When finding buyers find at least 10 serious buyers. What I mean by serious is make sure they are not tire kickers. Ask them direct questions like how are you going to pay for the property? Are you going to pay cash or are you going to use a lender? You want to find an experienced rehabber whos done quite a few deals and if the person doesn’t have cash the person has a good lender to finance the deal. You are going to ask what type of property does the buyer want, (3 bedroom? 2 bath? or more) If you live in a location where homes are cash flowing then landlords are a good source of buyers. Also ask them what is your ideal location and how much are you willing to pay for a property. If you have a total of 10 buyers, (You don’t really have to have 10 but when you are new that is a good number) and those buyers want property in the same location that is going to be your farm area, just make sure it’s not too far away from your place of residence, (I had to learn that the hard way) for the simple fact that it’s too long to drive back and forth and if you drive too much time and gas is wasted. Time is money with real estate investing make sure you are doing productive things that will make you a profit when you are working. Google “Time Value of Money” and study it and understand the concepts if you have any questions about it let me know.
Buyers (Demand) will fuel your hunting on what to look at and where in your particular location. Once you have a good buyers list in place. Start looking for properties. You might be able to find some properties on craigslist and offer YOUR PRICE not what they are asking. Remember when someone sells a property 90% of the time there is a reason…they want to upgrade, Someone died, Divorce, sick…etc Find out first: Why are you selling? this will reveal the reason and it’s possible that you can help them solve that problem. A lot of the really good deals you are going to get are going to come from your MARKETING!!! in this business marketing is the name of the game, Business cards, Bandit Signs, Websites. You have to let the world know that you are in business. The more leads you get the more opportunities you will have to buy a property. Ignore the MLS for now, work directly with the sellers because there you will get the best deals! Good luck and let us know how everything works out!
Wow rolyn that was the most in depth advice i think ive gotten so far. Thank you so much man! I do have some questions about wholesaling. I can understand marketing and finding buyers, thats a great idea.
But how DO i actually wholesale? What does “putting the deal under contract” really mean? I could pm you these questions if thatd be more convient for you.
No problem, it’s the least I can do. I just don’t want people to get burned like I did. I know there will be people that will say otherwise but I’m just speaking based on my experiences.
Depending on your area, (I’m not sure where you are) putting a property under contract is taking a Real Estate purchase and sale agreement and signing it with your buyer and the date for a set price. Once you have the property under contract you can sell the property to your already established buyers list with your added fee.
On this website go to Bird Dogs, Wholesaling under Newsgroup Forums and it will explain it in detail.
Ok i got it. Heres another question, how does it really differ from just Optioning the property? Not lease optioning, but just plain old optioning. Then you sell the option and the buyer excercises it and wala. Arent they essentially the same thing?
To be honest I have heard of lease optioning but I haven’t heard of just plain optioning. The concept of selling your option I was taught was cashing out of a lease option deal. If you get someone into your property on a lease option deal you can sell the lease option to another investor to cash out of the property. Wholesaling is a bit different but it does seem like it has some similarities. When wholesaling property you will come across some lease option deals so you will get a chance to do both. Also learn how to short sale. A lot of property owners are upside down on their property. Don’t become a jack of all trades and a master of none. Master Wholesaling, Then Lease Options and Then Short sales. My two cents!
Good idea. I just have no clue what short sales are 0.0
Well Ron Legrand talked about the optioning thingvin his book. Essentially youd put like 100 dollars down as an option fee and then negotiate a low price and thevoption to buy 6 months from then. Then sell it to another investor. I dont see really many differences except it allows you a longer time to find a buyer. Of course following your advice you should already have a buyer in place but still. There seems to be a few benefits.
Im just comfused on which one would be better used or if it even matters.
Mind if i pm you questions about wholesaling in the future if and when i run into a snag?
I’ve always been under the impression that when wholesaling you’re looking for fixers (because of the buying position it gives) on a discount and selling to investors, and with assigning a lease option you’re looking for descent places and selling the lease to the general public.
Sounds like you’re talking about getting a fixer on a lease purchase and selling to investors? I guess it could work, but you’d have two strikes against you, wanting a low price and flexible terms. I’d like to hear others thoughts on this.
By the way, very good thread. I’m in the same situation and will be acting on the same advice. Stop reading and get to work.
A short sale is buying property in arrears from the bank for less than the mortgage value. It is “short” of the mortgage.
Why in God’s name a vendor would accept a $100 option on a single family for 6 months is beyond me. If the house is empty, the vendor has to continue paying the upkeep on the house without any assurance that the property will be sold. Lease options at least pay the monthly bills.
The only times I’ve seen options being used were on large scale commercial developments or farms being converted to residential subdivisions where the buyer is applying to rezone the property and get financing, but is not guaranteed a rezoning for the use they want and rezoning may take a long time. And those options cost several hundred thousand bucks, not $100.
Well again i am not talking about lease optioning or lease purchasing. What im talking about does not involve the word “lease”. Just the option part.
The way legrand put it was you find a seller who is having difficulty selling his house and you purchase an option from them with a low strike price and tell them they can continue to try to sell the house any way they want. But if you find someone who will buy the option he must sell the house to you. So its a win/win cause he sells his house but is not restricted to selling it just through you, while you get good money from a buyer if you find one and if you dont you just lose like 100 bucks, and the buyer gets a good property at a low price that he can rehab or possibly live in.
Again thats the way legrand explained it and he had a story to back it up. But idk how realistic it is.
Essentially the reason theyd accept the option is because youre helping them sell the problem house thats just eating away at their cash. They can continue trying to sell it but youll be doing a better job of selling it. Thats why theyd accept the option offer. Im still quite confused on it all and dont fully understand it so im hoping ill get it sooner or later. I really dont know if optioning is a good technique or not.
Hello
An option typically clarifies rights by the seller and the buyer… I like a purchase agreement which allows the BUYER to remain able to purchase a property for up to 12 months without having to perform in the event t he seller finds a new buyer in the interim…
Basically a 12 month exclusive right to buy… Without performance clauses…
As investors we need to be in control of the outcome not the other party…
Here is the clause I include in my agreement.
IV. CLOSING DATE: This transaction shall be closed and the deed and other closing papers delivered in 60 days following the date of final acceptance or on _____, 20, unless extended by other provisions of Contract, or by written agreement of the Parties and also at the sole option of the buyer.
The Buyer shall have the option to extend the closing date for up to 365 days from the Contract For Purchase And Deposit Receipt date upon receipt by the Seller or Sellers Closing Agent of a consideration amount of one hundred dollars ($100.00), amount to be classified as additional fund, and shall reduce the purchase price by said amount. The right to extend the closing date is the sole right and option of the Buyer and does not require Sellers approval.
Happy house hunting
Michael
Well that pretty much solves my problem. Thanks 
So basically an option stipulates specific performances that must be taken by both parties while a normal purchase agreement doesnt stipulate that you actually have to perform while the seller must?
Still a lil confused. Maybe im just dense. Maybe it just hasnt been explained in terms that i understand yet. Any extra help is always nice.
Though i do find it funny how far off topic this has gotten lol.
The best way to learn something is by doing. You can read and understand theory but applying that knowledge is what counts. This post should help you tremendously. Exercises that will teach you many of the skills you need to be successful in real estate and very fast.
Yep but often times applying those steps can be difficult. No worries though, ive got a plan, a “do” plan.
Are there really alot of deals on craigslist? I keep hearin about it but havent looked into it.
Craigslist can be good in some areas and garbage in others. Some areas have high CL traffic. Some are almost non-existant. There are so many houses out there for sale right now. Many of them aren’t really advertised beyond just a sign in the yard. There is so much competition and the prices are compared against the REOs.
Sure you can find deals, but let me be more clear. The exercises to Buy Right and Sell Right is using Craigslist just for the exercise to develop the skills and understanding. I am not recommending to use only Craigslist. To Buy and Sell you must use all effective and appropriate sources.
Most beginners never learn to find motivated sellers, play the numbers game and cherry pick from tons of deals that meet their criteria. They compromise or give up after evaluating 3 deals. Many make costly mistakes selling too. By doing the exercises I recommend beginners can quickly learn vital skills and avoid costly mistakes on their way to successful investing. I have much more detail on the exercises on my blog on my site.
No, Michael is talking about a clause that allows the buyer to extend the closing date inside of a normal purchase agreement. It makes sense because a lot of lenders these days can’t make up their minds and you don’t want to end up in situation where you’ve reached the closing date and have no money to complete it. I’ve had hard money lenders do that to me before and walk off with my application fee and luckily I got the vendor to give me an extension so I could find another hard money lender, even though it wasn’t written in the offer. It’s not an escape clause to cancel the agreement if the lender bails on you. You still have to complete the agreement or you can get sued for breach of contract.
When people talk about option vs. lease option to purchase, they are in a sense talking about the “option” as an escape clause to cancel the offer to purchase if you can’t get the money together to buy it or you just changed your mind.
Rolyn - awesome tips, great informative post I love stuff like this - the “real deal” :smile
Hello everyone…
My escape clause is fairly simple…
IX. INSPECTION OF PROPERTY: Buyer shall have until the close of escrow to complete all Buyer investigations of the property, approve all disclosures, and other applicable information, which buyer receives from seller and/or persons hired to inspect property on behalf of Buyer; and approve all maters affecting the property, including but not limited to, the marketability of the property, the elevation, grade, and topography of the Property and to conduct engineering and soil boring tests as the Buyer deems necessary in order to determine the usability of the Property. Buyer may in Buyers sole and absolute discretion, give notice of termination of this Agreement at any time prior to the expiration of the inspection period, and upon such termination, all deposits held in escrow shall be returned to Buyer.
Do not use this as a seller…
And then I have
XXXIV. DEFAULT BY SELLER: In the event that Seller should fail to consummate the transaction contemplated herein for any reason, except Buyer’s default; (i) Buyer may enforce specific performance of this Agreement in a court of competent jurisdiction and in such action shall have the right to recover damages suffered by Buyer by reason of the delay in the acquisition of the Property, or (ii) may bring suit for damages for breach of this Agreement, in which event, the deposit made hereunder shall be forthwith returned to Buyer, or (iii) declare a default, demand and receive the return of the deposit. All rights, powers, options or remedies afforded to Buyer either hereunder or by law shall be cumulative and not alternative and the exercise of one right, power, option or remedy shall not bar other rights, powers, options or remedies allowed herein or by law.
XXXV. LIQUIDATION DAMAGE CLAUSE: If Seller decides to terminate this transaction at any time prior to close of escrow, he/she needs to give written notice of intention to cancel to Buyer. Upon receipt, the Buyer has the option of enforcing any one of the following three alternatives. By his/her signature herein below, Seller’s specifically agrees to the provision stated in this paragraph: (1) Buyer may cancel this contract, (2) Buyer may insist upon the specific performance of the Seller under this contract, or (3) Buyer shall be entitled to receive from Seller a total sum of $50,000 or 25 percent of the contractual price, whichever one is greater.
Dont use those either…
I think I have been laughed at for a 12 page agreement… Well maybe it is foolish maybe not… I look at these deals as a divorce… That first kiss is great however if youre not prepared to go to war then you cant start a fight… Well written contracts save time adn money…
Good house hunting
Michael
Wow you guys are amazing. This stuff is much better then the books.
So would anyone recommend an option over a normal purchase agreement with good clauses? Whats the pros and cons to using them really?
I absolutely agree with shortsale. Plain amazing advice from rolyn. Advice that is immediately applicable.
Also those excercises that you posted ryan are great. Gonna look into them more.
Also great advice as always from michael.
Has anyone made a good deal from craigslist?