimating repairs, that's a different story. But if you are brand new, have no experience estimating repairs, you better be walking properties with your contractor because that is one way that a lot of investors get burned. They're way off on their repair estimate. They're just guesstimating and that's not good for anyone. Now with the ARV, how are you going to know if that's off? Well, because if you followed my niching down instructions, you are focusing on very specific areas in your city. So you know the a RVs or you can very quickly pull comps and get those values. And remember when you're coming up with these after repair values, you've got to be comparing apples to apples, okay? Because comparing apples to bananas isn't going to get you what you want. It might give you an inflated number that sounds really good, but that's not going to end well. All right, so always compare apples to apples. Okay? So those are two things to watch when dealing with wholesalers, when looking at their deals, watch the repair estimate and watch their ARV estimate. Okay. So how do you find wholesalers? Well, it's actually pretty easy. So you can Google. Honestly, you can ask the Google for wholesalers in your city, comma state, you can, if you haven't already, join local Facebook real estate investing groups because they are great for finding wholesalers, contractors and lenders. Okay? They're great resources for things like that. And you can use the search function. You don't have to go in there and post a million questions. I promise you those three big ones have all been answered lots of times. So just utilize the search function in that Facebook group. Okay?

Debbie DeBerry: 18:00
All right. Then what do you do once you get some wholesalers ? So you're going to reach out to them. This is a relationship business. You've got to build relationships, so you're going to reach out to them. You're going to hopefully meet them in person, see what they're about, see if you mesh with them and then tell them what you're looking for. Tell them about your goals. Let them know how serious you are. Okay. And then continue to build that relationship. It will pay off even if it just means one deal a year that you get privy to before everyone else. That's another way. I don't know what your, whatever profit you make, 25 to 70 grand, I don't know what your profit is. It's an additional chunk of money that you wouldn't have had had you not built that relationship. This business is all about relationships. Okay, so build this one too. Also, there are certain questions that you want to ask them and guess what? I am actually sharing those with you, so check the show notes in. I am sharing my recommended questions that you've got to be asking wholesalers as you are vetting them, making sure they are a fit for you is just as important, if not more so than them making sure you're a fit for them.

Debbie DeBerry: 19:29
so take control of the conversation. My students have had really great compliments after using these questions with wholesalers. They're like, wow, you really came prepared. People usually don't ask these kinds of questions. So if you're listening to this on my website or check the show notes, if you're listening from a podcast provider and you'll see a link to my questions to ask wholesalers. Okay, so those are the big things about wholesalers. They aren't scary. They help you find deals, they help you make money, but you've got to build those relationships. And obviously, I mean this really goes without saying, I hope, but treat them with respect. Okay. I also wanted to talk about how their showings work. So let's say a wholesaler, okay, so let's say they have a deal, right? What they then do is they will email their list and let everybody know. Now one of two things can happen. So if the, usually if the property is vacant, it will be a first come first served deal. So if you want the deal, you better get out there really fast and give them their deposit, which usually they require anywhere from five to $10,000 down. And that's typically nonrefundable, which is another reason why you've got to be walking these properties with contractors so that you can know wholeheartedly that your estimate is right. All right. And that you can actually move forward on the deal. So they release the property. If it's vacant, it's typically first come, first serve. If it's not vacant, then they'll have a showing time. So they might release a property and say, here's our new property. We have a showing at noon today. Okay. And so that quickly you've gotta be able to a determine whether or not it's, it behooves you to go look at the property. So on first glance, do the numbers look like they might be in line with what you're looking for? If so, go to the showing. If not done, don't go to the showing. Okay. So it's either first come first serve , first person showing up with the contract with a signed contract and earnest money, or you go to the showing and you say you're interested. Okay. From there, there are a couple of different ways that I've seen local wholesalers handle things. One of the wholesalers, if multiple people are interested, let's say they're asking $200,000 for the property, if multiple people are interested in buying it, what they'll do is basically you draw numbers and the person, whatever they say, Lyft , let's say highest person gets it. Okay, so the person with the highest number gets the deal at that $200,000 price. Okay, that's great. I will do that all day long. Alternatively, another big wholesaler here in town, what they do is you say you're interested in the property and then they take the best and highest offer so that 200 grand can quickly turn into two 10 or two 15 or whatever the end buyer ends up paying. Not my favorite way of doing things and frankly I'm not going to, I'm not going to get in a bidding war on a wholesale property. I have, I have boundaries. Dang it. Uh, but really just like on principle, I am not going to get into a bidding war on a wholesale deal. Okay. So those are two ways that I've seen local wholesalers handle things. Showings contracts, a nonrefundable down payment as well as multiple parties being interested in a property. It doesn't hurt to get on every single wholesaler's list that you can find.

Debbie DeBerry: 23:55
Now obviously as I've said in my previous episodes on marketing, finding deals is a numbers game. Okay? Plain and simple. It's a numbers game. The more potential sellers highly targeted, the more potential, highly targeted potential sellers you can get in front of or have access to getting in front of, whether it be through wholesalers, real estate agents or the like, the more deals you are likely to get it is just a numbers game. A lot of people starting out flipping houses do not want to invest in marketing. That's fine. The trade off is it's going to take you longer to find a deal potentially, because again, it's a numbers game, so if you're okay with it potentially taking months to find a deal, maybe a year to find a deal because you aren't out actively searching, then that's okay. I just want your expectations to be set properly. Wholesalers are a great tool to use. They are a great source of potential deals. They shouldn't be the only thing you're relying on. And if so, it's probably going to take you longer to find a deal just for the fact that finding deals is a numbers game. Okay. I now , can I say that one more time? Ah, yeah, but I'm trying to stress a point. Okay. All right . So we talked about what a wholesaler is, what they do, how you find them, how you work with them, how they work, what it looks like to get a deal from them and then go to a showing what it looks like to go under contract with them. We covered it. Right? I feel like I touched on all of the questions that I typically get about wholesalers, so remember I said that I was going to share with you the questions that you've got to be asking them, which you will find those questions in either the show notes or if you're listening on my website on this same page where you're listening to this podcast or scroll down.

Debbie DeBerry: 26:29
episode 16 Holy cow. 16 episodes. That's amazing. I had no idea when I started this little thing that I would even make it this far. This is so much fun. Okay. If you aren't, please follow that flip. We are flipping a house right now live. I'm flipping a house with a couple of local students, so follow along. Go to follow that flipped.com and register. I'm sharing weekly updates, walkthrough videos, training videos as well as tools that I use in my own business and you only get those if you are subscribed. Additionally, if you are tired of sitting on the sideline and watching everyone around you flip houses and you have this big giant dream and you just don't know how to navigate the steps and make it there. My coaching and mentoring program does just that. I walk you step by step throughout the entire process. The support, I promise is unbeatable. And the group of women that I get to call my tribe are just freaking awesome. So if you want help, if you are totally ready and just need help, that's exactly what we're here for. Okay, so go to first flip done right.com for information on our awesome program. Okay, that's it for this week. I will see you on the next episode and until then, go out there, flip houses like a girl. Leave people and places better than you found them and make it a great day. Bye y'all.