Pros and Cons of Wholesaling Real Estate

There are definitely pros and cons of wholesaling real estate.  After being in the business for 23 years now, I’ve seen things come full circle more than once. History does repeat itself and it’s quite fascinating in the way it unfolds.

There are so many factors that go into this list. Based on your need for excitement or challenge, your opinion of my list may differ.  You may find things that are a suck fest to me – are one of the driving forces behind your motivation.

For example, I am a hard-core believer in working smart not hard. When things start to feel like I’m beating a dead horse, I’m not having fun anymore.  Other people actually like to work their you know what’s off, and feel like they’re accomplishing something.

So take this list with a grain of salt and interpret it to fit your thought process.

Pros of Wholesaling Real Estate

A “pro” is defined as a reason for doing something. Here’s my opinion of the reasons for getting into the real estate wholesaling business.

  1. Low start-up cost – Real estate wholesaling is a bona fide business model. It’s something that can be done as your primary source of income for the rest of your working years.
  2. Able to implement anywhere  – No matter what city or state you live in, real estate wholesaling is an option. Even if you live in another country where assignments aren’t a thing, you can create a business to flip contracts virtually.
  3. Networking is a form of marketing – if you’re just starting out and don’t have a marketing budget, you can use networking to your advantage.  You need to be a “people person” and have networking skills to pull it off. Networking is a way to have more experienced wholesalers share their deals with you and allow you the opportunity to make a quick buck.
  4. You can easily replace your income and make 6 figures a year – This may be one of the top reasons people are interested in wholesale real estate, along with the lifestyle that comes with it (see #5). If you get tired of living paycheck to paycheck and swapping your time for a measly paycheck, then wholesaling is very appealing.  With the right training and the right motivation, it’s easy to earn a six-figure income as a real estate wholesaler.
  5. Freedom / Lifestyle – Everyone wants the freedom to do whatever they want.  Wholesaling does allow you to have way more flexibility than a 9 to 5 job.  If you want to take the day off or the week off, you can do that.  You may have to take some phone calls while you’re on vacation, but what’re a few minutes out of your day?  Eventually, you can build your business up and let someone else take the calls.
  6. Little to no risk – What this means is that if you enter into a contract with a seller, and the deal falls apart, you had nothing at risk.  It’s all about finding the right sellers and negotiating the best deals. If you learn how to do that, then your risk remains very minimal.  Don’t be one of those guys that use your credit cards for earnest money deposits. NOT SMART
  7. Work From Home – Ultimately, we all dream about working in our pajamas. The COVID-19 pandemic changed the way we work as a country and now many people are working from home. When you venture into becoming a real estate wholesaler, you’ll always have that option. In fact, you’ll be at home so much you’ll start doing to Starbucks every day on purpose.

pros and cons of wholesaling real estate

Cons of Wholesaling Real Estate

  1. Inconsistent Income: There are many things that are inconsistent in the real estate wholesaling business. The one that has to be the biggest challenge is the income.  It is true that you’re able to control the amount of money on your deals. and you’re able to control your lead generation. What you’re not able to control is title problems, buyers backing out, and sometimes sellers backing out. These all present inconsistencies in your income, along with just the reality of being an entrepreneur.  You must learn to be an excellent money manager.
  2. You could wholesale forever (Not Building a Sellable Asset):  When you’re a wholesaler, you’re basically the backbone behind everything that goes on. You make the decisions, build the teams, and call the shots. Without you, there is no wholesaling business.  For that reason, you’re basically committed to doing this job for a long time. Until you just don’t want to wholesale houses anymore. Yes, you can build a team to help, but it’s not a true business that you can sell at a profit in the future.  There’s a GIANT learning curve.
  3. Challenge Expires – In the beginning, chasing deals is exciting. In fact, it’s so exciting that it will keep you up at night. After ten years or so, the excitement starts to wear off.  There are certain levels that can be achieved in this business, with the top being a public speaker that teaches other people how to do it.  Once you’ve reached that level, you may find yourself a little bored with the redundancy of the transaction. It’s literally like running up an escalator all the time.
  4. Competitive – Since the business model has an inexpensive point of entry, and it seems “easy” to the newcomers, it has a very high level of competition. Wholesaling houses is the gateway drug to more advanced types of creative real estate deals.
  5. Sellers Becoming More Aware – When I first started NO SELLER knew what wholesaling was.  Times have changed and now sellers are more aware of this business model. Some will even say “if you’re a wholesaler, then I’m not interested.
  6. Licenses Required in some states – Another thing to mention: when I started in 1998 none of the 50 states required a real estate license to be a real estate wholesaler. Things have changed and in recent years, there are several states that require licensing.  That changes the game in so many ways when it comes to entry points, start-up costs, and disclosures. One of the perks in the past was not needing a license since you were the principal in the transaction.  I’ve compared the pros and cons of having a real estate license as a wholesaler, also so you can compare.

There you have it, the pros and cons of wholesaling real estate. Hopefully, this will help you have a more realistic impression of what you re up against if you’re trying to get into the real estate wholesaling business.

 

 

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