How to Close REO Wholesale Deals (Part 4 of 5): Using an LLC

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Today’s article is part four in a five part series, where I will be shedding light on the various methods available to close REO wholesale deals and get around the “No-Assignment” clause that most banks include in their addenda.

In weeks 1-3 I have discussed using simultaneous closings, quitclaim deeds, and double closings to get your REO wholesale deals to the closing table.

This week, I will be talking about using an LLC to wholesale your REO properties to your end buyer.

Using an LLC to Wholesale

If you decide to use this method to close your REO wholesale deals, you will be making your offer to the bank in the name of an LLC, creating the LLC if/when the bank accepts your offer, and then selling your membership/ownership in the LLC to your end buyer in exchange for your wholesale fee.  When using this strategy, you are not selling the actual property to your end buyer, but rather the LLC which owns the contract to purchase the property.

When you form the LLC, you will want to have the Operating Agreement drawn up by an attorney who is familiar with what you are trying to accomplish. The Operating Agreement should define the management structure of the company, and allow for the transfer of management rights.  

Once your end buyer is in place,  you will need to execute a Memorandum of Management Rights Transfer (or something similar- consult with your attorney to find out what documents are necessary in your locale), with you named as the transferring member, and your end buyer named as the assuming member.

The consideration given for the execution of the transfer of management rights will be specified in the Memorandum, and will represent your wholesale fee. Once this exchange has taken place, your end buyer will proceed to closing with the Operating Agreement for the LLC along with the executed Memorandum, which will show that they are authorized to sign the closing documents and purchase the property.

The fees associated with setting up an LLC will vary depending on which state you are in, so this is something that you will want to take into consideration when deciding if this is the strategy you want to use when wholesaling your REO deals.

Unlike a double or simultaneous closing, when using an LLC to wholesale, there will only be one set of closing costs involved, so even though it may cost a few hundred dollars to set up the LLC, it may be cheaper to go this route and avoid that second set of closing costs.

Next week I’ll be back with the fifth and final installment of this series, so stay tuned…

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About Author

Formerly a bartender, Steph Davis is now a full time wholesaler in Tampa, FL. If you'd like to get an idea of what it's really like out there in the trenches, head on over to her blog:!


  1. Great stuff !While this isa great use of an LLC,I can’t even afford the set-up fee right now,so the “double close” using TRANSACTION FUNDING appears the most logical for me.Also,here in MARYLAND,I believe that selling the LLC involves paying additional transfer fees/taxes, due to recent law changes.Please correct me if I’m wrong.

  2. Hi Robert,

    I’m not in Maryland, but I have several friends who invest up there, and have heard they have some pretty steep transfer fees.

    I would check with an atty in your area to find out what your costs are going to be if you decide to go this route, and then compare to the other methods available..


  3. I invest in MD as well and this is a method I’ve considered. However after consulting with an attorney I was informed you should never contract a property in the name of an LLC that doesn’t exist; the LLC needs to exist prior to submitting the offer for approval. Your thoughts?

  4. You can always set the LLC up ahead of time if you feel more comfortable.

    I always make my offers in the name of one of my LLCs, and rarely have the banks request to see the articles of organization until after the offer is accepted..


  5. this is really interesting, and also makes me think of some follow-on questions.

    Do you find that your buyers are generally comfortable taking over management of an LLC as a method of transferring property?

    What about the membership? it has to be a real LLC to close, so I am assuming you are the sole member and you fund it with the capital necessary to do the transaction. When you do the transfer, are you also taking yourself out as a member and putting in the buyer as a member?

  6. I’ve never wholesaled any of my deals in this manner- I use a simultaneous closing or quitclaim deed instead. The investors I know of who use the LLC method tell me they sometimes run into problems with the end buyer not wanting to take title in the LLC. In such cases, you can either find another buyer, or use one of the other methods I’ve described in my previous posts (simultaneous closing, double closing, quitclaim)..

    Not sure I understand your last question… you set up the LLC either right before or right after your offer is accepted with the bank. The only funds that come out of your pocket on the deal are the costs to set up the LLC, which will vary by state. In FL (where I’m at), I believe the cost is $125, which is minimal compared to the closing costs that you would incur if doing a double or simultaneous closing..

    Yes, you will execute a Memorandum of Management Rights Transfer with you named as the transferring member, and your end buyer as the assuming member. This will be done in exchange for your wholeasale fee.

    Like I mentioned in the article, the paperwork necessary will vary by state, so best to consult a real estate atty and have them draw up the proper docs..


  7. There is only one transaction taking place, so only one set of closing costs, which your buyer will be responsible for paying.

    If you have an atty draft all of the documents for you, you might be out a few hundred bucks initially, but once you have the correct docs, you can use them over and over.

  8. As per your post of October 8 above, I would think you would refer any questions regarding LLC transfers to someone who specializes in this process. By your own admittance, you have never used this method and, therefore, have no experience with the details, specifically the pitfalls of using this method, which are many. Banks are crazy, but they’re not stupid. They are familiar with the various types of “assignments” and can read between the lines. If you’re not an attorney with national experience or some kind of documented specialist in this area, seems it would be best to refer answers out. You’re just parroting someone elses expertise here (or with any other method with which you have no personal experience) and your comments shoud be discounted by any serious investor/wholesaler.

  9. Hi Mark,

    I always advise people to get the input of an REI attorney before they
    jump in and try to use any of the methods that I talked about in this article series.
    I’m not pretending to be an expert in LLC transfers, but I do understand how they
    work, and I did consult with two wholesalers who use this method to wholesale REOs
    before I wrote this article.

    As far as the banks being able to read between the lines when making an offer in the name
    of an LLC- I’d have to disagree with you on that. I’ve made hundreds of offers on REO properties, and all of them have had one of my LLCs as the buyer, and the banks have never
    had an issue with it. Sometimes they will ask to see the articles of organization once the offer is acccepted, but other than that, it’s really not a big deal.


  10. Hi Steph, I’m a wholesaler in MD and beginning to make offers on REO’s using the LLC method. If I get a offer accepted on a Fannie Mae property, I know I will be able to flip deal to my end buyer, but will the deed restriction now apply to my end buyer? If so, is it best not to make offers on properties with deed restrictions if your end buyer will fix and retail? Thanks

  11. This method sound complicated! That means every time you do a deal like this you have to open up a separate LLC in order to sell the LLC to the buyer. If you do 20 wholesale deals like this a year you have to open up 20 LLC in order to do the deals? Who would want to do that?

    • Hi Jennie, the opening up all the 20 LLCs over the course of a year would financially benefit anyone that would want to save almost 20k over the year in transactional funding costs! 🙂
      I have a property under contract now in Cocoa, FL that I am wholesaling. If I don’t sell the LLC, then I will need to pay the transactional funding company $1295 fee to borrow the money for a day. With this LLC route, my end buyer pays.

  12. Charlene Garrison

    All of this information is really great. I am at a point of getting as much knowledge as possible. Today’s question is simple – please direct me to the form I would use to assign a rental property? I looked at the forms shown but could not distinguish which form I would need. If it varies by state, I am in Michigan.



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