Wholesale Exit Clauses for Those Who Have No LLC

26 Replies

Hey guys,

I don't have the money to be constantly buying LLCs for every offer I put on a house through a realtor. My mentor (who does lots of wholesale deals through realtors) made it clear to me that I need to be sure to have a lot of exit clauses on my contract that will serve protect my assets/liabilities (my home, car, etc) in the event that I get sued. That being said, my mentor is busy and can't help me revise my contract right now.

Could any of you guys point me in the right direction in regards to these clauses?

Do you know about the clauses he's talking about?

Do you assign contracts through your personal name yourself and use them?

Please, let me know.

Thanks.

Is this question related to putting a house under contract that is listed with a realtor, and then assigning it? Or is this a situation where you are finding off market deals?

and what are you going to get sued for...  no one is going to sue you to take your car  :)

@Jason D.

Let me rephrase that; a new LLC for each contract.

The strategy behind that is separating all of your assets under different names so that, god forbid, if someone were to sue you they could only seize the assets under that name.

It's protecting all of your other assets essentially. The only thing you could potentially lose is the one property vs ALL of the properties you have if you were to put all of them under one LLC.

@Khenan Newton if you plan on having these offers accepted, the fewer the contingencies, the better. I'm going to assume that any realtor worth his salt is going to advise his client to reject an offer with any out of the ordinary contingencies. Financing, inspection, and appraisal are about all you'll get away with. No need for an LLC, unless you are worth a lot of money and have valuable assets.
Originally posted by @Khenan Newton :

@Jay Hinrichs

You never know what these people might want haha

My car might be old but that just might be what someone fancies if they feel the need to sue.

 been doing this 4 decades no one sues anyone to just get a car in a real estate transaction.. unless you have substantial real estate holdings or are known to have LOTS of cash .. no one is going to spend the money to sue you... its just fear mongering.. 

and frankly one of the reasons dealing with wholesalers is so bad.. no accountability with most of them they just do deals that don't work and walk.. kind of like trying to sue a dead beat tenant.. 

@Jason D.

You just made a lot of sense, brother.

In which case, if I was worth a lot of money, then I would (hopefully) have enough money to produce an LLC per contract.

So you're saying I don't have much to be concerned about when it comes to getting sued for everything I own (I'm a college student so I don't have much), or is something else the case?

Just trying to figure out where I should put my eggs here. With no contingencies and no LLC I'm not sure how safe I feel haha,

@Khenan Newton if you're strategy is to assign contracts, you wont need an LLC to do that. If you plan on owning the properties, then an LLC may eventually be something to look into. Wholesaling, when done correctly, will make you an asset to investors and distressed buyers. You need to make sure you understand what a deal is ,though, because the seller is putting their financial future in your hands, and you have to pull through for them. Before thinking about making an offer, learn your market, learn to estimate renovation costs, learn after repair value. Bad deals cost you time, money, and your reputation. I have guys that email me constantly with "deals", that are laughable at best. After a wholesaler sends me more than a few ridiculous deals, I just delete the emails. Do your homework, wholesale correctly, and you'll be successful.
@Khenan Newton Wow this was painful to read. There is zero reason to need an llc for each offer. Is your mentor an asset protection attorney selling you llcs lol? You probably need a new mentor

Hi @Khenan Newton ! As others have mentioned, there is no need to have an LLC for each offer. That would be very expensive and time consuming lol.

Definitely study and read a lot. Wholesaling requires you to be able to properly price properties to know how much to offer and costs for rehabs. Reading a rehab and negotiation book would be useful.

Best wishes for your wholesaling career, you're off to a great start by questioning your "mentors"!

This is truly awful advice you've been given. Instead of lying to realtors, using bogus weasel clauses, and wasting time and money on asset protection, find a mentor that can show you how to source deals. That should be the first, second, and third priority of a wholesaler. Find a good deal and you won't need to weasel out of it, perform on the contract you sign, and you won't piss anyone off to get sued. 

@Khenan Newton Like Nick said, you're being given horrible advice. This is not how you run a wholesaling business. 

Even the most successful investors don't make an LLC with each offer, that's just insane.

@Nick C. I love this site already--I hope there are more people like you on here.

When you say source deals, you're referring to marketing strategies, right?

D4D, bandit signs, sphere of influence/word of mouth, lead listings, etc?