Time To Push The Button.....PART 3

Ah yes, the wholesaler. I've discussed this creature a little before but it's certainly a hot enough button to waste some more ether on it....

Seems to me that the fundamentals of investing for the small investor, seeking passive income opportunities, quality neighborhoods, cash flow, determining a suitable exit strategy, and much more, has all taken a back seat to the get rich quick notion of wholesaling, or doing contract assignments. Why is that I wonder....

Well, a good guess is that it's because largely that is what is being taught in the popular seminars. And it's what is being taught because my guess is that a pretty high percentage of people taking those courses have little to no cash and probably a somewhat lower but still substantial percentage have poor to mediocre credit. Thus, many of the attendees are looking for a vehicle to cash in without having to commit to taking title to properties, pay for rehabs and actually do something as unthinkable as BUY REAL ESTATE! Strange but true, the trend is seriously tilted towards wholesaling resulting in a number of problems for the loosely organized investor groups. Since there are now many, many newly minted "wholesalers", who is actually taking advantage of their "deals"? Other wholesalers? I think not. And of what quality are these "deals" being purveyed by newly minted wholesalers?

See, the idea of wholesaling as a venture was rooted in the idea that a good hunter (of real estate opportunities) would occasionally, if not regularly, encounter more deals than they themselves could or wanted to actually complete and so the surplus deals could be assigned (wholesaled) to other investors. Those deals were presumably evaluated in the same context as the first investor would use to evaluate deals for himself thus resulting in a reasonably sound opportunity for another investor to latch on to. At the same time the first investor could make five or ten percent for architecting the deal.

However, we're now into a phase of minting novice investors into full-fledged wholesalers. How good are the deals? From my perspective many are laughable. What is happening in many instances is the self-described wholesaler is simply packaging up everything he/she can find, reverse engineering the numbers to make them fit the learned formulas and then peddling the deals to other investors, many of them unsuspecting newbies anxious for a transaction. Sad but true.

If you disagree with my assessment, please fell free to comment... Seems to me many if not all seasoned investors now completely disregard wholesale deals unless they come from known, experienced, qualified sources, or, an entity fitting the original definition of a wholesaler...