Wholesaling VS Flipping
This is a continuation of “The Great Escape” audio podcast reality show with Eric Thiele. Eric has been given assignments each week to help him get his wholesaling business started. In this episode, Eric catches us up on the challenges he has faced and the successes he has achieved over the last few months.
Sean: Yeah, definitely. Believe me there are a ton of people that I know that flip HUD homes. They don’t double escrow them or use transactional funding, or even just regular wholesale flips. What they do is they’ll take the property down and then turn around and list it on the MLS or do some minor fix up to it and turn around and sell it; which I did. I mean I’ve done 100 plus fix and flips in my lifetime. But, when it comes to my operation, because I run on volume where I didn’t even look at the properties or see the properties, they just come in, and they go out pretty rapidly. So, in a situation where you have the time to be able to do that, to be able to take them down, look at the property, renovate it, and stick it on the market, you will get a higher bank for the buck. Instead of getting a $5,000 to $10,000 wholesale profit, you can make a $30,000 deal on there, which makes sense.
Now the inventory is getting tight across the country. Especially here in Phoenix, a lot of properties are coming in now. I’m going, “Hey, do I take it down, renovate it, and turn around and sell it? Or do I just wholesale it out and make a third or half the profit I could potentially make by turning it out?”
So let me ask you a question. What was the buyer’s analysis while you were marketing the property? What was their come back, what was their feedback on the properties, those couple of properties you took down?
Eric: Oh, in terms of why they didn’t want to go forward with doing a wholesale deal?
Sean: Yeah. Was it pricing? Was it condition? What was it?
Eric: I think both of those. Pricing that, like anyone else, I think you tend to start doing this in your local area. I’ve been living and working in Austin for the last two years, so I focused on Austin, initially. And you’re able to bid on properties, at least off of the HUD site, like 80% of full market value. You’re not going to get a property at 60% or 50% or whatever. So the margin is kind of thin there.
So that’s one thing. I’ve gotten a lot of feedback that, “Oh, this is priced way too high. I only want to pay half what you’re asking for that property.” So I need to crack that, figure out that puzzle of how is everybody else getting these really cheap properties. I know there’s mechanisms like getting the out of state owners lists and marketing to them.
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