How to Spot a Good Wholesale Real Estate Deal

Wholesalers often get a bad rap these days, and to be honest, we can understand why. A lot of the wholesale deals out there aren’t deals at all. Many are priced too high, riddled with problems, and/or backed by claims that fall apart the moment you apply any kind of pressure. 

However, wholesalers are also some of the best sources for finding legitimate deals. Unless you have your own marketing machine or a wiz of an investor-friendly real estate agent by your side, chances are you’ll have to rely on them eventually. 

So, how do you tap into this critical investment resource without getting scammed? 

If you’re buying rentals or flips from wholesalers, your success comes down to two things: choosing the right wholesaler to work with, and verifying every deal yourself. 

Read on to find out how we do both.

What is a real estate wholesaler?

A real estate wholesaler is your classic middle man. The wholesaling business model is simple:

1. Find a discounted property
2. Get the property under contract
3. Sell the property to an investor
4. Make a spread (assignment fee) in the middle

A straight talking wholesaler who knows their stuff is an invaluable contact to have. Finding motivated sellers on your own can be a slog, and a solid intermediary can be game changing for a real estate investor. 

Yet, simple though it may be, wholesaling is a business model that many execute poorly. Too often, properties are locked up without real analysis, repair numbers are guessed, rents and ARVs are inflated, and contracts are seen as disposable rather than commitments. 

In other words, both deals and the people who sell them range widely when it comes to quality. That’s why it’s important to tread carefully and ask the right questions any time you approach a new deal. 

Question #1: Does this wholesaler act like a professional?

Before you even analyze the property, analyze the person selling it.

A solid wholesaler typically provides:

• the address
• recent photos
  
• asking price or clear target price
  
• basic details (beds/baths, square footage, access instructions)
  
• a logical explanation of the rent/ARV estimates
  

Conversely, a wholesaler who won’t share photos, won’t tell you an asking price, can’t explain their numbers, and/or pushes you to make an offer based on very limited information is a major red flag. Generally speaking, their service probably isn’t going to have much value if they can’t be bothered to do the bare minimum and package the deal. All that they’ll be selling is risk. 

Question #2: What are the numbers backed by?

If you’ve found a wholesaler who is giving you something to work with and acts legit, the next step is to look into the numbers. 

A lot of wholesale real estate deals are priced based on absolute best case scenarios or even numbers created from thin air. Scratch just below the surface and you’ll often find optimistic ARV/rent estimates, unrealistic rehab costs, and no accounting for vacancy, holding, or any surprises.

As we all know, the best case scenario is rarely what plays out in real life. You’re only going to be looking at a real deal if the margins have some wiggle room. 

When analyzing the numbers, be sure that:

• repairs have plenty of contingency built in for surprises
  
• ARV/rent isn’t estimated at the very top of the market
  
• numbers are based on solid comps
  
• your margins won’t be destroyed if the market cools down or rehab takes longer than expected
  

Don’t just eyeball a nicely packaged deal either. Dig in and do your own research. Your job is to see if the deal still works after you make it realistic.

How to spot the good wholesale deals quickly

Get the scoop on the neighborhood

When it comes to neighborhoods, don’t just buy into a good story; verify the reality.

Before you trust an ARV or rent estimate, identify the micromarket and get your hands on some real, solid comps. Then answer these questions:

• What are similar homes renting/selling for right now?
  
• Are those homes sitting or leasing/selling quickly?
  
• Is the price range consistent, or all over the place?
  

If you’re buying an investment property, one of the smartest moves is getting a second opinion from someone who watches price trends daily (like a local property manager). Markets change and you don’t want to learn too late that you bought a deal based on numbers from 2021.

Be skeptical of rehab numbers

If you’ve never renovated a property before, it’s easy to underestimate costs.

There are lots of wholesalers who don’t actually know the first thing about home renovations. You’d be surprised how many base their rehab numbers on vague guesses as to how much a few cans of paint and some new carpets cost. Common problems with wholesale repair estimates include forgetting big-ticket items (roof, HVAC, plumbing, electrical), assuming cosmetic-only, ignoring deferred maintenance, and not building in contingency.

If you’re new to investing/working with wholesalers, bear this in mind: if the deal only works with a light rehab, it’s not a safe bet. If the numbers still work with plenty of room for surprises built in, go for it. 

Pay attention to the wholesaler’s behavior under pressure

How a wholesaler reacts when you scrutinize their numbers says a lot. 

A good wholesaler can be firm on price and still be fair. What you’re watching for is clarity, consistency, and honesty when you push back.

Red flags:

• changing terms suddenly
  
• cancelling because they found a higher offer after committing
  
• rushing you while withholding info
  
• acting like you owe them speed but they don’t owe you transparency
  

Strong relationships in real estate are built on repeat transactions. If they’re treating a deal like a one-time hustle, that’s usually what it is.

If you find yourself feeling uncertain use these questions as a gut check. This “integrity test” can usually tell you whether you can trust the relationship:

• Do they keep their word when it costs them money?
  
• Do they communicate clearly even if it might lose them a buyer?
  
• Do they treat contracts like real commitments?
  

You don’t need a wholesaler’s numbers to be perfect, but you should at least feel like a wholesaler believes what they’re telling you. 

Considerations for buying occupied wholesale rentals

Occupied rentals bring another layer of challenges to wholesale deals. If you’re looking at an occupied property, it’s crucial to verify not only pricing but the tenancy as well. 

If a wholesale property is occupied make sure you have:

• the lease
  
• the payment history
  
• an understanding of tenant quality and risk factors
  

If the tenant leaves two months after closing and the house turns out to need a major rehab, what was sold to you as a “cash flowing deal” can turn into a very expensive lesson.

If you can’t verify the tenant situation clearly, you need to buy deeper or walk away.

What to do if you’re new to wholesale deals

Wholesalers can be a great resource for finding discounted properties, but only if you go in with clear eyes and approach with caution. 

It helps if you keep things simple:

• Focus on a small buy box (areas, price range, property type)
  
• Verify rent and rehab independently
  
• Build relationships with a few wholesalers who provide real info
  
• Be willing to say no 99% of the time
  

Wholesaling is a numbers game. For every deal a wholesaler brings you, expect about 50-100 duds to precede it. 

Conclusion

Wholesale deals aren’t automatically good or bad. The key to sourcing deals through wholesalers successfully is to question everything. 

Verify numbers, look at comps, and most importantly, go with your gut. If the person selling is giving you shady vibes, it’s not worth it. You need to trust the wholesaler before you can trust the deal. 

Need help sourcing deals in your area? Reach out to a local Evernest Investor-Friendly agent for the scoop on available properties near you.