Pod Insights BiggerPockets Real Estate Podcast Build vs. Buy: Which Is Best for Your First Rental? About this episode You don’t have to buy your first rental property—you can build one instead. Newer systems, fewer repairs, and that “brand new” feeling that tenants may pay more rent for. But…is it worth it? Building a small multifamily in a single-family area could let you house hack and own a rare property in your market, but is the headache worth the effort?
With more and more investors choosing to build rather than buy, we thought we’d weigh in.
Dave and Henry are back answering your questions from the BiggerPockets Forums. Today, we’re talking about building vs. buying rentals, when an investment property is too old to be worth buying, the lender-friendly rehab budget Henry uses to get loans for his BRRRRs (buy, rehab, rent, refinance, repeat) and house flips, and whether wholesalers (middlemen) are worth buying properties from.
Plus, if you’re house hacking, should you tell the tenant you’re the owner? Dave tried to hide it before, and shares whether it was worth it.
In This Episode We Cover
Building vs. buying rental properties: is the time (and effort) worth the upside?
Renovating an older rental property? This build decade could be best
Henry’s exact renovation budget he shares with lenders to get fast financing
Are wholesalers worth their assignment fee? When we will and won’t buy from them
Should you tell your tenants that you’re the owner (what happens if they find out?)
And So Much More!
Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1307.
Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected] .
Learn more about your ad choices. Visit megaphone.fm/adchoices
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Dave Meyer? Would you ever buy a house built in the early 1900s? If you answered no, you might be overlooking the best deals in your market. In some areas of the country, most houses are old, especially the affordable ones investors target. So if your buy box starts in the 1960s, you're filtering out a huge chunk of inventory, including some potential home runs. Old houses do require a different playbook. Some repairs are surprisingly cheap, like new electrical might run you only five grand. But foundation issues or bad plumbing could turn your promising new rental properties into a long-term money pit. The key is spotting those differences before you close. So today, we're breaking it down.
0:43 Dave Meyer? How to spot the old houses that are actually safe bets? Which systems you absolutely need to inspect before closing? And the most common surprises hiding behind those old walls? Plus, we'll reveal the single best construction area to target on your next deal, the sweet spot where you can add value with modern updates, but the original build quality still holds up.
1:10 Dave Meyer? What's up, everyone? I'm Dave Meyer here with my co-host, Henry Washington. Today, we're answering questions from real investors in the BiggerPockets forums, and we're going to spend a lot of this episode talking about how to safely buy older houses. But our first question comes from an investor named Kyler in Birmingham. He says, "Hey, everyone. Me and my fiance just got engaged." Congratulations, Kyler. "And I've somehow convinced her to house hack for our first home in Oxford, Alabama." I don't know anything about Oxford, Alabama, but that sounds like it sounds like it fits. So congratulations on that, too. He goes on to say, "Being in a smaller city, there's not a ton of residential multifamily properties in the area.
1:54 Dave Meyer? Would it make sense to build a duplex as our first home utilizing an FHA construction loan? I can't find much information on people taking this approach instead of finding a pre-existing home. I understand that the cost will be higher and there won't be any opportunities to add value through renovation, but I wasn't sure if those were big enough reasons to look into a different direction." I mean, this is a good question, though, right? I mean, new construction has become pretty popular these days. So, Henry, what's your take?
2:25 Henry Washington? Don't do it?
2:29 Dave Meyer? Sorry, I guess don't do it is the simple answer here, but why?
2:35 Henry Washington? Yeah, here's in all seriousness, I think that if you had construction experience or you're in a situation where you have the resources necessary to pull this off, like you've got a great contractor that has a proven track record. You've vetted them appropriately, you've got the funds and everything all lined up and you've got the time horizon to wait for it to be finished. Then potentially, yeah, that's a really good idea because you're going to get the benefits of new construction and lower costs, but building isn't easy. It's something typically that investors start to take on after they've had some experience
3:18 Henry Washington? doing some regular real estate deals, some value add deals. Once they've got some more skills under their belt. So does it mean you can't have one built? I mean, people have personal homes built all the time. So if you were going to build a new home and you hire a builder and they take care of it all for you and the numbers make sense, then yeah, it might be a decent thing to do. But if it is something where you've got to go find the team, you've got to go get the loan and you've got to find the plans and and hire the structure, hire the engineers and like, that's just a lot. It's quite an undertaking and you can make a lot of mistakes and it could not be as profitable or as easy as just going to buy something on the market.
4:00 Dave Meyer? Yeah, I'm with you. I think this, this idea of build to rent, which is essentially what he's talking about, but build to rent combined with a house hack. Good idea. I mean, I think the numbers probably would make sense, but execution wise, it's difficult in a, for a couple of reasons. First and foremost, if you already had to convince your fiance to house hack. And she was maybe a little resistant to that. I'm just gonna throw out there that managing a construction project that you've never done before might put some strain on your relationship. Just, just, I don't know you guys, but I'm just gonna throw that out there that one could imagine that it might do that a little bit.
4:41 Dave Meyer? The second thing I would ask you, Kyler, is why not just somewhere else? Like, maybe you live in Oxford, you're passionate about this place. I just looked it up, it looks like a small town, but like, is there another place where you could buy a multifamily? And it would be existing and it wouldn't be that hard? I say this, one, for everything Henry pointed out, the complexity of it. But the other thing I think a lot of people overlook is if there's not a lot of multifamily in this market, and you build something that's unusual, you may have a really hard time renting it out. If everyone else in that market is used to renting single-family homes, because that's what's available in that market,
5:23 Dave Meyer? you could come in with a new product and it can be beautiful, but it might not be in high demand just because people in this area want single-family homes. My guess is the reason there aren't multifamily homes in this area is because there's not demand for it. So I think you also have to just think about the product you're building, and if it's actually applicable or an appropriate thing to be investing in, in that market. So if I were you, I would either choose a different market, or maybe don't go with a house hacking strategy, rent something and buy a investment property. There's a lot of great markets in Alabama to buy just regular old rental properties, for example.
6:06 Dave Meyer? It looks like Oxford, I'm looking this up, is not that far from Birmingham. There's good rentals there. Huntsville's a great market, there's, I mean, you're not even that far from Atlanta, some parts of Georgia. Like, there are places that you could invest in. So for your first deal, I would recommend doing that, even if that means giving up on house hacking, which obviously has a lot of benefits.
6:29 Henry Washington? All right. Our next question comes from an investor named Nicole. Now Nicole asks on the BiggerPockets forum, "I'm starting to look at some older properties, pre 1960s in Columbus, Ohio. Previously, my buy box was post 1964, trying to avoid knob into wiring and other challenges with older homes, but that is becoming a barrier to buying. So I'm thinking about expanding my buy box and looking for any advice on things to be cautious about or questions to ask." Here's what I would look out for in older properties. It's, yes, obviously knob and tube wiring. So the same thing applies. I'm always looking at the big five. I'm looking at plumbing, electrical, roofs, HVAC and foundation. But these older properties, I
7:13 Henry Washington? think where they really can hurt somebody is foundation.
7:17 Dave Meyer? Especially in the Midwest.
7:18 Henry Washington? Some of them have the old cinder block foundations. They're super wobbly and sometimes even when you fix these foundations and you can spend 20, 30, 40, 50 grand to do it, the house still is sloped and wobbly. Like it's not like you can just completely remedy these things. So it's something you have to consider when owning in this asset class. And more so, even if you buy a property that's older and you fix the foundation problems, if it's still a little co-wonkity on the inside.
7:49 Dave Meyer? Co-wonkity? What is co-wonk?
7:51 Henry Washington? Like, you know, a little wobbly, a little wobbly, a little, little.
7:54 Dave Meyer? Yeah. Okay.
7:56 Henry Washington? But you've got to go.
7:57 Dave Meyer? It's a new one.
7:59 Henry Washington? You may have to sell that property eventually and trying to convince somebody else that even though you spent 20, 30 grand on fixing that foundation, it may be a hard sell. So the first thing I tell you to look out for is to always have a specialist, a foundation specialist, take a look at the foundation of that property and give you their fair assessment on how structurally sound they think it is and how long they think it's going to last. Or if it's not, what's it going to cost to fix it? Because foundation work is, I think, the number one thing that's going to cause you a big pain in the butt. Next is probably plumbing issues with old pipes and make sure that you get a quote for what it's.
8:39 Henry Washington? Going to cost if you've got to replumb that entire house up to new plumbing standards. Cause especially if it's an older property and it's a, and it's a buy and hold. If you're planning on holding this for, you know, five, 10, 15, 20 years, at some point that falls on you to take care of. Right? So.
8:58 Dave Meyer? I'm doing this right now, replumbing a whole house. I think I've been telling you this for nine months because it's been going on for nine months.
9:03 Henry Washington? And what's it costing you?
9:05 Dave Meyer? Eighty grand.
9:06 Henry Washington? Woo, that's a house.
9:07 Dave Meyer? Yeah, well, for you.
9:09 Henry Washington? For me, yes.
9:11 Henry Washington? For me, the things to watch out for in older properties is always going to be plumbing and foundations. Electrical, yeah, everybody says watch out for an oven too, but like electricals, you know, between five and 10 grand, you put new electrical in. Like it's not the end of the world on electrical.
9:25 Dave Meyer? Roof is fine.
9:26 Henry Washington? But yeah, roof, 10, 15 grand, depending on how big the property is, not the end of the world. But plumbing and foundation, you can get up there into, into almost, you know, six figures and having to fix some of those problems. So you definitely want to have an understanding of what's going on with those things prior to you buying or closing on an older property.
9:46 Dave Meyer? I really like this question because I don't think there's a right answer. I think in the first eight years of my investing career, I didn't buy something that was after 1940. Everything I bought in Colorado was 1890s, 1920s, that kind of stuff. Because that's what I could afford in those deals that I can do. So I feel like I've learned a lot about this. I would still buy older properties. I think what you need to think through though, is how recently renovated the property has been when you're buying it. Because if it's, if it's hasn't really been touched, if no one's done the work Henry was talking about of making sure the foundation is good, making sure the plumbing is up to date, you don't want to do that.
10:30 Dave Meyer? Like, like most people don't want to do that unless you have a lot of experience with this kind of thing. Like I even talked to James, our mutual friend Flipper. He said that there's only a certain number of contractors he uses and he has. Done thousands of deals for these older type homes because it is really specialized to be able to do this effectively. So I think the challenge here is that a lot of people look at these older homes and say, oh, that's a great value add opportunity. And there is, if you can execute it, and there are some things that I've been able to do successfully, but I will say, everything costs more when you're doing these renovations than if you're, you know,
11:10 Dave Meyer? you take out a tub, all of a sudden, like literally this happens and you're like, oh, that's a drain I've never seen before. Like I just like that you can't get a part. So you wind up having to replace the whole thing. The other thing I would say is that doing a lot of the value add that is most valuable, like redoing a layout is very, very difficult. And so like, I think it's the kind of situation where you can buy an old home if the layout is good, if the plumbing has been upgraded, ideally electrical, but as Henry said, it's not crazy. But like ideally it's been updated. If all that's true and you're just doing like cosmetic or someone's done a great job and it's like a really cool old house that's been renovated, go for that. Like that's fine.
11:52 Dave Meyer? But I think it's the like, hey, this is cheap. I'm going to renovate it cheap. It's tough.
11:58 Henry Washington? Another thing to be cognizant of is your heat and air situation. Some of these old homes have boilers. And these things vary depending on what part of the country you're in. But if you've got to update that to modern heating and cooling, especially if it's a property that's never been ducted before, your price goes through the roof in terms of what it costs to put modern heat and air in there. If you have to do all new ducts and actually duct a house. Instead of you spending five to eight grand, you spend 16 to 20 grand or more, putting in HVAC and modernizing HVAC. So another thing to watch out for.
12:38 Dave Meyer? What is your sweet spot year? Like if you could pick a year for a house to be from, what would you pick?
12:45 Henry Washington? 70 to like 75.
12:47 Dave Meyer? Yeah.
12:48 Henry Washington? Cause they're, the layouts are cool. They have big rooms.
12:52 Dave Meyer? Have a sunken living room with like one of those weird couches.
12:56 Henry Washington? Built in couches. Yeah. Yeah, absolutely.
13:00 Dave Meyer? I think it's the sweet spot because yeah, you don't have the risk of knob and tube. Sixties is good, but you still have some asbestos risk in the sixties. So yeah, lead paint. Like if you get into like the mid seventies, the lumber quality was better than it is today.
13:14 Henry Washington? That's fair.
13:15 Dave Meyer? It's true. Like if there's some really funny like memes, you can go look at the size of a two by four over time. Like it used to actually be two by four. Now it is far from that. But yeah, like a lot of the quality of the construction was really good back in the seventies. And I, I agree. You see a lot like mid century kind of style homes. That layout is popular right now again. So I'd still try and find 1960s or more recent. But you might be able to find some gems in there in the older stock that has been upgraded where, you know, someone bought it in the eighties, upgraded it a lot. And now most of the systems are eighties quality.
13:57 Dave Meyer? Like that's a little different than something that truly is like a time capsule.
14:02 Henry Washington? Right.
14:03 Dave Meyer? Hasn't been changed in a really long time. All right. Great question though, Nicole. Really interesting one. I think a real predicament and thing to think about for anyone investing, especially in the Midwest and the Northeast. You see a lot of these old homes. It's a, it's an important thing to consider. We got to take a quick break, but we'll be back with more BiggerPockets community questions right after this. Stick with us.
14:29 Dave Meyer? Welcome back to the BiggerPockets Podcast. Henry and I are here answering your question, or BiggerPockets community questions about anything to do with real estate. By the way, we are answering these from the BiggerPockets forums. If you have questions about your own investing, go post them on the BiggerPockets forums. You can get dozens or hundreds of responses from experienced investors. There are three and a half million people on biggerpockets.com answering these kinds of questions. And we might just pick one of your questions for these episodes. Our next question is from Ally in Houston, who has a question about renovation budgets. She asks, "For investors using hard money, private money, or renovation loans, how detailed does your rehab budget need to be? I've seen some lenders accept a pretty simple breakdown.
15:14 Dave Meyer? For example, roof cost, HVAC costs, interior cost, and contingency. But others seem to want line item scope, including trades, assumptions, draw schedule logic, and proof that the numbers are realistic. For people who have done this a few times, what makes a rehab budget, quote unquote, 'lender-ready' in your experience?" Uh oh, Henry's giggling.
15:36 Henry Washington? No, it's a good question.
15:38 Dave Meyer? It's a good question? What do you do? Just write $50,000 on a piece of paper and hand it over?
15:43 Henry Washington? Yeah, I give them a napkin with like Cheeto dust on it. Then I write a number. In my experience, let me put it this way. I've done hundreds of deals. I've used the exact same template for a rehab budget to send to a lender every single time.
16:00 Dave Meyer? Across lenders?
16:02 Henry Washington? Across lenders, different lenders. And it is a very simple, high-level renovation budget breakdown. So I'll do a detailed scope. But when I send it to the lender, I roll it up to high level. And so I'm just going to read some of the line items that I have on one of my most recent renovation budgets. So I'm going to share my screen so you can see what it is that I submit to the banks. I've been using the same template here. And it really is just the trade in one column and then the total cost for that trade on the other column. And I'd say it's a fair mix between enough detail so that the bank knows what I plan to do, but not so much detail
16:47 Henry Washington? that it's annoying for me to put it together. Does that make sense?
16:53 Dave Meyer? Yeah, you're prioritizing how annoying is this for you?
16:57 Henry Washington? Absolutely.
16:58 Dave Meyer? I like that.
16:59 Henry Washington? Absolutely.
16:59 Dave Meyer? So you're thinking about it just so like, the way your mind is working on this is these are the different vendors, like trades, that you're going. To and paying to. So you're not saying like, oh, I'm putting down X square feet of Y product.
17:15 Henry Washington? Correct.
17:15 Dave Meyer? Of flooring. You're just like flooring six grand.
17:18 Henry Washington? Yeah. So for me, flooring six grand, that includes the tile I'll use, the LVP that I'll use. It includes the carpet that I'll use in the bedrooms. It's just all rolled up into one. Interior paint, that's just interior paint. But if I was going to paint the kitchen cabinets, it would be in this same number. Labor and materials, right? There's some individual items that I'll purchase in here, you know, toilets, appliances.
17:42 Dave Meyer? Yeah, you get granular with some of it.
17:44 Henry Washington? Some of it gets a little granular, but for the most, I consider this high level because you can get a lot more detailed. And but behind the scenes, if I were to unhide some of these columns, you'll see like the detail behind it. How many square feet of flooring or paint, but I don't show that to them. I just roll it up. And show them. So when I'm building the spreadsheet, I'm doing it in detail. And then I'll roll it up to give to the bank.
18:10 Dave Meyer? Well, let me ask you this because you do far more flips than I can ever dream of, but aren't you doing this anyway? Like, aren't you creating this budget when you're underwriting the deal? So like, what additional work are you really doing here even to to talk to the lender?
18:28 Henry Washington? Yeah, you are doing this work or you should be doing this work. Where this gets annoying for the investor is if you're shopping lenders. What they will do is a lot of them have their own templates for this that they want you to fill out. And it becomes very tedious and annoying to have to keep converting your spreadsheet into whatever versions they have. So I just use my own and I send that to them and I tell them, if you have your own template, that's great. You can put this in your template, but I'm just gonna do this one time. And I do it, like I said, I do it at the detailed level, but then I can roll it up because I have to do it anyway. So I'm not really spending any extra time to build this for a particular lender.
19:11 Henry Washington? It's something I have to build anyway. I just give them a simplified version.
19:14 Dave Meyer? And like you've never, regardless of who you're talking to, what lenders you're talking to, fine. No one's pushing back on this.
19:22 Henry Washington? No one's ever pushed back and said, you must put this in our template. I have had people say, we want this in our template. And then I just say, you can absolutely put that in your own template.
19:32 Dave Meyer? Yeah, go for it.
19:35 Dave Meyer? Have fun. Do whatever you want.
19:37 Henry Washington? Have at it.
19:38 Dave Meyer? I get that it's annoying to do it, but like if you go to the level of detail Henry has done here, which doesn't seem onerous, right? Like it's not crazy. You're just going to give people a lot more confidence in you. So like, I don't see why you wouldn't. I, I don't see like quote unquote, say just writing interiors 50,000 or doing what Henry's talking about is a difference. What 30 minutes of work? Like, yeah, just do that and get the loan.
20:02 Henry Washington? Absolutely. Yes. It'll give lenders confidence. You're right. They're just going to do a gut check. And honestly, if I gave them this and they came back to me questioning the details of it, that's not a lender I'm going to use. Because that's telling me that the rest of this process is going to be equally as annoying.
20:18 Dave Meyer? The one thing I will say is if you're a newer investor, expect a higher degree of scrutiny and that's okay. Like that you have to put yourself in the lender's shoes. And if they're going to make you jump through a couple of extra hoops to say like, look, I've done my research. I've gotten multiple quotes. I have good people lined up. Just do it. Like, I know it's annoying, but it's like a couple of hours of work. You have to think about the scale of what you're asking for. Usually you're asking tens or hundreds of thousands of dollars for someone to lend you. It's not that big of a problem to do this because you should be doing it anyway for your underwriting.
20:54 Henry Washington? All right, Dave, we have another question coming in from Andrea in Houston. Andrea has a classic question about house hacking a duplex. She says, I purchased a duplex and I'm planning to live in one unit and rent the other one. I don't want the renters to know that I'm the owner, but I'm not sure how to do that. I have a Realtor who will list and show the property, but I'll be the property manager and sign the lease agreement. I'd appreciate any tips on minimizing issues.
21:21 Dave Meyer? When I first house hacked for several years, I did this exact thing. I said that I was the property manager and that I had a partner, which is true. And so like when they would ask me questions, I would say like, oh, I gotta go talk to my partner, which is true. But there were times when I just kind of like, you know, you want to distance yourself from it. And so this can be useful. I will just say like, looking back on it now, I probably wouldn't have done that. Like I guess I've just like gotten to a more mature place in my life where like, I just feel more comfortable having direct conversations with people about like what you're comfortable with and not comfortable with.
22:02 Dave Meyer? I was just young and I like, didn't want to have hard conversations and I was trying to avoid conflict. And it worked fine, but you don't need to do this. I just think you need, you can be the owner. It's okay to own the property. It's okay to say no when someone asks for something that's unreasonable. And I think honestly, it just builds trust. Like I, I kind of look back on that. I'm like, I wish I was honest about that. To, to, to, the, the truth was I was a part owner. So like that, that I could have just said that and have it been fine.
22:42 Dave Meyer? I just think realistically, like you're going to tie yourself in knots to like, create an illusion that doesn't need to exist.
22:51 Henry Washington? This is all based ethic in like some, like one bad story or myth or something that's made its way around like the investor sphere. Like it, I've never done this. I, they, anytime I've House hacked, they knew I was the owner and I didn't have problems and I didn't get excessive questions. No one bothered me like it was fine. It's not a big deal.
23:14 Dave Meyer? I would also think about the upsides of telling them you're an owner. Like if they know the owner of the house and not just some random property manager is sitting next door.
23:23 Henry Washington? Yeah.
23:23 Dave Meyer? They might take more care of the property.
23:26 Henry Washington? That's 100%.
23:27 Dave Meyer? Like maybe you could just focus on forming a strong relationship with your tenants and then they'll stay forever and they'll like living there. I think that part I did get right, even though I, you know, I wasn't fully honest about my ownership stake in these things.
23:41 Henry Washington? Yeah.
23:42 Dave Meyer? It's like when I house hacked, I just tried to get along well with people and before they moved in, I would sit down with them and explain what I've explained to every tenant I've ever had. I am a very reasonable person. I will pay for the things that need to be fixed. I'm not trying to nickel and dime you. I want you to have a good experience in this home. All of those things are true. And I would ask in return for them to be reasonable. Like if they are going to be late, if they have a problem, just tell me and we'll talk about it. And it was always fine. It was always fine. So I, I just think that that is the better long-term approach.
24:15 Henry Washington? Yep.
24:15 Dave Meyer? I just see people recommending this, I think out of fear instead of realizing that like the best thing to do is just have an honest and good relationship with your tenants.
24:24 Henry Washington? My initial thought process when I was becoming a landlord and I was going to house hack was that I just assumed if they knew I was the owner and I lived next door, that they'd probably take better care of the property and I was more concerned about that. But I do the same thing you did with tenants when I, when they moved in, I just sit down and have an honest, upfront, just open conversation because there's just such a stigma between tenants and landlords. It goes both ways a lot of the times and tenants just want a landlord who's going to take them seriously if they have a real problem. And landlords just want a tenant who's going to pay rent on time. And so I just sit down and have that conversation like, hey, my job, what I want to do is to
25:05 Henry Washington? provide you a safe, clean, comfortable place to live. If something's wrong, like I want to fix it. I don't want you to fix it. Like I want to do my job.
25:13 Dave Meyer? 100%.
25:14 Henry Washington? And so as long as you let me do my job, I want you to do your job, which is to pay rent on time. And if there's something that's stopping you, let's just talk about it. And that's, it's always set a good tone.
25:24 Dave Meyer? All right. We got one more question for you, but we got to take a quick break. We'll be right back.
25:33 Dave Meyer? Welcome back to the BiggerPockets Podcast. Henry and I are answering investor questions from the BiggerPockets forums. Our next question comes from Corey in St. Petersburg, Florida. Corey asks, "Should you work with wholesalers or avoid them altogether?" Pretty straight up question, right? Goes on to say, "On one hand, wholesalers seem like a great way to get off-market deals without having to build a full marketing machine. On the other hand, I've heard mixed opinions about deals being marked up too much, numbers not penciling out, or getting blasted on massive buyer's lists with the same property. For those of you who have experience, do you work with wholesalers? Do you prefer to source deals yourself? And if you do use them, how do you filter out the good ones
26:14 Dave Meyer? from people pushing bad deals?" Henry, I think this is, it's got your name all over this.
26:21 Henry Washington? My general answer to this question is, sure, you should work with wholesalers. I think where the question comes from is because there are a lot of bad wholesalers that kind of give the business a bad rap. And maybe it's disproportionate in wholesaling, but there's bad operators in every business and we still use other businesses.
26:42 Dave Meyer? Every business.
26:43 Henry Washington? There's bad realtors. You still hire a realtor. There's, you know, there's bad contractors. You still hire a contractor. So, and that's scary when you're new because it's hard to know what to evaluate or how to evaluate if a wholesaler is a good wholesaler. And I also think there's two parts to this question slash answer. If you bought a bad deal from a wholesaler, chances are that's your fault and not their fault.
27:10 Dave Meyer? Yep.
27:11 Henry Washington? Right? That means you didn't evaluate the deal properly. Maybe you took the wholesaler at their word on what they said the property ARV was, or maybe you took the wholesaler at their word on what they said the renovation was going to cost. When I look at a deal from a wholesaler, I pretend anything they say isn't there. I don't care how much they think the ARV is. I don't care how much they think the renovation is. I don't care how much they're asking for the property.
27:40 Dave Meyer? I agree.
27:41 Henry Washington? Has absolutely nothing to do with what I'm willing to pay for the property. The only thing that matters on a wholesaler's sheet when they send me a property is the address. So I can do my own due diligence and so that I can underwrite that property myself. I can determine what the renovation budget is myself and I can figure out what my offer price is. And even if my offer price is $50,000 or $100,000 less than their asking price, guess what? I make the offer anyway. So the first part that I think you're concerned about, which is probably buying a bad deal from a wholesaler. That's on you. You have to evaluate every deal on your own with your own research and come up with your own number.
28:26 Henry Washington? And then decide whether you want to buy that deal or not. Now, the second part about this is fear of working with wholesalers. Because you get yourself into some sort of legal trouble because things weren't done Right. The right way from a legal perspective. This is a different problem in my opinion. And this does happen sometimes. Wholesalers will market deals as if they have them under contract when really they are just available on the MLS. That's right. Wholesalers will daisy chain a deal, meaning they don't have the contract on the property. Somebody else has the contract on the property. They found that deal that's already under contract. Maybe they said, all right, this wholesaler's got it in a contract and is trying to sell it for $100,000.
29:11 Henry Washington? I'm going to pitch it to this guy for $105,000. And if I get this guy to say yes, then I'll go to the wholesaler who has it and say, hey, put me in this deal. I got you a buyer for 105. I just want to make my five. Like, that's the kind of stuff you need to watch out for. Right? That's the kind of stuff that takes a little more knowledge to be able to know what to look out for and what questions to ask. So I would always make sure you ask the question of the wholesaler, hey, are you in direct contract with the seller? Right? That's a very upfront question and they should be able to answer that. Yes. If that answer sounds funky or funny, or it sounds like there's some other
29:51 Henry Washington? Stuff going on, then you should probably just stay away. There's other deals that may be able to get done a lot cleaner than that. Two, I would ask them about their experience. How many deals have they done? Ask them where they closed those deals and then call that title company to verify that they've done transactions before. And ask that title company, did they go smooth? Did everything work out? Okay. Does this seem like somebody that I should be able to trust? Based on the deals that they've done in the past. So you can verify their experience through the title company that closed their previous deals. If they don't want to share any of their experience or the title company that's closed their deal, I'd probably stay away from it. I probably wouldn't do it.
30:26 Henry Washington? And then always, always, always ask to see the original contract between the wholesaler and the seller. Before you sign the assignment contract. Because an assignment contract is just an addendum to the original contract. The wholesaler has with the seller. And when you sign that addendum, you're agreeing to take the wholesaler's place in the original contract. And so if there are things in that original contract that you don't agree with, you can't perform on, or you don't like. You are already saying that you will do those things.
31:11 Henry Washington? So never sign an assignment contract without seeing the original contract. And now wholesalers may have an issue with this because typically that's going to let you know how much they make. To get around this, I just tell them, hey, you can redact the original purchase price and you can redact how much your assignment fee. I don't care about that. I need to see what everything else in the contract says. So that I can make sure that I can perform to this contract that I will now be legally obligated to perform on.
31:40 Dave Meyer? I mean, that's perfect. I have very few things to add to that. That was an incredibly good holistic answer. I will just say this, I think you should view wholesalers the same way you look at all of your deal flow. Like you wouldn't just take a listing that you saw on Zillow or sent to you by an agent or a pocket listing and be like, oh, that's the price I should pay. Because this person sent it to me, I'm going to buy it and I'm going to trust it. You would verify everything and just treat wholesalers the same way. The second thing I'll just say is this idea that it's marked up too much. I hear this a lot. I understand that it does not feel good to do that. But your job is not to figure out who's making what before you get your hands on it. It's to figure out. Am I willing to pay the price that we've agreed on? If it works at that price, what does it matter?
32:24 Dave Meyer? Who's going to the wholesaler and what's going to the seller? Like, it doesn't matter. I know it's like gets in your brain. I've had those thoughts too.
32:31 Henry Washington? Yeah.
32:31 Dave Meyer? But like, at the end of the day, if you're getting the deal at the price you need it to be at, don't care.
32:36 Henry Washington? Absolutely.
32:37 Dave Meyer? Good for you. You got it. That's, that's what you want. Don't like, don't be mad because they made some money too. Like, I, I think that's kinda the, the, the right way to think about it.
32:47 Henry Washington? The last deal I closed from a wholesaler, I made $50,000 on. And I found out as I closed that the wholesaler also made $50,000. And I'm not gonna lie to you, I was a little like, man, you made 50 grand and you didn't have to do anything? But would I do that exact same deal all over again? 100% I would.
33:06 Dave Meyer? I mean, you're just a little jealous. You're like, you did way less work than me. Same amount of money as me. Like, it's, it's annoying, but like, you still made money. So like, you gotta just kinda look at it from the big picture. All right, well, these were fun. Great questions for the BiggerPockets community. Again, if you have them, go check them out on BiggerPockets forums or answer some for yourself. If you can answer these questions, go help out another investor on the BiggerPockets community. That's what the whole thing is about. Henry, thanks as always, man. This was a lot of fun.
33:34 Henry Washington? Thanks, man. Good to be here.
33:36 Dave Meyer? And thank you all for watching this episode of the BiggerPockets Podcast. We'll see you next time.
Previous He Started with $5,000. Now He Owns 14 Rental Properties (And Quit His Job!) Next Homes Are Selling for Much Less Than You Think | July 2026 Housing Market Update Page updated October 29, 2026 · transcript and summary are machine-generated
