Updated over 5 years ago on . Most recent reply
Confusion with wholesaling and assigning contracts
Hi everyone, I'm still extremely new to this real estate thing. I've wholesaled one property about 5 years ago but after that I kinda got pulled away from it for awhile. Anyways, during the time I was away I learned a lot about business and financial management and I'm ready to dive in and get back to it. The last place I worked at I was talking with one of the owners and he does coaching for our local REA groups and does millions of dollars in deals each year in real estate investing. I was talking with him about wholesaling and he says that the "correct" way to wholesale a property is to actually purchase it under an LLC and then sell the actual LLC that owns the property. To me this seems to be a little over the top and unnecessary. I do see the logic behind it but, if I were to do it that way, I feel like I might as well rehab the property and flip it instead of going through all of that effort for a few thousand dollars... The deal I did before I just got the contract signed and then just assigned it and it was done. No problem. So my question is, does anyone else use LLC's this way for wholesaling or is this crazy?
Most Popular Reply
Utah and many other states have been cracking down on wholesaling because the regulatory bodies view it as practicing real estate without a license. If you do it with a license, there is some ambiguity with what needs to be disclosed and agency representations. Moreover, in Utah the state approved purchase contract has a clause in it regarding assignability that requires seller's permission.
By purchasing with an LLC the same buyer closes on the deal as the buying entity in the purchase contract. This avoids some of pitfalls above. The same thing can also be accomplished with trusts as the buying entity.
A disposable LLC only costs $70 to register in Utah. So it's not that cost prohibitive.
But you definitely want to be talking to an attorney before getting into this to make sure your entities and assignments are done correctly.
@Jeffrey S. Breglio has a lot of good resources for wholesaling with an entity as the buyer.
Good luck!