Wholesaling vs. Note Investing

You know I’m partial to note investing but I’m always interested in what’s going on in other areas of real estate.  In fact, many of my students invest in other forms of real estate and wholesaling is one of them.  When we talk, I ask them what I ask everyone that reaches out to me:  Why are you considering note investing?

Real estate wholesaling can be a lucrative venture, but it also comes with its set of challenges and pain points. Here are some common responses I get about real estate wholesaling:

  1. Uncertain Income: Real estate wholesaling doesn’t guarantee a steady income. Deals may take time to close, leading to unpredictable cash flow for wholesalers.
  2. High Competition: The market for distressed properties and motivated sellers is often highly competitive. Finding good deals that haven’t been already snatched up by other wholesalers can be challenging.
  3. Market Volatility: Real estate markets can be subject to fluctuations, impacting the profitability of wholesaling. Economic downturns or changes in market conditions can make it difficult to find buyers for wholesale deals.
  4. Dependence on Networking: Wholesalers heavily rely on building and maintaining a strong network of real estate professionals, including investors and rehabbers. Success is often tied to the ability to establish and nurture these relationships.
  5. Legal Complexity: Real estate transactions involve legal intricacies. Wholesalers need to ensure that their contracts are airtight and comply with local regulations. Failure to do so can result in legal issues and financial consequences.
  6. Need for Marketing Skills: Wholesalers must excel in marketing to find motivated sellers and attract potential buyers. Effective marketing strategies are essential for success in this competitive field.
  7. Deal Financing Challenges: Securing financing for earnest money deposits or to close deals can be a hurdle for wholesalers, especially those who are just starting or lack established financial resources.
  8. Emotional Stress: Negotiating deals and managing the uncertainties of the real estate market can be emotionally taxing. Dealing with motivated sellers facing distressful situations can add an additional layer of stress.
  9. Reputation Management: Maintaining a positive reputation is crucial in the real estate industry. Wholesalers need to be mindful of ethical considerations and transparency to avoid damaging their reputation within the community.
  10. Time-Intensive: Wholesaling requires significant time and effort spent on market research, deal analysis, negotiations, and relationship-building. The time investment can be challenging for those looking for a more passive form of income.

While real estate wholesaling can be rewarding, there’s a lot involved.  Mortgage note investing is the opposite.  There’s steady, long-term, passive income (with lump sums of cash), low competition (this is still the best kept secret in real estate), mortgage notes are actually a HEDGE against real estate market fluctuations, no sales or marketing required, no financing challenges or legal complexities, and no stress from negotiating deals.  As far as time-intensive, well, the 4 hours a month that I spend on notes is hardly time-intensive! 

One thing I can say we have in common though:  Reputation Management.  All investors want a GOOD seller and likewise, sellers want GOOD buyers.  We all want honesty, integrity and the ability to close a deal without issues.

To your success! 🥂