As a veteran real estate investor, I try to keep my portfolio diversified with several different types of investments—some rental properties, one or two flips at a time, and occasional wholetailing and wholesaling properties when I spot deals that are too good to pass up. So, when a new investor I mentor named Sheila came to me for advice on choosing between wholetailing vs. wholesale strategies, I answered with a question: why choose one?
The fact is, both wholetailing and wholesaling strategies can work well for new real estate investors. However, there are also unique challenges and pitfalls you’ll need to navigate if you want to be successful.
Comparing Wholetailing vs. Wholesale
Let’s compare wholetailing vs. wholesale and discuss the pros and cons of each real estate investment strategy.
Wholetailing real estate is similar to flipping houses—your goal is to purchase a property for less than the market value, fix it up, and sell it for financial gain. With a traditional flip, you’re usually looking for distressed homes in poor condition and then performing large-scale renovations to bring the property up to its full market potential. Wholetailing, on the other hand, is a more short-term and small-scale investment.
As a wholetailer, you’re also dealing with distressed properties, but the goal is to find a home that just needs a few essential repairs to become habitable and sellable again. By limiting your repairs to a handful of high-impact items, you decrease the amount of money spent on renovations. You also shorten your investment time frame, which reduces your holding costs.
Since you’re not fully renovating the property, you probably won’t be able to bring it up to its full market value, which means you might not get as big of a payday from wholetailing as you would from flipping. However, since your property will be listed below market rates (while still being habitable thanks to your repairs), your pool of potential buyers will also be much larger. The home will appeal to other investors hoping to find a good fix-and-flip property, as well as regular homebuyers looking for an affordable fixer-upper.
One potential issue with wholetailing, especially for inexperienced investors, is that you need an instinct for knowing which properties make good wholetail candidates. You need to know that you can bring the property up to health and safety codes and make it marketable to buyers without sinking too much money into repairs. If you’ve never renovated a home before, or you don’t have reliable property evaluation tools, you may not know how to spot great wholetailing deals while avoiding money pits.
|Requires less capital investment on renovations and holding costs than a traditional flip
||Smaller profit margins than flipping
|Faster than a traditional flip
||Requires more time and money than wholesaling
|Large pool of potential buyers
||Can be challenging for inexperienced investors
Wholesaling is an even shorter-term real estate investment strategy than wholetailing. When you wholesale real estate, you purchase undervalued, distressed properties and then sell them to other buyers without conducting repairs or renovations. The goal is to mark the price up just enough to make financial gain while still appealing to other real estate investors and developers looking for cheap properties.
To see any financial gain from wholesaling, you need to sell the properties quickly. Many wholesalers rely on a network of other investors working with large quantities of distressed properties and have deep enough pockets to make quick cash deals. It can be hard to jump into wholesaling as a new investor if you don’t already have contacts like this.
Even if you sell your wholesaling properties fast, your return of investment on each one can end up being smaller than other real estate investment strategies. You’re not doing anything to improve the home or increase its value, so there will be a limit to how much you can sell it for. That means, to make a decent income from wholesaling, you need to move a lot of properties—which means you need ready access to enough capital to purchase a lot of homes in a short time-frame.
|Requires a smaller capital investment per property than flipping or wholetailing
||You need a network of potential wholesale buyers
|You don’t need experience with renovations or repairs
||Smaller profit margins than flipping or wholetailing
|Very short-term investment strategy, so you see your ROI quickly
||You need enough capital to purchase many properties in quick succession
Despite the challenges, both wholetailing and wholesaling can be strategies for new investors. Of course, you will need to have access to the tools, training, and mentorship you need to find leads on qualifying properties, to separate the good deals from the bad, and to get financing for your investments, and then, to sell your homes fast.
Develop Stronger Wholetailing and Wholesale Strategies With HomeVestors
So, how exactly does a new investor gain access to everything listed above? By joining a nationally known and trusted real estate investment franchise network like HomeVestors®. I’m sure you’ve seen their “We Buy Ugly Houses®” billboards by the side of the highway or heard their ads on the radio—as an independently owned and operated franchisee, I’ve been able to take advantage of this powerful incoming marketing campaign to find quality leads on distressed properties for wholetailing and wholesaling.
As a new investor, I also benefited from the comprehensive training program and one-on-one mentorship of a HomeVestors® development agent to help me spot good deals, negotiate with buyers and sellers, and build my business. Plus, if you join HomeVestors®, you can take advantage of a full suite of real estate investment tools, including a lending portal to connect you with fast financing, and the DealVestors® listing platform designed especially for investors, wholesalers, and wholetailers looking to buy investment properties.
Need help developing wholetailing vs. wholesale investment strategies? Contact HomeVestors® today to learn more about becoming an independently owned and operated real estate investment franchise.
Each franchise office is independently owned and operated.