The Wholesaler's Buyer Tier List: Who Actually Closes?

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Transcript

Why Buyer Type Matters

SPEAKER_00 0:00

What's going on, everybody? Welcome back to the wholesaling tier list. I've been wholesaling for over a decade. I've done close to 3,000 deals in all 50 states. And today we're going to be breaking down my personal tier list of the types of buyers that we have when we do disposition.

Tier F Daisy Chainers Explained

SPEAKER_00 0:20

Starting off with tier F, the Daisy Chainer. Now, when I say the Daisy Chainer, I'm talking about the Daisy Chainer that pretends to be a buyer, but you don't find out that they're a daisy chainer until the day of closing. And if you've been wholesaling for any period of time, you've come across this type of buyer, the buyer that literally pretends like they're cash. They're bringing this, they're going to end up flipping it, they're going to be a landlord, they're going to do all these things. But then you find out that's not the case. They're just a wholesaler, just like us, and they're trying to get somebody else to buy the deal the same day of closing. Maybe they even took it to a different title company and they're doing a pass-through closing through two different title companies. I've even had it where there were three title companies involved on the same transaction on the same day where funds went from Old Republic to Fidelity National all the way over to Independent Texas title, where I got paid. Luckily, the deal closed. But sometimes when you're dealing with these daisy chain buyers, it doesn't close, it causes massive amounts of issues. Why? Because of lack of transparency, lying. And that's my issue with the daisy chainers. It really has nothing to do with the fact that they're making money on the deal, it's the fact that they didn't tell us. And when communication breaks down through lies and the lack of transparency, it causes issues with our sellers. And so for that reason, the daisy chain buyers are my least favorite, and that's why they come in at F.

Tier D Hard Money Flippers

SPEAKER_00 2:00

Next up on D, we have the hard money flipper. Okay, so there's a difference here between cash and hard money. Hard money is typically the newer flipper, the person that maybe they're just getting started. Maybe this is one of their first ever flips that they're ever taking down. And the reason why this is an issue is because sometimes they need to go raise the cash to close. Maybe they're getting it from a crocodile or something like that. Maybe they're trying to raise it inside their community, and they don't know that you have to get an appraisal. They don't know all the underwriting terms that have to take place before they actually get the loan. And so, for that reason, the hard money flipper is way down on my list because there are so many timing issues, there's so many unknowns that whether or not this buyer will actually be able to fund the loan. And so, for that reason, I put them at level D.

Tier C Landlords And Discounts

SPEAKER_00 3:02

At tier C, we have the landlord. The reason why landlords are low for me is because normally they want to buy at more of a discount. And also, landlords have an issue with cash flow sometimes, in comparison to other buyers that have consistent large chunks of money coming in, landlords can get tapped out pretty quickly. And because of that, it's hard to have repeatable business with them. And the underwriting can be very different per landlord. Sometimes landlords like, hey, I don't buy past this year, I don't buy houses that are two-bedroom, one bath, I won't buy anything that only has one bathroom, I won't buy anything that has this type of roof or this type of issue. And so it leaves you on the dispositions trying to find a different buyer. And also, just because I am a wholesale educator, I think wholesalers have a tendency to want to underwrite deals as rental properties to basically pay more for the property and say, oh yeah, it doesn't work as a flip, but it would be a great rental. And in reality, the landlords are still looking for cash flow, but they're also looking for the equity. Meaning, as a wholesaler, you still need to buy at a discount. So for those reasons, landlord comes in at C.

Tier B Wholetail Buyers

SPEAKER_00 4:30

At B, we have the wholetail buyer. The wholeta buyer is someone that wants to buy at a discount, not do a ton of work, list it on the MLS and make their profit. Typically, these buyers are willing to take a reasonable amount of profit, $30,000, $40,000, $50,000, and not as much as a flipper would. And so the wholetailers also have a faster cash cash conversion cycle. And so, because of that, I really enjoy these buyers because they are willing to take on more inventory, aka more assignment fees for us, than the typical buyer. The only issue with the wholetale buyers is normally they won't pay as much as, well, level A and level S.

Tier A Cash Flippers And Volume

SPEAKER_00 5:20

And so level A is the cash flipper, the person that likes to flip houses, but they have their own cash, whether it is private money, their own personal cash, they're borrowing it from a line of credit, whatever it is, it's not a hard money loan. These people are established and they have a tendency to buy the widest range of properties, meaning that they're they're willing to buy the properties that are super physically distressed, they're willing to come in and buy properties that are unique, maybe those two bedroom, one bath that your landlord wouldn't buy. And these people normally are volume buyers because they are well established, that's why they have their own cash. And so, in reality, these are my favorite types of buyers to wholesale deals too, even though they aren't at level S.

Tier S Owner Finance Unicorns

SPEAKER_00 6:12

And the reason why is because level S is the hardest type of buyer to find, and that's the person that primarily focuses on owner finance. They want to do wraps, they want to be the bank. These investors are quite frankly, in my opinion, the smartest investors. They come in, they fix the properties up, and they get rid of that inventory, putting themselves in a position of power and leverage with being in a lean position, but not really being liable for any of the physical condition of the property moving forward. And so for this, these are kind of unicorn buyers. It's rare for you to come across someone that this is their primary focus, but when you do, hold on tight to that buyer because they are probably going to be the best buyer that you ever come across. And so, to reiterate my list at level S, owner finance, level A, the cash flipper, level B, wholetail, level C, landlord, level D, the hard money flipper, and all the way down at the bottom, those worthless daisy chainers. Let me know do you guys agree or disagree

Full Recap And Your Take

SPEAKER_00 7:22

with my tier list of cash buyers? Let me know in the comments. Regardless, show me some love, like today's video, and we'll see you guys tomorrow.