The Unsustainable Wholesaling Business Model
It all started with a simple question. BiggerPockets.com founder Joshua Dorkin sent me an email with a link to the BiggerPockets property directory. It contained several wholesale listings in Phoenix. Joshua asked, “can you check them for me?”After searching the Arizona Regional Multiple Listing Service and tax records I didn’t find anything out of the ordinary. The person that posted these listings didn’t own any of the properties, but that’s not unusual. He probably had them under contract and was looking to assign the deals to a wholesaler buyer. Of all the listings, just one was on the MLS and it was a HUD home showing pending.None of the owners of record lived in Arizona, but that’s not unusual either. Obviously, the guy listing these deals on BiggerPockets was marketing to out of state buyers. Not a bad strategy given the all the competition for good deals here in Phoenix.Still, something smelled fishy.The following day I got an email from a Phoenix wholesaler. His website contained many of the same listings that were on the BiggerPockets property directory. I called this wholesaler and asked him if he was advertising on BiggerPockets. He said no. I asked him if he had hired someone to post his properties on the BiggerPockets property directory. Again, he said no.As it turns out the person posting these listings neither owned nor controlled the properties. Worse, he didn’t have permission from the wholesaler that did have controlling interest to advertise these deals on BiggerPockets, or anywhere else. This phony was just trying to build a buyer’s list using someone else’s inventory.That, my friends, is an unsustainable wholesaling business model.The funny thing is none of these listings, the ones on BiggerPockets or on the actual wholesaler’s website, were very good deals. The after repair values were overinflated and the repair estimates were underestimated.That, my friends, is also an unsustainable wholesaling business model.