Should You Wholesale or Fix & Flip?
So you’re new to the world of real estate investing.
You’ve got an entrepreneurial spirit, you’re hardworking, and you’ll do whatever it takes to become financially free over the next 12 months.
And in my experience, there’s probably one question that you’re wrestling with as you try to make your mark on the industry:
Should I wholesale or do fix & flips?
Let’s lay it out.
Why Fix & Flip over Wholesaling
In a word?
Fix & flip means that you’re looking for a motivated seller offering his property at a steep discount. You also realize that with a certain amount of rehabbing, you can significantly raise the value of that property.
You then get financing – probably from a hard money lender or a business partner – and use that money to hire a general contractor to fix up the house.
Once it’s in tip-top shape, it’s time to sell.
Overall, that’s a complex process that takes months. But the flip side is that a deal that complicated and time-consuming results in more potential profit. In my experience, you’ll walk away with anywhere between $20k and $50k (I’ve seen over $100k before, but that’s rare).
So, fix & flip is better, right? Not necessarily. Let’s look.
Why Wholesaling Beats Fix & Flip
Wholesaling means you’re flipping, but not fixing – which eliminates about 90% of the time, hassle, and risk.
Of course, you’re also pocketing a smaller check… but here’s why I love wholesaling:
- No concerns about market changes because of the quick turnaround time
- Move to your next deal faster
- No hiring contractors
- Fewer unexpected costs (late fees, unforeseen rehab costs, etc.)
- No getting loans or risking lots of money
- Less earnest money
Basically, fewer headaches and less risk!
For those two reasons, I ALWAYS tell my new investors to start with wholesaling.
Sure, the profits are usually in the $5k to $10k range. I’ve even advised students to take a $2k payday and move onto the next deal.
But they’re just so quick and easy (well, relatively easy when compared to fix & flips). You don’t need money. You don’t need experience rehabbing or managing contractors. If you know how to find people and can find a buyer (both things I teach), then you can be successful over and over again.
In fact, I know real estate pros who only do wholesaling. Some just don’t like rehabbing, and that’s fine. However, I personally recommend doing ALL types of deals eventually because that’s where the most money’s made.
But for now, get a wholesale deal or two under your belt. A couple of quick wins is usually what you need before jumping to fix & flips. Plus, fix & flips require a little more money to pull off. Even if you qualify for 100% financing, there are often unexpected costs that come into play and having that $5k paycheck from the wholesale deal can be the difference.
Want to learn more about wholesaling?
Work with me and my team, and we’ll help you flip your first home:
Partner With Me