Which is better for a first deal: a wholesaler or a private lender?
What each one actually does
A wholesaler finds a property under market value and assigns you the contract for a fee. They focus on locating motivated sellers and getting the deal under contract. Their margins can be significant, so the price you pay is often higher than a direct purchase.
A private lender provides money for the purchase or repairs, usually secured by the property. Private loans can close faster than bank financing, but they often carry higher interest and fees.
Choosing based on your goal
If you already have leads and cash, a private lender may be the only piece you need. If you lack deals, a wholesaler can supply properties to evaluate. Be clear about which gap you are trying to fill before you sign anything.
Ask each party for references and proof of past closed deals. Check any assignment agreement carefully, since rules on assignment differ by state.
Watching the costs
Add the wholesaler's fee and the lender's interest and points into your total budget before comparing the deals. A low purchase price can look different once those costs are included.
Compare terms in writing and walk away from anyone who pressures you to decide quickly. Careful comparisons protect a first-time buyer.
Common mistakes
- Paying a wholesaler fee without checking the total budget
- Signing a private loan before reading the default terms
- Assuming every wholesale contract can be assigned freely
