Hello all im fairly new to the forum but i’ve read a few post as to creating a name on here…anyway im going to be starting my real estate adventure monday…i’ve made up my mind to start out wholesaling because it fits my investing style right now…(i have bad credit, no saved cash :anon ) i’ve been doing a little research in my market as to building a buyers list(i have 3 cash buyers) and i want to start out with foreclosures and bank owned properties,but i believe i need a proof of funds letter to even submit a offer?? what is the process in making a offer and getting it excepted and what type of contingency’s should i put in place so that i have enough time to let my buyer know about it?? and should i let my buyers know that i deal with bank owned so i’ll need there immediate attention?? thanks in advance :beer
Congrats on your decision to get started in your new career. I replied to a similar post about getting started just a few minutes ago. I think you are wise to pursue wholesaling as your strategy to begin. But don’t overlook lease options, either. They are low risk, require minimal cash out of pocket, and are a heck of a lot easier to get the homeowner to agree to in my experience. Good luck.
If you have no money you won’t be making any offers on bank owned properties/foreclosures. You’ll need to float an earnest money check of probably $1-2K. You can get a proof of funds letter from any number of transactional funding companies. Just google it. Also keep in mind REO contracts are not assignable so you’ll either have to double-close, buy it in an LLC and sell it at closing, or buy it in a trust and assign the interest. If you aren’t familiar with this terminology then learn it before you start making offer.
As far as how to do it, making offers on bank owned properties is easy, just get a realtor to do it all. They handle everything and tell you what you need to do. You don’t have to pay them a cent.
If your buyers are indeed cash buyers then you won’t need to tell them there’s a sense of urgency.
Congrats on getting started!! This business is awesome if you know what your doing.
I would recommend that you steer away, far away from bank owned right now for these reasons:
- Takes waaaaay to long.
- To much competition
- The need for earnest money & transactional funding(possibly)
- Banks are tighten their spreads.
- A Need for an agent to make offers for you
- Finding a good escrow officer that knows the biz
- The bank addendum’s are like reading a book
So what’s the alternative? Motivated Sellers…Here’s the benefits:
- All deals are off market, you’re the only one that knows about them.
- I never put earnest money down.
- No need for transactional funding.
- Very little competition.
- Deeper spreads, more money
- Less hoops to jump through.
- Chances of being regulated…slim to none
- Turn a deal in 2 weeks
Is that enough?
So how do you find these motivated sellers:
- Bandit Signs in strategic locations in your city.
- Direct mail, preferably the Yellow Letter to these lists
a. Absentee Investors
- Internet marketing.
There is an endless supply of motivated sellers.
What ever direction you wish to go, good luck and remember…
Never, Never Quit, Just Adapt and Overcome!
Thanx for the input guys i really appreciate it… basically right now im focusing on just motivated sellers to wholesale the deal…i was also interested if i come across it doing a lease option or subject to deal for the benefit for me and my family cause my credit is shot :anon i think it would be sweet if my first sub to or lease option was for myself i’ve been researching it and it seems fairly easily i just really need to understand the paper work involved in it :deal … how realistic is it for me to find something that suits my needs right now??? I set a goal to have either a sub to/lease option deal or a wholesale locked up preparing to close before the month is over… :biggrin
P.S. >> I’ve been going craigslist crazy posting ad’s and chatting with sellers and even buyers that post they buy houses cause im doing the same, they all say lets do lunch and even partner up on a deal one day…This maybe a stupid question but what do they mean partner up??what do i have to offer right now??(no cash or credit) :shocked
It would be suicide to try and tackle REO’s with just three buyers. You better have a solid much bigger list before even considering it. Work with For Sale By Owners. At you can control the terms of the contract and you can put down very little earnest money. When you have a few deals under your belt, then you can move up to REO’s
Thanx xpandergt :beer i see exactly what your saying… whats your thoughts on the other question i had??
I am new to the game as well but figured I would throw in my 2 cents on the partnering up situation. Since there are a few competitors out there, it is always good to actually sit down with them and see what they have to offer you. You may not have any credit or cash to offer them right now, but you may drum up leads that they will want and vice versa. At that point you are almost getting into equity marketing and exchanges. These can be fairly beneficial after you lock up some properties. For right now though, I would say go ahead and meet with these other investors and just feel for what they are looking for in a deal. These guys have the versatility to become a buyer or seller for you. I would shy away from “partnering” on a deal, in terms of I’ll find the deal and you work through it and we can split the profit. Very few investors will look at this as a good opportunity and may end up structing the partnership in a way that they benefit the most since they are taking all the risk. Honestly, partnerships are the most difficult things to manage when starting up an investment career. I have tried a handful of partnerships only to have someone get pissy with the arrangement and crush the deal. You are better off using these investors as buyers/sellers and they will look at you the same. Just find what kind of deals they are looking for, and if you get the opportunity to birddog for them they will toss you an agreed upon finders fee. Just make your presentation straight up with them. You don’t have to divulge how you are drumming up leads or who you have for buyers, but exchange info most definitely.
Great Information! I’m working to get a R.E. biz started with little money and credit.
Hi AJ290… You mentioned lease options are a lot easier to get the homeowner to say yes to. Most homeowners that I’ve spoken to what to sell now and want cash now. How do you get the homeowner to agree to a lease option?
Hi Sean Terry… When you mentioned turn the deal in two weeks, I suppose you are referring to L/O, Sub2 and wholesale deals. How do you get sellers to agree to a sub2 deal? Most that I’ve contacted don’t want to give you the deed?
Thanks for all your input and help!!
I know you didn’t ask me, but just thought I’d help…
You aren’t gonna get anyone to agree to a deal that they don’t want. Either they’re a motivated seller or they’re not.
A truly motivated seller will more or less go along with any solution that you provide them, assuming they like & trust you and the solution makes sense to them. These will represent a minority of the sellers you come across.
On the other hand, you won’t get a non-motivated seller to agree to anything whatsoever, unless you pay all cash and retail price. This will represent the overwhelming majority of the sellers you come across.
The key is being able to tell the difference. Here’s my test: if they are willing to give me free equity (assuming there is equity) then I’ll try to work with them. If they won’t, I immediately move on to the next one.
Look at you go :beer you get kudos for wanting to start from the bottom. First thing first, don’t worry about the proof of funds letter, if you really need one it won’t be hard to find a mortgage broker that will supply one. simply get you some marketing out, I see that you are to have your buyers on deck and that’s good. If you have no money for bandit signs, find something. Get creative!
I’ve often seen people in your situation make it despite their current situation. Just don’t give out push until you get a deal. It’d be a lot easier after you get that money in your pocket. :beer
Congratulations on deciding to start. In my opinion with your situation, you should concentrate on straight wholesaling to start. It is best suited for where you are right now. Start your marketing asap.
I agree with NSU, you need to know the difference between motivated and non-motivated sellers.
If I send out 1000 marketing pieces, I can expect at minimum a 1% return, thats 100 sellers, I already assume that 90 of those are not motivated and want retail. 10 should be motivated for different reasons, 1 deal will be made out of that (5k+). Those are very bare numbers.
If you set yourself up to expect that type of return you will be fine, anything more is gravy.
I would stay away from foreclosures (unless you are talking about preforeclosures) for right now.
Build up some cash, pay some bills, get confidence, meet buyers and branch out.
Right now im using mostly Craigslist for buyers and sellers i’ve come across 2 sellers this week and had to pass on them because they had no room 2 nego a lower price they basically wanted retail for there mediocore houses :bs … im going to keep posting ad’s im doing 3 ads a day right now… im also driving different routes to places i need to go to fing FSBO’s i’ve collected a few and i will come them all tomorrow to see what the situation is on them…
Alrite!!! just got off the phone with a woman that just recieved a home after her dad’s death its was his and he owned it since 1989 and its a free and clear. last years taxes are owed with a ARV of around $88k most homes on the block have been sold for $85-97k and she’s chucking the equity over to me I told her i could do 20k cash she accepted she said i have enough problems with my own home to deal with another. plus she wants it gone because she cant take the pain of her dad kinda sad… so we set up a showing tomorrow so i can check things out abit and see what shape its really in. to. she assured me it was in good she shape but you can never be to sure…i cant wait to put that baby under contract how much should i try to make off of it??? and should i let her know that i will be selling my interest to somebody else??
If you are starting out in wholesaling, invest in a good course or find a good local mentor to guide you along the way. That should be objective number one
sooooooo i check the home out and like she said it wasnt in bad shape at all its in a nice suburban area i could use some new windows though(the wood kind) and it looks like the paint color and design hasnt been changed since the 90’s :smile so i went over the purchase contract with her we signed and i told her that i buy alot of properties and sometimes when one project isnt done in time to free up the money i pass things over to my other investor friends(picked that up on a youtube video) and i asked her would that be alright if i did so and she said fine i just want out… so we signed for $22,000 with a 14 day inspection clause i took a ton of pictures with my sis-inlaws camera and i decided im going to sell it for $35,000 because it has small repairs that need to be done and its ARV is around $88,000 lets go!!! :dance2
Good job! Did you get it under contract yet? Sounds like a very good deal. Tip: in the future never name the price first. Instead ask them, “If I pay you all cash and close quickly what would be the least you would accept?” Then ask, “Is that the best you can do?” You’d be surprised how low a motivated seller would sell for.
You should make as much as your market will bear. Heck, at $88k ARV you could mark it up to $44 and still be selling at 50 cents on the dollar which should move it quickly (assuming it doesn’t need a huge amount of repairs). You’d make $24k and never touch the house.
No real need to tell her you’d be selling your interest. No reason to hide it either. Fact is she shouldn’t care where the money is coming from, as long as she gets it.
Ditto on what Sean stated… If you are developing a list of serious buyers that can buy at the drop of a dime short sales are NOT the way to go. They take entirely way too long and you don’t want to wait forever to make some serious CA$H. The typical short sales can take months to be approved, you have no clue how many deals I had fall in the toilet because the bank wanted to take forever to respond. Even after waiting an eternity for the bank to come back with a reply 7 out of 10 times it will be a no.
I see your serious getting started in real estate, so you may not want to waste your time playing with banks. You need to find these properties before they are even up for foreclosure. There are countless of people under financial burdens and are willing to sell their home for way less then is owed. You need to promote yourself online and offline. In the newspaper, phonebook, bandit signs, word of mouth etc.
Short Sales is not the way too go.
Sounds like you have the makings of a good deal. Go to the home and do a thorough inspection. If 20k is what she is willing to take… unless the house is a shell inside you should get it under contract.
I would caution you…Do not fall in love with the prospect of your first deal. Keep focused and run your numbers. Closing costs, holding costs, repairs, your profit, mktg for end-buyer…just make sure the numbers will support this deal. Get good comps, and start marketing right away, to gauge interest in that neighborhood. Even if the numbers look good if nobody wants to buy there you are spinning your wheels.
As far as how much to make, I would say to consider the investor…if you want them to be a repeat buyer make them love doing deals with you. You don’t have to make a killing but don’t short yourself…5k is usually a good barometer but you can make as much as the deal will allow. The more you make the less your investor makes so keep them happy and you will have them for more deals in the future.
:bobble :beer As we speak im holding a $5,000 Non Refundable Earnest Money Check from a buyer i picked up from craigslist my deal will be closing next week and i’ll collect $4,000 at close… Plus i had someone today call me about a nice home for sale $18,900 with a FMV of $28,000 that would make a great rental i would like to set up a lease option on it so i can get some supplemental income going from it :biggrin man o man and i having a great day!!!