The Best Way to Wholesale

Recently I spent the last two weekends in Dallas, Texas with an extremely knowledgeable southern gentleman and Real Estate investor/IRA expert, Walter Wofford from Jackson, MS. Just when I thought I knew or heard it all, here comes a fellow with a concept that made my head hurt. Some of these ideas, I know what you’re thinking: “just won’t work for me,” or “won’t work in my area.” Now I don’t live in Jackson, Mississippi, in fact I live far from it but I’m almost confident that this theory could work in just about any area with just about any deal. To be honest, I haven’t been able to stop thinking about this concept and I’ve even called up one of my old Birddogs just to run it by him. Needless to say, he was impressed and ready to get started.

Now, first of all, you need to line up a few things in advance before you put into practice what I’m about to tell you, but these are things that eventually get put together anyway somewhere along the line of a normal wholesale to retail deal. Normally, a wholesaler would find a wholesale deal or they have Birddogs (or as Walter calls them, “Property Sniffers”) find a wholesale deal. Next, the Sniffer would get his/her assignment fee as you know (e.g. typically $3–5K, whatever it may be) and the wholesaler would take title, clean up the unit, and flip it to an end buyer. The wholesaler then turns around and pays his partner (Uncle Sam) a big portion of his profit (whether it be through transfer taxes or short term capital gains). This is where Walter’s model becomes unique.

What’s different than what is mentioned above is that Walter lines up his money list and buyers list before he even sends the Birddogs out. Walter’s team of Birddogs then find him properties, but he will use a strategy where they take title for the property for a small gain (like 1K) and he’ll compensate them for the small transfer tax.  He then lines up the end buyer in advance with owner financing that he structures with a private investor who likes investing in safe first mortgages. The private investor loves this because he’s getting a short term stream of payments on a property with a safe LTV (Loan to Value), and 12 years of payments at 8.5% on a property with an ARV (after repair value) that comps out nicely (usually much higher than what the Birddog took title for). And the best part is the property transfers from the Birddog to the end buyer with very little transfer tax or income tax as well. The cool part’s next, after Walter finds this investor who likes 1st mortgages, he creates one with a partial on the back end that his Roth IRA will buy from the 1st mortgage holder for $1K. He can do this since he found the deal and never actually took title. The end buyer also loves this because he/she is getting to buy a property with low money down, some mortgage payment credits (for the first three or four months) towards minor fix ups, a monthly payment that’s as low as rent, and a term that’s typically 5-15 years instead of 30 years. I love it!

A quick example goes something like this: The Birddog finds a property for $17K, makes a quick $3K for finding the deal, the end buyer purchases the property for $21K with a private 1st mortgage from an investor off of Walter’s investor list with $3000 down on a $45K 12 year note at 8.5% (you could up this yield by extending the term or giving the 1st mortgage lender more juice off the monthly payment) with $200/month taxes and insurance totaling $499.53. This way there are only two transfers of title, one from the seller to the Birddog, and one to the end buyer with Walter and the 1st mortgage holder in the middle of the deal.


So let’s recap, everybody wins:

The Birddog wins because he has his end buyers with financing in place; they have an endless supply of investors with short term high yield 1st mortgages.

The end buyer wins because he gets private financing with no bank requirements, no appraisal, shorter terms, a payment less than rent, as well as some possible repair credits.

The first mortgage lender wins because he can get a short-term high yield safe first mortgage.

And Walter does okay because his Roth IRA makes almost an infinite rate of return tax-free on his $1000 investment on the back end partial with very little risk or money into the deal and never taking title or doing repairs.


Now I’m only scratching the surface, and I hope that I have done the theory justice. This theory of utilizing your IRA for tax-free wealth, removing yourself from the hard work equation, and using very little of your own capital is my type of investment. And even if you’re not a wholesaler, the ideas involved in this method can be applied in some way to your expertise. You can find out more about Walter’s tax-free investing education here: http://www.iradealmaker.com/