I have enjoyed reading the various posts on here, and now I am looking for a little advice.
I am just getting in to wholesaling. I have a relationship with a very large investor in my area who averages 10-15 incoming calls a week for people wanting to sell properties that he is not interested in (either city properties or ones that don’t meet his income goal). Up until recently, he was simply ignoring these deals! Starting now, he will be giving those leads to me to work and assign and we will be splitting all assignment fees.
I have a small network of buyers set up (25-30) that I am in the process of dialing in their deal requirements.
I got up and running this week, and I am cherry picking the best deals to get things started. I actually signed two contracts this week…one of which is a no brainer and the other of which has me confused a little, so some advice is appreciated.
Deal #1 City property, ARV value 50-55k house is currently rented section 8 for $650/month, maximum of 5k to overhaul (not too much since it just passed a section 8 inspection) I signed the contract this week for 15k! One of my investor clients went with me to tour the home, and he is writing me a $5,000 assignment check next week. WOW! That seemed easy!
Deal #2 Also a city property, 2-unit with ARV 60-65k, property is in disrepair and will need about 15k in rehab…seller is motivated since the city is trying to cite her for the property’s condition. She is willing to sell for $6000 in back taxes…WOW! Another slam dunk!..Not so fast…I get there to sign the contract and she mentions 'Oh, I took a $44,000 mortgage on the house in 1999, but haven’t made a payment on it in over 5 years…I actually did a BK a few years back and I thought I didn’t own the house anymore until they contacted me about it’s condition recently" She proceeds to show me the mortgage documents she has (which are 5 years old).
Now, I (being new) don’t know what to do…So I signed a contract for her to sell me the house for $6,000 free and clear of all encumbrances. How do I now handle this property? Run Away? Is it my responsibility to find out what is up with the mortgage? Do I put it out their to my potential investors and let them dig into it? Do I put it out on assignment with a refundable assignment fee if there is an existing mortgage?
On your second deal, you would want to take it to a title company and have a title search done to find all the liens. It may cost $100-$150 but it would be worth it either way you go.
If the title search shows that there is a mortgage, initiate a short sale. Be sure to take plenty of ugly pictures, & throw in the city citations as well!
Also, the title search will show if the back taxes are attached to the title with a lien. If there is one, that could be further leverage on the bank since the loan they made in first position has been “bumped.”
Thanks for the replies, but my basic question remains…as a wholesaler (new or seasoned) does the responsibility fall on me to clear up the title issues, initiate a short sale, etc. or would it make more sense to allow a potential end investor deal with this?
I guess I am trying to get off cheap here since I am new and don’t have a tremendous amount of capital to work with, but if I get the gist of what is being said, I get the feeling that even if the assignment fee is refundable, an investor would probably not be willing to get involved in this deal unless I have all the legwork done, correct?
Typically, assignment fees are paid from the closing proceeds.
Think about it this way: If you were buying a property from a wholesaler, you’d want to make sure you have a clean title, you don’t have a deal, and the wholesaler didn’t deliver his product.
If you want to get into the wholesaling biz, Steve Cook’s course is great. He’ll tell you to stay in control if you want to get paid.
Thank you. I found a property with an ARV of at least $100,000. Other properties sold in the area between 100k and 130k. Say the properties ARV=$130,000 and need about 40k of work, interior and exterior. It has potential. The seller is asking 70k, I may get him down to 67k. What should I do?
I was thinking ARV=$130,000-32,500(.25)-40,000 for repairs=57,500. Is this the figure I should be asking? Then charge the buyer $64,000. The difference would be 5% of the ARV=$130,000 which is $6500. Or just take $3,000 for myself and swing a deal with the seller for $60,500 and find a buyer for $64,000. Is all this correct, or how should I swing this?
Would you happen to share some steps to take from looking for a property, what to look for, finding investors then what to do when I find an investor/buyer?
I don’t wholesale…I usually buy, rehab, and rent…though, I did flip the last property and will probably flip the one that we made the offer on last night.
When we look for a property we have certain parameters that are preset - must be in the parish where we live, must be in one of the better neighborhoods in town, must be at least 3 bedroom (if we got a great price on a 2 bedroom, we might consider it – we have one), must be significantly under market price (conventional wisdom here says 30% below ARV minus any fix-ups but we can be a little thinner because of our lower overhead)…the one we offered on will have an ARV of about $82K and needs about $7K of fix-up (kitchen cabinets, paint, fix holes, fix some windows, a couple interior doors, new roof., yard work, some sweat labor, etc.). It’s listed for $62,500 (reduced from $72K) and we offered $55K. It’s got good bones and the hardwood floors (carpet covered) look pretty good so far…We will probably pull the carpet, refinish the floors (hardwood floors are hot right now…)
We buy cash and can close tomorrow (we can actually close after work today if necessary - lol), we just need the bottom line number and time to go to the bank for a check. Because we buy for cash, our holding costs are reduced to taxes, insurance, utilities, and loss of use on the cash. We do most of the work ourselves – we like it and it keeps us off the streets …
If I were wholesaling, I would build a list of rehabbers that are looking for bargains (guys like me) to rehab or to fix and hold…
I think I found a good deal but Id like to keep myself. It has flipp potential I think.
ARV$115,000-$34,500(30%)-$15,000(repairs)=$65,500
The seller wanted 70k but I got him down to $65,000. Is this a good price to pay or should I go lower. But I think the numbers with $65,000 offered be me may work. Id like your opinion.