Do all of my potential buyers really have to be cash buyers only? I understand that the problem with buyers obtaining conventional financing is that the lenders may have a problem with seasoning. but isn’t there any other way around that?
When you wholesale, you only have a short period of time before your option period is up. If your option is long enough that the seller can wait on you to wholesale to someone getting a mortgage, why would the seller have accepted your offer in the first place?
When we buy, it’s for CASH, close quickly (less than 7-10 days), no hassle, etc. That’s what motivates the seller to accept our low offers. Usually, only investors with cash or a line of credit can evaluate a deal and close in less than a week. A lender slows the process and can deny the loan for various reasons. Cash is as solid as the person handing it to you.
Lenders are more terrified of being caught in a flip than just about anything. Even a whiff of a double-close will send them running.
Wholesaling is done to cash/hard money borrowers for a reason.
Maybe you could take a note back from your buyer and then sell the note, though. Find a note buyer who understands what you’re doing. Maybe you can discount the note enough to still make a good margin on your deal and provide the note buyer with a yield that is attractive, especially if your note is only for a year or two, enough to get the borrower in the door with time to refinance.
Just a thought.
My focus is centered on purchasing properties with a good spread for rehab. I work with two HM lendes who move pretty quickly. I cant see why a wholesaler would not be willing to take hie/her fee at settlement. If wholeselling were my focus I would likely write contracts with closing paid (if possible) by the seller and work with the rehabbers a bit by not requiring so much cash up front. Maybe I’m missing something but I know I’d be working three deals as we speak if they’d been a bit more recptive to the idea.
Just a thought.
If you want max profit, then just sell to an end buyer who can get a loan. Another problem with a wholesaler who is getting a loan is the seasoning requirement for most lenders. If you don’t know what title seasoning is, then you have more research to do before getting started in wholesaling.
Dee…You apparently didnt read my entry very well…I’m very familiar with what seasoning is which is why I mentioned that I am a rehaber working with hard money lenders who dont have seasoning restrictions. Secondly, I’m looking to buy potential rehab properties from wholesalers not in becoming one.
Sorry Dee I thought you were responding to my entry…my apologies.
No prob. I usually quote who I’m referring to, but didn’t this time. We’re all just here trying to help, so it’s all good.
:bobble
My intentions were to assign over to investors who have the intent to hold. Your right, I am new to wholesaling and I do have a lot of studying to do however, I am well aware of title seasoning(I am a mortgage banker) I was simply looking for a way to avoid narrowing the list of prospective buyers. 90% of my clients are investors that look for rental properties. The problem is that they are not typically in a position to do cash purchases. Many of them are first time investors with a regular 9-5. Once again, I only I asked because I didn’t know. After all, that is why I came to the forum. To learn.
My point was that the first step in understanding assignments is to understand how they work and who your audience is. I was explaining that these are cash investors who will close within a week. They want a high return for their high risk, so your offer of a 90% hold wouldn’t meet most of their needs for quick cash and a good profit.
When we assign, it’s usually not to an investor who is going to hold. Most people don’t pay cash for rentals, they use leverage. They may assign and then get a loan, but I rarely find an investor who is willing to pay cash for a 90% deal. If they pick up a rental on an assignment, they usually want more equity.
It can be done, but you just have to get out there and build a strong list of cash investors who want rentals at only slightly below market. If I were you, I’d take less profit and give investors better deals at 80% or so. You’re still making profit, but you’d have more takers.