By Mike Baird
If you’re just getting into the real estate investing business, you’re probably still feeling out your options. When you look online, you’ll see that there are actually a few different options for getting into the industry, and one of the most popular is wholesaling.
When you first look into it, wholesaling looks like it might be the perfect way to dip your toes into flipping houses. After all, you don’t ever have to take ownership of the houses you wholesale, and you don’t have to handle rehabs or closing, either. You just have to put a little bit of earnest money down to buy the contract on the house, and then you can turn around and sell that contract to a house flipper.
Sounds pretty simple, right? Well, it is and it isn’t. On paper, wholesaling is much simpler and easier than flipping houses, but it’s not necessarily the least labor-intensive way to make money in the real estate investing business. Basically, there are a few reasons that wholesaling can be a lot harder than house flipping, depending on your background and areas of expertise.
Are You a Marketing Expert?
How familiar are you with finding leads on distressed properties? Are you an expert at getting your name out there and letting potential buyers (other investors) know that you’re the one to turn to when they need a great flip? If you aren’t ready to do a lot of marketing, including postcard campaigns, bandit signs, social media marketing, in-person networking and more, then wholesaling is going to be very difficult for you.
Are You Looking for a New Career?
In a lot of ways, while you don’t have to put the sweat equity into rehabbing the houses you sell, wholesaling involves a lot more footwork than flipping. It’s actually easier in many ways to earn extra money with house flipping than it is with wholesaling.
With a part-time house flipping business, you just have to find a good deal (maybe even through a wholesaler), hire your project manager or general contractor, make some design decisions and then sell your rehabbed house. With a part-time wholesaling business, you’re going to have to figure out when you can collect leads, market your business to sellers and buyers, call potential buyers and make deals, all while you’re maintaining your day job.
It might not sound like you have to do much more with your wholesaling business than you do with a flipping business, but all of the tasks I listed for wholesaling involve you doing the work. On the other hand, a lot of the tasks I mentioned for flipping can be pretty easily delegated.
You Need More Deals to Make a Living
If you want to make a full-time career out of real estate investing, you might not be as worried about balancing your day job with your investing tasks. However, you should keep in mind that the profits from wholesale deals are much smaller than the profits from flips.
You’re generally going to look at a profit of around $3000?5000 on wholesales, so you’ll have to keep them coming in on a regular basis if you want to make a decent living. You have to make far fewer deals to make a good profit when you flip houses than you do if you decide to get into the wholesaling business.
Some people think that wholesaling is a good way to learn the business and get your feet wet without diving in head first, and some people have successfully gotten into flipping that way. Others have stuck with wholesaling and loved it. For me, I prefer going for the more lucrative career without a potentially difficult and time-consuming stop along the way.