HELP!! What are we missing?

Bird Dogs, Wholesaling
1

Hello everyone! We are new to posting but not new to REIClub.com. We have been on this site off and on for well over a year.

We have finally decided to start posting and using the forms after farming through a great deal of the material on the site.

Let me start by give everyone reading a little information on ourselve’s (myself and my partner).

I’m a Civil Engineer and have been in the field for over 5 years (I’ve seen a great deal of real estate come from a whole in the ground to a large income producing property). These experiences are what spurred my desire to start investing rather than just working for the developers and investors.

My partner is a sale’s professional and has been for over 8 years. He sales homes, albeit the one’s that come on wheels, nonetheless, he had made a good living until a few years ago.

We aren’t exactly ‘green’ to investing either. Yet, we have been trying to get started investing using little or no money and this is where some questions have arisen.

Yes, we have put two properties under contract. One fell through because of our on mistakes that we are well aware of (no questions there). The second property was an option-to-purchase property that we exercised the option on but didn’t get the Gen. War. Deed signed upfront. When we went to have this signed the sales agreement was due to expire and the seller tied up the property with lawyers (we have a great RE Attorney) and we decided (with our attorney’s advice) it would have cost us more money than we could have profited on the property to go after the seller in court, so we let it go to the tune of about $3K of upgrades.

The question we have is this.

What are we missing? Now, we are essentially trying to wholesale a property or two upfront so that we aren’t out of pocket any more money. The second house cost us some money out of our pocket and made us a bit skittish to put any money into the next couple of properties.

What are you all’s experiences and suggestions on wholesaling/bird dogging.

We understand ARV’s, rehab cost, methods of buying, etc.

We want to know if you all can think of the best ways to get deals done, how to flip them fast, best way to find these type of deals, etc. Any advice is welcomed!

We are building a buyer’s list. We are affiliated with the closest metropolitan REI club and we stay on their email list. We also have about 5 Cash buyers we are in contact with (some in the market we are buying and some 30-50 miles down the road).

PLEASE, help us and give us any advice you think would help some guys that have some usable knowledge, university & school of hard knock education, as well as, the essentials to get this going.

Thanks and we look forward to many more post.

The Guys @
Two Pillars Properties

2

What happened with that second property that you lease optioned? I’ve done hundreds without an issue like you describe. I have to think some good paperwork and a bit of know how would have prevented this from happening in the first place. Where did your agreements come from?

3

On the second property; we signed all the documents except the Gen. War. Deed and the Sales and Purchase Agreement because we didn’t have a notary the day we negotiated the final terms. We said we would wait until the end of the 90 day option period to complete these two things because we knew there was a potential to find a buyer in that window and simply assign the option to them.

As the day approached for the option to expire we presented the Purchase and Sales Agreement that stated we would take over the property sub2, as well as the G.W.D.; mind you we had already signed and given them a copy of the letter to exercise the O-2-P.

The seller was very uneducated and wanted to take to a lawyer, which we were happy to comply with because all had gone well up to this point. However, after they saw the work we had done (which would have cost them about $15,000 to hire someone to do) they refused to move forward. We tried to go about this a number of different ways, we were very open minded, yet frustrated.

The property was located in a very rural community and their lawyer had our lawyer believe that the chancery would not make the seller perform on the contract (which is the same ruling he has given any many other similar situations) and would suggest for us to work the deal outside court. This is true even though they had signed a contract stating that they were liable for performance on the contract.

Our lawyer was located about 3 hours from this district and as we begin to look at the numbers it soon looked like the deal would leave us chasing our tails so we stepped away. We had potential for about $12K-$18K profit but the lawyer fees were already at $1K and this was at a discounted rate and only for phone calls and emails between lawyers. These fees coupled with a potential 6-9 month holding period we decided that we would lose less money by walking away. Our lawyer said we had a case but he didn’t feel that it was something we would want to do because it would probably have to go to the state level to get a ruling and wasn’t for sure that we would make any money going through mediation.

Any advice on what we could do or could have done?

As importantly what’s you all’s thoughts on moving forward!

4

lesson #1:

don’t do work on property you don’t own.

5

Ok. I think there was a lack of communication between you and the seller. As long as the seller is educated from you about your options, then will not doubt and run to the lawyer. But if they do run to a lawyer, make sure it’s a lawyer you recommend. It makes you look more like the good guy. Sub 2 deals are a little more entailed than regular option to purchase deals, as far as the paperwork is concerned.

Yes, I wouldn’t do any upgrades, until after you get possession or you have equitable interest of the property. Now there are ways you can handle this type of problem in the future. I would lease option a home for at least 3 years from the original seller. I also think it had something to do with the paperwork, too. There’s a right and a wrong way to do a sub2 or a lease option deal. :slight_smile:

Sometimes, all you need is 5 good cash buyers - Obviously the more the better, but as long as those buyers can perform, you’re good. Bandit signs will work, too.