I just started finding properties. Whenever I contact investors, the first thing they ask me it's the address. How do I protect myself? Is there a way to give them the address without fear of them going behind my back and directly contacting the landlord?
Thank you for your quick responses.
Do you have it under contract? If so there's your reassurance since you have something that would prevent any other deal from closing once you've opened escrow. If not then you're brokering without a license which is illegal so you'd have other more pressing problems.
I do not have it under contract. But, What if the investors pay you a finder's fee?
That's a fair question. After all you are investing a lot of time to find good deals. @Matt Devincenzo is right about having it under contract. This is how you protect yourself.
In addition to having it under contract for purchase, have them give you an option to outbid anyone that gives them an offer (right of first refusal). The way this works is once they have an offer that they accepted, you have the right to give them $1 (or $50 or $1,000, what ever you agree to) and purchase it using those terms. Make sure you make this option "assignable". This option will cost you some cash, because you have to give something of equitable consideration (value) in exchange for the option for it to be a valid option contract, but if you sell it's value right then you can probably get it for $20 or something. You would have to have an attorney draft this up for you, but it could be worth it for you. It's a document that you would file with the state register office if you do not end up closing on it.
The benefits of this to the seller is that they always have a chance to get a better price for their house and they don't have to feel bad about negotiating with buyers.
The benefits to you is that someone cannot go in and undercut you even if you do have a contract that expires.
But one thing to consider while you are starting is to build up some good faith. Even if you don't have your own properties, don't be afraid to pimp out some other wholesalers properties when you are building your buyers list. The way this works, is that when you are calling buyers to build your list, and you ask them what they are looking for, if you don't have something they like, recommend someone else's deal. That way you don't leave the buyer empty handed and waisted their time, and they will respect you for providing value and be warmer to you the next time you call them. On that note, try to work out something with other wholesalers in your area. There will always be lots of deals to go around.
Finally, if someone does decide to go around you, they will almost always find a way to do so. Don't let it get you down, keep working and moving forward and you will be very successful!
@Jean-Paul Israel about finders fees.
You can often get away with that. But it's still infringing on the problem that @Matt Devincenzo is talking about and can land you in trouble. Matt, how many people have you actually seen prosecuted for that?
I've seen people use marketing fees to try to get around this and I have not heard of any problems with that, but it is still on a very dark gray vector especially if you are getting any payment in result of performance and not just for consistent effort (like per call, or per house that you market to even if it doesn't close or result in a purchase).
Have you considered getting a RE license? You may actually enjoy it and be very successful combining your talent for finding deals and buyers. As a realtor people will respect your opinion more and it will open more doors for you!
In the end, I think you just need to learn to get lots of deals under contract (ethically obviously).
This is some advanced material, I LOVE IT ! But, this is the other challenge, how do I know if it's worth it to put a property under contract? How do I know how much investors will be willing to pay for it and then put it under contract at the right price?
Hey @Jean-Paul Israel a lot of people talk about this on here and that's one of the things that will make you a goo or bad wholesaler. From what I know you will have to know After repair value (ARV) of a house plus comps in the area of what other homes have sold for.. And if the house needs work you will have to know about how much to be able to pass on a deal to an investor at a good price. I believe what the property could rent for as well but I may be missing other things...
That's a hard question.
Ways to find value range from free to paid and the difference is normally the time it takes you to get the real data.
I use PME Blackbook (also known as REI Blackbook), but that's a paid service, and that works in NY. Another good service is realquest express (freeish).
Otherwise you can look at solds in zillow and trulia, but I don't like to use them much. Although they have gotten a lot better in recent years. You should look at zillow because the people selling their home will, and you need to be able to defend your opinion from that if zillow is not accurate.
Also, I think NY has that as public data that you can view online.
The best thing to do is call up some appraisers in the area and offer to take them out to lunch or dinner and ask them how they find the deals (or find an investor friend and on one of their appraisals, the appraiser probably put his source for his comps) and hopefully they are not just using the MLS.
Also, it is always worth it to put a property under contract as long as you are clear with the seller what you are doing. Your needs and their needs have to match and if they do, then you can work it out so that they work with you because of all the value you bring. If they are not motivated then there is nothing you can do in the first place as an investor. Don't let unmotivated sellers eat all your time, that's what realtors are for (and another reason to get a realtors license).
The way that you figure out if investors will be willing to pay for it is to find out who are the guys that are buying and just ask them. Look for a list of properties that are purchased that does not have the house itself as the mailing address. You can find a bunch of list brokers online (reisource.com , so on) or you can often have a title company pull you a list (as long as you give them your business). I use First American Title, but i'm not sure if they are in NY (I cannot imagine them not to be though). From this list, you can also see what they are actually buying. But call them up and ask them. Try to have some other deals from that area in your pocket when you do call them, even if they are not your own.
Unless you are in a rapidly appreciating market, the general rule is:
ARV *.65 - Repair costs - your profit.
The more competitive the area the higher that percentage is. Go to a REIA and ask around. In your area, it might be 100% of after repair value - costs because in 6 months the value in that neighborhood are expected to increase 30%. In that case it might be ARV * 1.0 - Repair costs - your profit.
This is learned from spending time in the market. A good realtor can let you know, but calling the buyers directly I think is the best.
One last hint, learn to create a good professional scope of work. This adds huge value to you are a wholesaler. It is a lot of work, but if you are good at it, serious investors will appreciate it and you will sell properties faster. And once you get a reputation, and your scopes are spot on, they will start to make purchases based off your recommendations. But that is about relationship billing and takes time to develop.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you