Wholetailing is a new real estate investing model that’s found its footing in between traditional house flipping and wholesaling.
It’s a tactic that every real estate investor should understand and, ideally, add to their deal-closing toolkit.
So in this guide, we’ll discuss what wholetailing is and how it’s different than wholesaling and house flipping. We’ll walk you through a real-life example of a wholetail deal Ryan Dossey did, profiting $79,000. We’ll explain how investors can find more wholetail deals with targeted marketing. And then we’ll offer 4 practical tips for wholetailing real estate.
What is Wholetailing?
Wholetailing is a hybrid form of real estate investing, part house flipping, and part wholesaling. The word itself is a combination of “wholesale” and “retail.” In a wholetail deal, the investor purchases a property, makes either very few updates and repairs or none at all, and then sells it on the MLS to a traditional housebuyer for a profit.
The benefit of wholetailing real estate is that you stand to make a large profit like you would when wholesaling a home, but with only a fraction of the work and cost.
However, there’s a bit more risk involved — as with traditional house flipping deals — since the investor has to close on the home rather than just putting it under contract such as in a wholesale transaction.
Wholetailing is ideal when A) you’ve found a property that needs very few repairs and updates in order to be market-worthy, B) you’ve secured it for a profitable price (remember the 75% rule!), and C) you have the capital available to purchase the home.
Wholetailing, Wholesaling, and House Flipping (Oh My!)
If you’re new to real estate investing, then juggling the terms can get a little confusing.
So we wanted to take a moment to clarify what investors mean when they say wholesaling, wholetailing, flipping, and buy-and-hold.
Wholetailing — When the investor purchases a property, puts very little time or money into it (just enough to make it marketable), and flips it on the MLS for a profit.
Wholesaling — When the investor puts a property under contract and flips that contract to a cash buyer, charging an assignment fee for finding the deal.
House Flipping — When the investor purchases a property, makes major repairs and updates, and then sells on the MLS for a profit.
Buy-And-Hold — When the investor purchases a property with the intent of holding it, filling it with tenants, and creating consistent cashflow.
To learn more about when you should use each of these different models in your investing business (we recommend using all of them at different times), check out our guide over here.
Real-Life Wholetailing Case Study Examples
We’ve explained what wholetailing looks like hypothetically.
But what does it look like in real life? Check out the video below to learn about how Ryan Dossey wholetailed a home for a net profit of $79,000. Or you can read the summary I’ve placed under the video.
As many of Ryan lead’s do, this one came through organic SEO, meaning that the prospect searched in Google for someone who could help them sell their home fast for cash, found Ryan’s website, and provided their contact information.
They set up an appointment with the sellers and asked them why they were selling. The sellers — a husband and wife — explained that they were pregnant with twins and their current home didn’t have enough space to accommodate the upcoming kiddos. In fact, they’d recently found another home they loved and committed to buying it but couldn’t get a mortgage from the bank until their current mortgage was paid off.
This deal was a little difficult, though, because the home was situated in a rural area with very few nearby properties for estimating comps. Comps varied greatly and seemed to fall between $150,000 and $270,000. Ryan decided to be conservative and offer the sellers $155,000. To his surprise, they accepted his offer without hesitation.
Ryan planned to wholesale the property and even found a buyer who’d end up securing them a ,000 assignment fee. But Ryan got the feeling that this property might be more profitable as a wholetail deal.
So he reached out to a local realtor and asked for them to provide a BPO (Broker’s Price Opinion). The agent advised them that they should list the home at $249,000.
They did. And it sold within 24 hours.
Their net profit — after all costs — was $79,000… which was $43,000 more than if they had wholesaled the property as planned.
Here’s another example of a wholetail deal from April Crossley.
How To Find More Wholetail Deals
By this point, you might be wondering how you can find more wholetail deals.
The answer is pretty simple: continue marketing and generating leads as you have been, but keep wholetailing in your back pocket. Wholetailing is often more profitable than wholesaling, but it’s not quite as simple.
Remember the three criteria we mentioned above…
A) You’ve found a property that needs very few repairs and updates in order to be market-worthy.
B) You’ve secured it for a profitable price (remember the 75% rule!).
C) You have the capital available to purchase the home.
If you want to do more wholetail deals, then you’ll want to have an avenue for securing private money, you’ll want to be extra careful with your ARV and repair/update cost math, and you’ll want to be prepared to get help from local realtors.
In the end, wholetail deals aren’t very different to find than wholesale deals or house flips… you just need to be prepared to wholetail when the opportunity presents itself.
4 Tips For Doing Wholetail Real Estate Deals
Finally, here are 4 practical tips for doing wholetail real estate deals.
1. Keep Generating Leads & Finding Deals
As you search for wholetail deals, you’ll want to keep generating leads and finding deals in a way that works for you.
You’ll want to streamline this part of the process as much as possible.
Create internal systems that make it easy for you and your team to collaborate, hire people when needed, and make sure you’re using software that makes your life easier, not harder.
Here are a few resources we’ve created that will help you consistently generate leads and secure deals for your business…
- How To Find & Secure Private Money For Your Real Estate Deals
- 5 Tips For Finding & Buying Bank Owned Properties (REOs)
- 3 Tips For Following Up With Wishy-Washy Leads
- 3 Simple Steps To Improve Your Website’s Local SEO Rankings
2. Understand The Wholetailing Criteria
How do you know when you’ve got a good wholetail opportunity?
After all, you might not want to wholetail every deal. We recommend wholesaling when you’re looking for a fast and easy assignment cash-in, holding when you’re trying to build long-term wealth, and wholetailing when you’ve found a property that will sell easily on the MLS.
Ryan Dossey’s motto is to “Keep the best and wholesale the rest.” You can come up with your own standards for what properties get wholesaled, wholetailed, held, and flipped.
And remember: there’s no reason that your company can’t engage in multiple different types of investment models. You can do all of the above when it makes sense for your business.
In fact, to build a well-balanced business that survives different types of market, it’s a good idea to be practiced at all different real estate investment strategies — that’ll give your business more longevity.
3. Always Pay For a Retail Inspection
In the case study that we walked through above, we didn’t mention this, but Ryan Dossey actually forgot to do an inspection before purchasing the property.
But he learned his lesson and never made the same mistake again.
After the buyers paid for an inspection on the property, Ryan was surprised (and terrified) when the inspector came back claiming that the property was structurally unsound and needed to be examined by a structural engineer. Concerned that he’d made a big mistake, Ryan paid for a structural engineer to check out the property.
Fortunately, the structural engineer found no problems with the home and the sale moved forward as planned.
But there’s an important lesson here: in wholetailing, you’re putting your own money on the line… so always pay for a retail inspection before you buy — it’s better to discover problems sooner now rather than after you’ve purchased the home.
4. Make it Livable & Marketable
As you might expect, one of the most common mistakes that investors make when wholetailing real estate — as with flipping homes — is they spend more money than needed on updates and repairs.
Remember: when you’re wholetailing, your goal is to clean, repair, and update the home so that you can list it on the MLS and attract modern buyers… but it does not need to be pristine.
A lot of what you’ll do when wholetailing is cosmetic. You might put on some fresh paint, pay to get the home cleaned out, or do some minor landscaping. It’s also possible that you’ll update some appliances and repair a few HVAC systems. But you shouldn’t be dishing out tens of thousands of dollars to fix the home like you would on a flip.
In the end, you just want the property to be livable and marketable. That is, you want it to be safe for the buyers and you want it to be appealing to people in that target market — but it doesn’t need to be the best home in the area.
Also, keep in mind that the longer you take to make fixes to the property you’re wholetailing, the more risk you’re taking on your shoulders as sudden market fluctuations can cut into your expected profit. Wholetail deals should be fast and profitable, with as little time spent holding the property as possible.
Wholetailing is a new investment model that promises bigger returns than wholesaling with slightly more risk and significantly more upfront capital.
Most investors won’t be able to wholetail every property, but it’s a great investment strategy to add to your toolbox nonetheless. Sometimes you’ll make more money wholetailing than you would wholesaling… and you’ll spend less than you would doing a full rehab.
So keep it in your back pocket. And pull it out when it makes sense.