Why Wholesalers NEED Money Connections to Close the Best Deals
As wholesalers, we need money connections as the market heats up. As the competition grows, not only do we need to be competitive, but we also need to have some private or hard money connections. We get paid for our ability to find great deals. In some of the great deals we come across, owners need to close fast, tenants need to vacate, or an estate needs money FAST. Maybe the owners aren’t easy to deal with, so you want to close to get them out of the picture.
Want more articles like this?
Create an account today to get BiggerPocket's best blog articles delivered to your inboxSign up for free
Of course, this technique is no good on slim margin deals. However, if you have a deal where you know you can make, say, a minimum of $15,000 net after all your costs, this could be worth it. For those not familiar with costs, this could include your vacant house insurance policy, Realtor fees if you list on MLS, closing costs on the buy and sell, and prorated taxes on the sale of the house.
A Hypothetical Example
Let’s say Susan and John spoke with two other people who promised 10 day closes that were in their contract. You know that you can make a quick $20,000 on the sale after your costs. Susan and John say they will only let you walk through twice after the sale. And you know for a fact that the buyers on your list will not pay what you can get on the MLS. So you pick up the phone, call a lender, tell him the scenario and are 100% transparent that you want to close on property and sale the house as-is.
If you’re thinking to yourself, wait, I don’t have any money connections, first, starting out it might be wise to offer half of your profit to a partner who has connection or lender. Your local lenders lend based on deals, trust and relationships. It might take time build this. A quicker way for you to build this is offer half of your deal. Don’t think in terms of one deal; think of this as someone you can always call if you need help.
Alright, moving along — you close on the house and relist on the MLS. In most major cities, the market is hot so instead of netting $20,000, you end up make netting $23,000 because some agree to pay more than list price.
A Real Life Example
Now, let's do a real life scenario. I got a lead on a pre-foreclosure house in a great neighborhood. I went to knock on the door, knowing we had to move fast because the auction already started on the house. However, knowing my local foreclosure laws, I knew I had time to get the loan paid off and buy the house. As you could imagine, we needed a fast close due to the situation. And the owner needed money to move before the Sheriff locked her out.
We promised the seller X amount and gave some up front and the rest after she had her stuff out. I had no money connections at the time. However, I had great relationships with people who did. I called up one guy, and he said, “Let’s do it.” He made a phone call and his credibility was so strong, the lender agreed to lend money without walking through.
A week later, after closing, when owner was out the property, the lender, my partner and I walked through it. The lender said he had not lent on a property sight unseen since the good ol’ days. He just really liked the neighborhood. After we all confirmed the property was vacant, I shot an email to my list. My list we ended up getting more than our asking as well. When the smoke was clear and everyone was paid, we made $52,000 on that deal. That still might be one of the easiest and best deals to this date of my real estate career. We split it and now do rehab deals together.
In conclusion, even though you are just a wholesaler, you always want more tools in your bag to solve more problems. Just submitting low cash offers will not take you very far. I recommend you to search BiggerPockets and read Brandon Turner’s book on creative real estate investing. Being a one trick pony will only take you so far. Don’t limit yourself; we are entrepreneurs so we should be limitless when it comes to our incomes. We get paid to solve problems. Of course, we can’t solve everyone’s problem, but we should be the Advil to solve most people’s headaches.
Wholesalers: What do you think? Have money connections landed you some great deals?
Leave your comments below!