How much of my own money do I need to put down for wholesaling?

Question

Hello BP, I was wondering how much of my own money I would need to put down to put a property under contract with a wholesale deal?

Can you put a property under contract with no money down and then assign it to a cash buyer?

Jaron Walling · Answer

@Luke Davis You don't need an exact amount of money to start off wholesaling properties. What you need is education, research, and experience to understand what a GOOD DEAL looks like. I would spend my money on those items before you even approach a seller.

In my opinion there are too many people in this space and they don't realize they're pushing "deals" that don't cash-flow or make any profit as a flip.

In my opinion there are too many people in this space and they don't realize they're pushing "deals" that don't cash-flow or make any profit as a flip.

Jay Hinrichs · Answer

quite common in the mid west and in low value assets.. in Texas there is the 100.oo  two week option money that is standard

you put up 100.00 for a two week due diligence period.. you dont close you lose it..

when I first came to Oregon from Northern CA  I was also shocked at the very LOW EM deposits and the use of promissory notes as EM deposits.. so folks were not putting up anything but a prom note as EM.. as things got more competitive up here you never see the EM note any more and deposits that were generally 500.oo to maybe 1000.00 have gone up to 3,000 to 10k.. on my new construction I require 10k .. these are 500k to 700k new builds..  mid west were they are trading these houses more akin to the price of automobiles you can get away with that 100.00..  I have had them offer me 10.00 and 15.oo   LOL.

Darius Ogloza · Answer

@Jason Selig Pardon my French but what kind of fool allows you to tie up his property for 21 days for a measly $100?

Darius Ogloza · Answer

I am as free-market libertarian as they come, but this strategy skirts past investment and starts to look and sound like predation.

Jaron Walling · Answer

@Diamond Smith If you found a deal that good you should probably buy it and renovate it yourself. If it's free of any major damage that's a great opportunity to learn renovation.

Jason Selig · Answer

My personal opinion when you are buying from a private person, I would offer $100 up to $500 tops. Midwest area around here, I like $100 amount. The money should be going to Escrow account either way; the current home owner isn't getting the money unless you drop out of the deal outside of normal contingency's that I would strongly advise to add. Minimal 21 day inspection period. If in question, try to extend it out or specify business days. To get cash buyers in, their contractors or try to come up with transnational money if you want to hold on to it to get more of a wholesale fee. Or if I have contracting experience...Pre-hab it...get more money back then a typical wholesale "assignment" fee. But if you can't find a buyer and have to back out, you can release the $100 to the homeowner for their time...or negotiate a different  amount to extend it? As far as do you need an amount - I have heard it both ways. Traditional realtors and mortgage providers want a percent or more down. Theoretically, you should need a dollar amount even if its a single $1.00 for the purchase and sales agreement to be valid. But it can go through with out any earnest money. I bought my own personal house through traditional funding without any earnest money down. And I am friends with a full time wholesaler that rarely does put any money down unless there is expected competition.

Jay Hinrichs · Answer

the way wholesalers assign contracts and advertise properties they don't own here in Oregon is Illegal .. a complaint to the DRE will get them a cease and desist letter..

Jason Selig · Answer

Yes, the low earnest money is for lower priced Midwest type of properties. (Indiana, Oklahoma, Arkansas, Kentucky, Tennessee, etc.) And buying directly from a distressed seller, tired landlord, or unwanted inheritance. It does not have to be a stereotypical old man/old lady that is just wanting money to go into a nursing home. Not all wholesalers are the same. Some of us have spent a considerable amount on education and marketing. Not just watching a free video and preying on the little old lady down the street like many traditional funding investors tend to think of us as. Would I offer $100 on a million dollar home....obviously not. A $100 on a $30k agreement or less....yeah. If the deal goes south...not a huge loss. If I am double closing or going through a real estate agent, I would put down at least $500. Again, this is properties that need to be rehabbed before likely even being able to be sold on the mls. And yes, there are people that get by without putting any earnest money down. I just read a post that I do believe, assigned three properties in 2 months. For a total of $42k and spent less then $100. Pure luck on stumbling on said properties or had referrals. But having a known cash buyers investors list, some local landlords wanting more rental property that more then fell into the 1% rule or better. That they didn't have to market for or negotiate with or pay their realtor 5+% commission for. If they are willing to pay $60k all day long for....can you really blame the wholesaler for presenting the deal and walking away with a similar profit as a 4-6 month rehab? And get paid in about 30 days instead of 7 months?

Jason Selig · Answer

My personal opinion when you are buying from a private person, I would offer $100 up to $500 tops. Midwest area around here, I like $100 amount. The money should be going to Escrow account either way; the current home owner isn't getting the money unless you drop out of the deal outside of normal contingency's that I would strongly advise to add. Minimal 21 day inspection period. If in question, try to extend it out or specify business days. To get cash buyers in, their contractors or try to come up with transnational money if you want to hold on to it to get more of a wholesale fee. Or if I have contracting experience...Pre-hab it...get more money back then a typical wholesale "assignment" fee. But if you can't find a buyer and have to back out, you can release the $100 to the homeowner for their time...or negotiate a different  amount to extend it? As far as do you need an amount - I have heard it both ways. Traditional realtors and mortgage providers want a percent or more down. Theoretically, you should need a dollar amount even if its a single $1.00 for the purchase and sales agreement to be valid. But it can go through with out any earnest money. I bought my own personal house through traditional funding without any earnest money down. And I am friends with a full time wholesaler that rarely does put any money down unless there is expected competition.

How much of my own money do I need to put down for wholesaling?

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