The whole truth on wholesaling: “It’s not easy.”

After 15 years investing in real estate, James Hawk considers wholesaling a great tool for his company. When homeowners reach out to him requesting an offer, his team analyzes the opportunity and decides on the optimal strategy: flip, hold, or wholesale—where he’ll assign his interest in the property (contract) to another investor for a profit. “I don’t consider myself a ‘wholesaler.’ I’m a real estate investor, and wholesaling is simply one strategy every investor should understand and utilize when the opportunity is presented,” he says. “Wholesaling is often overlooked, but it works for every asset class.” Here’s how it works, plus some advice on putting it into action.

How did you get into wholesaling? “In 2009, I was a department supervisor for a steel fabrication company in Florida. My plan was to become an agent, as I love opportunities that won’t limit growth and earning potential. Then I stumbled upon Michael Jake on YouTube posting content on wholesaling. I watched them all. I was skeptical at first, but after a lot of research, I came to the conclusion it was legitimate. Since leads and opportunities require a significant investment, you need multiple ways to monetize. I’ve closed wholesale transactions for a few thousand dollars to six figures on a single deal.”

How does wholesaling work? “When I started, it was primarily more hit-the-pavement style strategies and direct mail in the form of yellow letters to distressed homeowners. FYI, you will receive many angry phone calls… but it worked! I had already begun building a list of serious cash buyers in the area, so I started going to appointments and making offers to homeowners during the day, since I worked night shifts at the time. I was backed by cash buyers waiting on a good deal, so that helped build my confidence. Today, we don’t do any cold outreach to find sellers, owners reach out to us via marketing channels requesting an offer. We put everything under contract with the intent and ability to buy the property, then we’ll make a decision on exit strategy. Wholesaling is one of the strategies.”

How’d your first deal go? “Since I focused on finding buyers in the beginning, my first three deals didn’t require any marketing investment. I simply had a buyer with a specific amount of money to invest, so I negotiated a deal for three properties and then assigned them to my buyer for a total of $24,000 profit. Which at the time was incredible, since I was making around $50,000 per year with my job. Shortly thereafter, I quit my job to go full-time, but my advice for anyone getting started is make sure you have at least your annual salary in the bank before quitting your job.”

What are the challenges of wholesaling? “I like to summarize the business like this: It’s simple, but not easy. You will run into complex title issues, fraudulent sellers, crazy stories, inherited properties with multiple owners who don't get along, and so on. There’s never a dull moment, and you meet some interesting people. Last time we checked the numbers for my appointments, I’ve been to 1,700+ houses personally and made offers to buy their properties. The better at solving problems you are, the more money you will make. The best wholesalers are what we call ‘transaction engineers,’ which refers to their ability to buy a property in a variety of ways that eliminate objections with solutions to every problem. This could be offering owner financing, cash offer, and leasebacks. The ones that understand how to make an offer based on that seller’s situation will typically gain the most success.”

What advice do you have for others who want to follow in your footsteps? “Anyone jumping into wholesaling needs to understand you are not selling the property, you’re selling the contract to buy. You need to be very explicit and transparent with any marketing to buyers, or you could be seen as brokering without a license. As for rewards, the barrier of entry is low overall compared to the potential income. Build relationships with a couple of good private money lenders, hard money lenders, and strong cash buyers in your area, then you’re ready to begin making offers to sellers. Doing this the right way can also help many sellers. We’ve had many people cry at closing over the years, being so thankful for helping them and solving their problem.”

What is the biggest misconception about wholesalers? “Unfortunately, cash homebuyers are bashed consistently online, and there are many unethical homebuyers not doing the right things and shouldn’t be in the business, to be fair. This hurts the ones out here that are doing it the right way, truly wanting to help people, but are still grouped in with the bad actors.”

Any horror stories to share? “You’d be shocked at what we go through with sellers. We were under contract to buy a house and went above and beyond to do everything for this seller. We planned on buying this property to flip, but received an acceptable offer to wholesale the property. So everything was in place for closing, and the seller completely ghosted us right before the closing date. We spent weeks trying to reach her and recorded a memorandum of contract with the county, as well. This essentially should protect our interest in the property if she signed a contract with another buyer; the title company or attorney preparing the title would see this memorandum and need it to be released before a sale could happen. Well, come to find out the vice president of the small credit union holding the note for her mortgage created her own deed and paid off the mortgage for the seller—kitchen table closing. So the title was transferred without a title company or attorney, and now our only recourse would be filing a lawsuit. Between 2020 and 2022, we had over 40 sellers sign multiple contracts with buyers. Needless to say, they were all daunting transactions.”

Um, any heartwarming stories? “We put a property under contract to buy in Fort Myers, FL, two weeks before the area was devastated by a hurricane. This property was owned by an older couple and needed major repairs prior to the hurricane. So they lost power and didn’t have any money for food. We advance sellers money all the time if the title comes back clear to close for moving, a deposit for a new place, and so on. Typically, the funds would be released from escrow, but the seller needed the money ASAP. So during the storm, we facilitated helping them get to Western Union and sent the money. Many times, purchase prices are renegotiated after a storm, due to additional damage or just the fear of an immediate value drop based on storm stigma. Well, the hurricane damage wasn’t substantial enough for us to do that with this couple, and we felt like they had been through enough, so we left the same deal in place and found a buyer to close on the property. We could have easily dropped the price without an issue, but our goal is to truly help people, and sometimes, just because you can drop the price doesn’t mean it’s the right thing to do. And one of the best aspects is that we gave them $40,000 higher than they were asking for the property! When they called us, all they wanted for the property was $45,000. We gave them $87,250. And we still made a $12,750 wholesale fee on that deal.”

Anything else you want to add? “Here’s a cool story about life coming around full circle: Around 2018, I joined a highly exclusive mastermind for real estate investors that requires a significant annual investment and an in-depth screening process. Once I became a member, I realized that Michael Jake was also a member of this group! He’s a great real estate investor and very nice guy, so it was cool after 10 years of success to become friends with the person from the beginning of my journey into the business.”