At this point, I really don’t have the chance to go through the licensing process. As such, I need to only do wholesaling where I won’t get in legal trouble for it. And yes, I know that in theory you can do license-less wholesaling anywhere, but some states (Ohio and Illinois come to mind) are notoriously fussy about it. Going to court is a massive pain in the arse, and I don’t want to chance it. What areas should I focus on (for virtual wholesaling)?
Hi,
If aspiring wholesalers would work steadily to grow a business you would find that assigning 95% of your properties is not a bad deal at all, even though assigning will only make 7% of your contracts value if you do 300, 400 or 500 homes a year your making some big money!
And provided your name does not come up on a HUD1 you stay off the radar with the powers that be, you don’t have to worry about a license as an assignment does not require a license because you never close on it to own it!
Let’s say each house you wholesale is worth $5k per home, 300 homes is $1.5m per year!
GR
You didn’t answer my question.
What areas to focus on for virtual wholesaling is the question of the century. It’s probably something you will have to figure out by trial and error. I would have suggested big cities, but I have done very well in the smaller towns near my city. I wud say stay away from Detroit and Dayton but I’ve heard of wholesalers doing great in those cities.
I like Gold River’s analogy of doing 300 deals a year. I will set that as a personal goal.
But even doing 50 deals a year you will need some systems in place, it’s going to take some organization and definitely need some help as in employees working on commissions.
I suggest going into different cities and recruiting bird dogs, managers, maybe realtors.
I’m reading a book called “The Magic of Thinking Big” I have been doing very well being small time, but who doesn’t want to do better?
Let’s make some money…
Rando
Well, you’ve mentioned two states that don’t like unlicensed wholsalers. Stay out of those states. Otherwise, there are no “best” areas to wholesale without a license, other than those areas with deals.
Forget licensing…
The way to operate anywhere without a license, is first to keep your name off the title, and use assignable option agreements …and assign them, in return for an assignment fee, or use whatever “name” for the fee that conforms with local laws.
Meantime, you’re still a principal in the transaction, but you are not taking title to the deal. Two important things when anonymously flipping houses without a license.
You need nothing else.
Read up on options. They are very powerful, and are used by professional investors and agents all the time.
Again options allow investors to:
- Flip deals without taking title
- Exclusively control the deal for a period of time, without ownership
- Secure an equity interest in a deal
- Act as a principal in the transaction, and not as an agent.
Learn the option requirements of the states you want to wholesale in, stay out of Ohio and Illinois, and call it a day.
Hi,
Yes, I did answer your question! Anywhere USA!!!
GR
Hi, I noticed my area was mentioned as one of the states that requires a licences to wholesale. That concerns me as a newbie. If I understand right, It wont matter that I’m not licensed under the OPTIONS allowed for investors, and using the assignable option agreement keeping my name off title. So, is it OK wholesaling in my Ohio area as long as I don’t use that term?
I downloaded this interesting article below. If I was in Ohio that wouldn’t stop me from wholesaling, as long as I have a contract to purchase the property, I have equitable interest. I do not represent the seller or the buyer as a broker.
You Ohio wholesalers main problem is those idiot Realtors. I’ve had several tell me even here in California that what I’m doing is illegal, and I’ve lost profitable deals because these Aholes told the seller that I’m not licensed and operating illegally.
Just last week I had a Realtor that seen one of my bandit signs and called and say she had a 2/1 for sale for 160K I asked if it included farm land, she said no, just a lot. I told her I wud never 160K for a 2 bedroom house. I told her about the burnt house I just purchased for 18K and told her I don’t pay more than 40K for 2 bedroom houses. She asked how I find my deals and I told her I do marketing, direct mail. She tells me, it sounds like your doing the work of a Realtor, why don’t you just get your license. I replied in my smart alek voice while wearing my sht eating grin, cuz realtors work for chump change and I make more money than realtors, She then says, “I bet you do” She quickly hung up.
I told one investor that I hadn’t had any good experiences working with realtors, without hesitation he says, and you never will. If you wanted to torture me in the worst possible way, lock me in a room with a bunch or self righteous know it all realtors for 30 minutes.
Anyways, check out this article.
The following court case clearly delineates the difference between acting on your own behalf and acting as a broker.
In Xarin Real Estate v. Gamboa, 715 S.W. 80 (TX 1986), an investor named Xarin entered into a purchase contract with the owner, Gamboa, then assigned his purchase contract to a third party, Baker. When the deal blew up, Baker sued Xarin claiming, among other things, that Xarin was illegally acting as a real estate broker without a license.
The court ruled that, “No evidence exists to show that Xarin was acting for anyone but itself when it sold its interest to Baker. Xarin was shown on the sales contract to be only the purchaser and was not shown in any agency capacity… There is also no evidence that Xarin acted for Baker when Xarin acquired its interest in the property from the Gamboa’s. Generally, to establish that one person has acted for another in an normal agency relationship, there must be an agreement between two persons and one must exercise some control over the other.”
Two important points are worth noting here. First, the court acknowledged that Xarin had “an interest in the property” when it signed a purchase contract with Gamboa. Having “an interest” in real estate allows you to sell your interest, which is specifically exempt from almost EVERY state’s licensing laws.
Second, the court made an important point that that the Xarin did not have a deal with Baker in place when it made the deal with the owner of the property. This is important because the reverse can also be true; if you make a deal with a buyer first, then find him a property, a good argument can be made that activity is brokering on behalf of the buyer. Investors who wholesale properties are not doing it this way, they are tying up a property with a purchase contract with no definition exit plan. That means the investor is at risk, and thus a principal, not a broker.
While the case is in TX, not Ohio, the actual language of TX’s licensing statute is almost identical to OH, and I don’t see why an OH court would rule otherwise.
I am curious to see who actually get slapped for this and has the guts to challenge the Division in Court, because I predict the Division will lose in court.
William Bronchick, ESQ.