Wholesaling and Flipping in Houston Texas

11 Replies | Houston, Texas

Hi Everyone,

I'm in Augusta Ga and I'm just getting ready to start flipping and wholesaling in Houston Texas.

I'm looking for any advice about closing , any laws I should know about ....and do i need a Texas LLC to do business ?

I have my Ga LLC already.

I look forward to talking to everyone.


Thanks

Sean

Hi Sean,

Welcome to Houston! Be sure to check out the local REIAs to quickly find local investors and build your buyers lists. You don't need a Texas LLC but do need to find a few good title companies that work with investors. There are some new disclosure laws that you need to be aware of when wholesaling. No need to try to be deceptive, just tell everyone exactly what you're doing, be sure to have "and/or assigns" on the contract and make sure you are marketing your position in the contract, not the actual property.

Thanks for that information. I will be out there soon to get my feet on the ground and get going. 

I am looking for wholesale deals as well as deals that I can buy and flip if I need to.

Maybe one of you can answer this for me, I’ve debated with some people on other threads.

What is the value that wholesalers bring to a real estate transaction?

It is my position that the only way a wholesaler makes money is by getting a seller to sell a property for less than it is worth or by getting a buyer to buy for more than it is worth.

I believe wholesalers remove value from the transaction, they don’t add any.

@David Hines: it's a good question. I've thought about this too. One theory could be that wholesalers add value by contributing inventory to the market that would not exist otherwise. My understanding is that WS often find off-market properties that would not make it to the stream of commerce by other means, or at least facilitate them getting there faster (e.g., WS can liquidate a house for an estate a lot faster than by grinding through the probate process). Sellers may find that the upsides of WS in terms of speed of transaction and quick cash are worth somewhat of a lower price, which is plausible because the margins WS get on sale/resale are not great.

Overall not sure if I think WS add value to the market, not all market actors do for sure, but if I were to make the argument it would run something like the above. 

@ David Hines I think we hammered this to death in that other thread, didn't we?  We get it, you are a realtor and you think wholesalers are sleaze.  And I will humbly disagree with your position -- it is not a zero-sum game.  

There are lot of distressed run/down properties out there that you just aren't going to sell on MLS. Properties with foundation issues and cracks in the walls. Oh you think you will, I know -- you'll list it as a 'handyman special that just needs a little TLC...' and you'll tell the seller that it is just a function of pricing it to sell. That's a laugher, but nobody is here suggesting that realtors do not add value. Those houses won't pass any kind of inspection and damn sure won't appraise, so they are cash deals from the jump. In the end, maybe you'll sell it to some flipper, or a wholesaler that works with some proven flippers. Let's just agree your target market segment is real slim on these.

Now that is the case with distressed homes, but there are also 'motivated sellers' who just do not have time wait 45 days for your buyers with VA/FHA loans to close. Again, the solution is cash buyers, or some kind of creative financing arrangement that brings then current. And if the cause of the motivation is financial distress, then I would humbly submit to you that those troubles didn't begin last month when they were put on the pre-foreclosure list. It was been gradually snowballing, over months, maybe years, and during this time zero maintenance has been done on that house. So even in these cases, it is pretty rare that a wholesaler rolls up on a perfect, pristine house.

Here is where I will agree with you, David -- unless the wholesaler is willing and able to go through with the transaction, they shouldn't be putting it under contract.  If they are able to assign it to a flipper, fine.  If not, then they should be in a position to run with it themselves.  And my guess is that most aren't.

@David Hines I would like to add that when I talk to sellers, we ALWAYS talk through why they would not want to list their home on the MLS. They need to have a pretty good reason to give away a bunch of equity to an investor. And I could tell some interesting stories.

But I try to advise them to list if they can.  If there are just minor repairs need to sell it quickly, then what can they do to make that happen?   

So I try to swim in that end of the pool.... just wasting my time and theirs.  List it if you can.  

That still leaves plenty to work with.

Whenever I wholesale, i am always upfront with whoever I'm dealing with. I just simply tell them. I'm putting this house under contract with you for whatever price we agree to. I let them know that I will market the home to my cash buyers and that I think they will purchase within a certain length of time. I make my money based on what i sell it for. They usually are ok with it because they don't have access to my resources. If they are ok with it we have  a deal. If not, I walk away , no harm done. I always have my funding in place before we do a deal. At the end of the day, they know we aren't working for free. We are looking to make money.