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WHOLE-TAILING- NOT QUITE THE SAME AS WHOLESALING

Whole-Tailing- Not Quite The Same As Wholesaling

Whole-tailing is an investment strategy that is not as popular as some other concepts, but it is a very viable option for many wholesalers. But before launching into these deals, you need to understand the one key element that makes a whole-tail agreement different from a standard wholesale agreement.

In a whole-tailing deal, you are actually purchasing the property and closing escrow. But you then take the property that you now own and put it back on the market and sell it to the end-user. But you need to be aware that there are a few issues that can deter an end-user or the end user’s inspector that you need to eliminate prior to the resale. So it is essential that you carefully evaluate each property before deciding to whole-tail it.

What To Consider

  1. Comps – When you are deciding what to fix and what to leave as is, the comps in the area are going to play heavily in your choices. You never want to do too much to a property. If you can’t recover your investment at the time of the sale, that money is lost. Small projects that add a wow factor will help sell the property, and in most cases, you can recover the small investment for items like a new faucet and sink, a backsplash, or modern vanity in the bathroom. But never update past the point of recovering your investment.
  2. Details – No one wants to feel like they are living in someone else’s house. Take the time to remove growth charts marked on walls, or very personal details, features, or wallpaper. Also, invest either the time or the money to deep clean the place. Touch up paint damage, really clean the bathrooms, caulk dirty tubs or tile and replace damaged or missing doors.
  3. Noticeable Issues – If there are issues that will grab a buyer’s eye and could be a deal-breaker, consider having the items fixed. Doors or windows that are damaged, sagging flooring, or damaged floors can often be fixed relatively reasonably. And removing the issue will be far easier than convincing the buyer that it is not a serious or structural problem. When a buyer sees an issue, it always makes him or her wonder about more significant hidden issues. So take away that one small thing that will drive more questions about more substantial, more expensive problems, concerns, and headaches for you.
  4. Structure – You know that the property is going to be inspected. So, if there are structural issues, it is cheaper for you to address them and know the cost rather than wait and give the buyer a price break. And hopefully, you were able to determine these issues before you purchased the property, and you accounted for the repairs in your budget.
  5. Exterior or Other Major Issues – Curb appeal is critical. You only get one shot at making a first impression. So go ahead and invest in painting a deck, sprucing up the landscape, or replacing damaged screens. Any other major issues should have been seen and accounted for in your pre-purchase inspection and should be well within your repair/reno budget.

Clearly, whole-tailing is very much like a speedy flip. But it is a great way to get through a fast project and bury your fees and profit in the new price of the property so that the buyer does not try to get a massive price reduction.

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Meet the Author

Pranav Prasannan

Pranav Prasannan

Digital Marketing Manager at Batchservice.
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