The expensive market of California

23 Replies

Hello everyone. My name is Bader Alameri and i live in San Jose California and I’ve been learning about real estate wholesaling for a while now am I believe I am ready to get on the field and actually flip deals. Now the fact that I live in California which is a very expensive market, I know that it will be much harder to find deals that are at least 70% of ARV. So my question is how can you do business out side of your local market virtually? Or is that even a thing? I thank you guys in advance for such a great website with so much valuable content. And also I would love to connect with investors and wholesalers that are in my local area already. Thanks a lot guys

Why do you want to start with flipping? I would first purchase a buy and hold property and learn the ins and outs of real estate investing. With your first property comes knowledge that you can then apply to fix and flip and wholesaling.

Hi Bader - I also live in California and will certainly not be looking in this market due to higher home prices. There are several resources to help you if you want to look out of state. I'm currently reading David Green's  Long Distance Real Estate Investing, which is helpful. 

I agree with @Michael B. that while a flip sounds attractive, in that I'd like an infusion of cash for my next investment, I think with out of state investing I'm going to be looking at buy and hold myself, at least for my first property.

@Bader Alameri You've gotten good advice here by the folks above me. 

Start small, take it easy and learn the ropes. Wholesaling might be the hardest option you can take considering the high attrition rate. 

Please, don't listen to BS gurus who tell you can get into the "game" with low or zero $. These guys are, mostly, scam artists who are trying to sell their products. 

There's a reason that millions of people have patiently become rich and stayed rich. They did't take shortcuts. Once you've mastered the basics, scaling up will not be a problem. 

@Omar Khan you just shattered my dream! This guy on the Youtube commercial says he is wholesaling houses while sitting on a tropical beach. He said he does like 4 deals per hour netting like 200k per month. He says it only took him about 3 months of work to get to this point and everyone is stupid for not doing the same thing! Don't tell me he is lying!! :-D

Guys thank you so much for the great advice here. Let me answer your question on why I choose wholesaling. I’m fully aware that it is very hard to actually get the dice rolling and that there is no such thing as starting with 0 money, however, I find the idea very attractive because of the assignment fees that you will be collecting as a wholesaler. And yes I do agree that almost every wholesale guru is just trying to sell their product while on the flip side there’s actual people that are putting in the work and are getting results. Now my question is for those of you that have invested out of the local market, how hard is it to wholesale out of state?

Don’t let the prices in CA scare you away from flipping. Yes, there is extensive investor competition in CA, but the rewards can offset the frustration. All things equal except values, 70% ARV in CA = more meat on the bone than a 70% ARV in the Midwest/South.

Originally posted by @Michael B. :

@Omar Khan you just shattered my dream! This guy on the Youtube commercial says he is wholesaling houses while sitting on a tropical beach. He said he does like 4 deals per hour netting like 200k per month. He says it only took him about 3 months of work to get to this point and everyone is stupid for not doing the same thing! Don't tell me he is lying!! :-D

He's not lying. You should buy his premium course, then pay him more every month for "strategy" calls. Make sure you run a yellow letter marketing campaign and spend most of your money on bandit signs. 

Extra points if you pay for everything with your credit card and have a bad credit score. 

Originally posted by @Michael B. :

@Omar Khan you just shattered my dream! This guy on the Youtube commercial says he is wholesaling houses while sitting on a tropical beach. He said he does like 4 deals per hour netting like 200k per month. He says it only took him about 3 months of work to get to this point and everyone is stupid for not doing the same thing! Don't tell me he is lying!! :-D

 Dave Del Dotto was the first infomercial person to do it form the beach in Hawaii with beach babes on each arm

and yes he made Millions teaching.. and then rolled those millions into high end wineries in the Napa valley at the right time.

one was right across the street from my house on Atlas peak .. I used to go over end of the day and enjoy a glass or two while he regaled me with how it was back then as he basically created the TV real Estate guru  .

Originally posted by @Bader Alameri :

Guys thank you so much for the great advice here. Let me answer your question on why I choose wholesaling. I’m fully aware that it is very hard to actually get the dice rolling and that there is no such thing as starting with 0 money, however, I find the idea very attractive because of the assignment fees that you will be collecting as a wholesaler. And yes I do agree that almost every wholesale guru is just trying to sell their product while on the flip side there’s actual people that are putting in the work and are getting results. Now my question is for those of you that have invested out of the local market, how hard is it to wholesale out of state?

 not to mention the way its taught is not legal in CA  just check in with the DRE and ask them.. tell them your model and I think they will tell you license needed I know its argued upside and down on BP.. if its was just as easy as assigning contracts NO one would need a license .. there would be no need for agency or anything else like it.. be like china free for all.

Originally posted by @Jay Hinrichs :
Originally posted by @Michael B.:

@Omar Khan you just shattered my dream! This guy on the Youtube commercial says he is wholesaling houses while sitting on a tropical beach. He said he does like 4 deals per hour netting like 200k per month. He says it only took him about 3 months of work to get to this point and everyone is stupid for not doing the same thing! Don't tell me he is lying!! :-D

 Dave Del Dotto was the first infomercial person to do it form the beach in Hawaii with beach babes on each arm

and yes he made Millions teaching.. and then rolled those millions into high end wineries in the Napa valley at the right time.

one was right across the street from my house on Atlas peak .. I used to go over end of the day and enjoy a glass or two while he regaled me with how it was back then as he basically created the TV real Estate guru  .

Remind me of the Tom Vu method. I uncovered that gem on Reddit. 

Tom Vu and His Babes - must watch!

He seems like the original guru/hustler - "just have the guts", "financial freedom", "don't have to ask your boss for a raise"...

@Omar Khan , I think this is such a great point new investors like myself need to hear. I've been listening to the BP podcast and they do a great job highlighting people who have done really well - but a few guests have also brought up that you don't NEED to do the crazy things some people have done to be successful. There are a lot of investors who buy slowly, hold, and build up wealth over a long period of time. That's not exciting, but it's solid, and it's the path I'm looking to go down. 

As @Jay Hinrichs mentioned, wholesaling is illegal in CA, as you need to be licensed to bring buyers and sellers together and make a commission (aka assignment fee). It's important to know what the laws are in the state you're going to be working in. 

Real estate is regional, and the investment strategy for each area is based on the local market. Buying/holding in a high dollar area might bring appreciation, whereas other areas it could take years. In an area with low appreciation but a large inventory of old outdated homes, you might be able to rehab and sell or rent. 

The point is, no matter where you are, it is important to get to KNOW that specific market. If you don't have the money to be traveling across the country to look at a property if there's a problem then you probably shouldn't be investing so far away. If you're buying from someone that sells turnkey, be sure they're reputable. 

@Karen Margrave @Jay Hinrichs Wholesaling is absolutely NOT illegal in CA. I see you guys are not even in CA so I really question where you get your facts. Newbies in this forum rely on this kind of information and trust people like you... Very poor performance without any factual basis... It's not as easy as saying "You can't bring buyers and sellers together and make a commssion. A wholesaler is not making a commission.

Come on guys. You, as real estate investors, should understand the importance of words in business. Your guys' assumption about the commission is pretty much as far away from the truth as saying - "a cash out refi is taxable income because you have money in your pocket after the refi."

Every person has the right to assign a contract under CA contract law. It's basically like SELLING contractual terms and has NOTHING to do with a commission. There even is a 100 year old supreme court decision about this matter.

 If you guys don't believe me I would highly advise you talk to a good attorney about this subject - Jon Enochs, a ROCKSTAR attorney down in OC will be able to explain everything about wholesaling if you retain him. He is, among other well known investors, Todd Tobacks attorney who is doing quite well wholesaling in CA. Wholesaling and assigning contracts has to be done right of course (like anything in business) but if it is done right, then there is nothing illegal about it. 

Sorry guys not trying to offend anybody but it's bad practice to give advice on something that you guys obviously don't understand because you don't even do business in CA.

@Michael B. Actually I've been licensed in CA since 1984 in real estate and since 1993 in Construction. I lived in CA for decades, and have been out of state for the past year. 

It is my understanding that if you bring a buyer and seller together, and are paid any type of fee, it's activity that requires a real estate license in CA, especially if you negotiate the contract or are involved in making offers, signing of contracts, etc. There may be a loophole, but I personally wouldn't want to deal with the State on it.  You can call it "assignment fees" or whatever you want, but the DRE will probably consider it commission. 

@Karen Margrave Well, it doesn't really matter what the DRE might say about it, since common law favors the freedom to assign contracts. The only time you are not allowed to assign a contract is if it is prohibited in the contract itself. So the only time DRE would even be allowed to interfere would be if you use their contract.

Technically you can "wholesale" anything - cars, houses, goods etc.  For example, I go to my neighbor who owns a beautiful Lamborghini Huracan and negotiate a sale. We go ahead and draft a contract with specific rights and obligations on both sides. Who is going to stop me from selling my contract to an interested buyer at a higher price? Do you think I will get in trouble with the DMV because I don't have a california car dealer license? I won't because it's not up to the DMV what I do with my contract. 

And, It's not up to the DRE to decide what I do with my contract for a purchase of a house. It also has nothing to do with being a loophole, it's the actual wording that makes the difference in law.

Because it was mentioned earlier that we should call the DRE to ask about wholesaling, I challenge you to do the following test:

Call the IRS, tell them that you are a real estate investor. Tell the person that answers the phone that one of your properties appreciated. Tell the person you got a HELOC with PenFed and you are going to draw 100k out of your asset to buy a Ferrari. Use your normal investor lingo. Ask the person on the phone if you need to pay income taxes on your draw. There is a good chance that the person will say yes. You know why? Because this person is being paid to answer phone calls and is not an attorney or CPA. The IRS call center person will hear: $100k - draw - buy a cool car - must be income.

Calling the DRE to answer the wholesaling question is useless. You will get an answer that reflects the gut feeling of a person that is being paid to answer a phone. Like in my IRS example. The DRE call center person will hear: finding deals - selling houses - must be licensed. 

Karen, you are an extremely experienced real estate investor. You know that it's not as easy as saying "bringing buyer and seller together - need license." All experienced real estate investors use the law to their maximum capacity when it comes to taxes, asset protection and other things. It's only a touchy subject when it comes to wholesaling because there are a lot of agents and brokers in this forum that don't like it and voiced their gut feeling about the legality of wholesaling. 

Originally posted by @Michael B. :

@Karen Margrave @Jay Hinrichs Wholesaling is absolutely NOT illegal in CA. I see you guys are not even in CA so I really question where you get your facts. Newbies in this forum rely on this kind of information and trust people like you... Very poor performance without any factual basis... It's not as easy as saying "You can't bring buyers and sellers together and make a commssion. A wholesaler is not making a commission.

Come on guys. You, as real estate investors, should understand the importance of words in business. Your guys' assumption about the commission is pretty much as far away from the truth as saying - "a cash out refi is taxable income because you have money in your pocket after the refi."

Every person has the right to assign a contract under CA contract law. It's basically like SELLING contractual terms and has NOTHING to do with a commission. There even is a 100 year old supreme court decision about this matter.

 If you guys don't believe me I would highly advise you talk to a good attorney about this subject - Jon Enochs, a ROCKSTAR attorney down in OC will be able to explain everything about wholesaling if you retain him. He is, among other well known investors, Todd Tobacks attorney who is doing quite well wholesaling in CA. Wholesaling and assigning contracts has to be done right of course (like anything in business) but if it is done right, then there is nothing illegal about it. 

Sorry guys not trying to offend anybody but it's bad practice to give advice on something that you guys obviously don't understand because you don't even do business in CA.

actually if you look me up on the CA  DRE website you will see I have been a broker in CA since the late 70s  

Last time I listened to an attorney about if something was legal or not regarding regulations it cost me 25k.. they are not always right and they are paid to argue..  really depends on if the DRE wants to define it further than whats already on the books.. 

I know in Oregon they have decided to do that.. and there are some other bigger wholesalers from OC on this site that used to defend the right to wholesale IE run their business exactly like a real estate broker  IE website showing the homes craigs list direct mail etc and he has since recanted..  

I have just never seen a wholesaler advertise a contract.. but be that as it may .. I suspect its like Oregon here is what our DRE said to me when I sent in a flyer form a wholesaler I got on the internet and asked if it was legal to market a contract in this manner.

"

State of Oregon - Real Estate Agency

Frances Hlawatsch | Financial Investigator

Thank you again for the information, if I have further questions for you during the investigation I will certainly reach out.

The Agency is well aware that unlicensed “wholesalers” are rampant in our jurisdiction. Addressing the problems is like trying to put out small individual fires in a forest that is burning. The Agency’s investigations are complaint driven, so we rely heavily on the public, and our licensees to bring these individuals to our attention.

Thank you for getting back to me. The advertising copy you attached to your email came out perfectly and will be very helpful. Thanks!

"

I got tired of the arguments about is this legal or note and non of you guys probably actually talk to the STATE .. lawyers are not the regulators.. So then I had a follow up meeting with this investigator last week.. And they are digging deep into this wholesaler she had 3 files she had gotten from title companies and was showing me date downs.. The other interesting comment she made is they have no opened an investigation into the Licensed Brokers who are also listing these "contracts" on MLS and again her words not mine but they don't think that you can list property you don't own.. even with the sellers permission.. I don't know.. but to them its selling real estate like a broker.. not selling a contract there is no listing field on MLS for a contract only for houses.. exactly like a broker does..

But be that as it may just like we all speed at some time in our driving career this is rampant and well its just unfortunate if you get targeted she said the one that I sent in has been doing this for years and face's massive civil penalties and she even told him you had better get a license.. your not an investor your not coming into title and the double close does not cover it.. because you still marketed a property you did not own.. And I know for sure OHIO has cracked down on the wholesalers methods and FLA.

So I suppose its just your SOP  if you don't advertise you don't describe the house or any features of it and Hey I got this contract.

But the other point is granted assignments are done all the time but when you have a scheme that 100% of what you do is direct mail tie up a property put it on your website advertise it in the exact same manner a broker does.. and just assign it and make an assignment fee or marketing fee or whatever you call it and I see it on many of the huds on deals I fund.. their position is if it looks like a duck and quacks like a duck it must be a duck.. LOL.. 

However as I have said I don't like CE for all the states I am licensed in but its the laws.. also you have this on the mortgage side just look at all the lenders that try to lend in CA OR and NV without licenses  just because its legal for the exact same loans in WA with no license or many east and mid west state.. but you NEED a license in those 3 states if you hold yourself out as any kind of lender.. When I was speaking at a FIBI meeting in Manhatton beach a few years back.. first thing I do in those is I say raise your hand if you are a licensed realtor most of the room raises their hand then I ask raise your hand if your a private lender and 3/4 of the room raises their hand.. now there are carve outs for small amounts of loans but some guy who has 5 million of his own money and is going to reias handing out cards saying he is a private lender that dude or dudet in CA OR and NV needs to be licensed.. just like am a licensed mortgage banker and I can use my CA RE brokers license to legally lend money.. 

Anyway... have a good day... I have a new mission in life if you see my sig at the bottom of this check It out.

Originally posted by @Michael B. :

@Karen Margrave Well, it doesn't really matter what the DRE might say about it, since common law favors the freedom to assign contracts. The only time you are not allowed to assign a contract is if it is prohibited in the contract itself. So the only time DRE would even be allowed to interfere would be if you use their contract.

Technically you can "wholesale" anything - cars, houses, goods etc.  For example, I go to my neighbor who owns a beautiful Lamborghini Huracan and negotiate a sale. We go ahead and draft a contract with specific rights and obligations on both sides. Who is going to stop me from selling my contract to an interested buyer at a higher price? Do you think I will get in trouble with the DMV because I don't have a california car dealer license? I won't because it's not up to the DMV what I do with my contract. 

And, It's not up to the DRE to decide what I do with my contract for a purchase of a house. It also has nothing to do with being a loophole, it's the actual wording that makes the difference in law.

Because it was mentioned earlier that we should call the DRE to ask about wholesaling, I challenge you to do the following test:

Call the IRS, tell them that you are a real estate investor. Tell the person that answers the phone that one of your properties appreciated. Tell the person you got a HELOC with PenFed and you are going to draw 100k out of your asset to buy a Ferrari. Use your normal investor lingo. Ask the person on the phone if you need to pay income taxes on your draw. There is a good chance that the person will say yes. You know why? Because this person is being paid to answer phone calls and is not an attorney or CPA. The IRS call center person will hear: $100k - draw - buy a cool car - must be income.

Calling the DRE to answer the wholesaling question is useless. You will get an answer that reflects the gut feeling of a person that is being paid to answer a phone. Like in my IRS example. The DRE call center person will hear: finding deals - selling houses - must be licensed. 

Karen, you are an extremely experienced real estate investor. You know that it's not as easy as saying "bringing buyer and seller together - need license." All experienced real estate investors use the law to their maximum capacity when it comes to taxes, asset protection and other things. It's only a touchy subject when it comes to wholesaling because there are a lot of agents and brokers in this forum that don't like it and voiced their gut feeling about the legality of wholesaling. 

your write you should or anyone doing this should put together their marketing materials and write out their business plan send it into the state and get a written response..  Just like I sent in a copy of a wholesalers add and you saw above the response in writing I got back and a scheduled appointment with the investigator to talk about it in detail..  the law frankly reads the exact same in each state its up to the state to decide if they want to up hold the statues that are on the books..  and problem is like some one else said you put 3 lawyers in a room and you will get 5 different opinions on that same subject.. I have had that experience personally of my securities lawyer telling me I am fine .. then sitting in front of the state securities attorney and regulator telling me I am not fine and paying to watch the two argue LOL.. we thought we were right they thought we were wrong.. they would shut us down until we had our hearing at the administrative law court.. I asked how much would that be  well a year and 100k or just pay the fine and agree to a modified C and desist so that's what I did.... all that BS cost me 25k.. and a lot of stress frankly I had never been in that situation before.

I have 2 Oregon wholesaler or at least they used to be they learned on the Sperber program and both got turned in and fined over the last few years so they bring me their Oregon deals I CLOSE them then we do a little something to them and remarket them NOT before we own them ...One got turned in by a neighbor for putting a for sale sign in the yard .. the neighbor wanted the house was pissed off knew the person who put the sign in the yard did not own it and filed a complaint.. Oregon is small enough that you file a complaint and an investigator is going to take it on.. Just like when I sent in the wholesalers flyer I got .. I doubled checked though I looked him up in the DRE  his license he let go a few years back I did a date down on the property same owner 30 years.. and so I said to the state hey what gives her he is using the exact same marketing materials my wife the broker uses on our houses there is no mention of assigning a contract you read that flyer and any sane person would think he owns the property..   

Originally posted by @Bader Alameri :
Hello everyone. My name is Bader Alameri and i live in San Jose California and I’ve been learning about real estate wholesaling for a while now am I believe I am ready to get on the field and actually flip deals. Now the fact that I live in California which is a very expensive market, I know that it will be much harder to find deals that are at least 70% of ARV. So my question is how can you do business out side of your local market virtually? Or is that even a thing? I thank you guys in advance for such a great website with so much valuable content. And also I would love to connect with investors and wholesalers that are in my local area already. Thanks a lot guys

 Flipping properties out of state as a novice investor is a non starter. Flipping is a very tough business. The market is at it's peak margins are thing. You'll need a competitive advantage to outlast your competition. Not being local to the market is going to add far to many hurdles in your way.

@Courtney M. @Michael B. @Omar Khan

I'm with these guys all the way! It's so refreshing to hear people say woah why would you flip when you can cash flow with way less risk. So many investors are in love with BRRR even if it doesn't make sense in this market! There are so many solid cash flowing deals, at least in OKC where no work is required. No need to fight a good thing. When the market turns we'll all be BRRRing haha.