Wholesaling a Wholesale deal?

Question

I found came across a wholesale deal and I was curious to know if people wholesale other wholesale deals?

Here are the specs:

Asking price: $32,900

Repairs: $10,000

ARV: $80k

Rents for $850/mo

Could I wholesale this deal or would it be better to do an assignment of contract?

Phil Pustejovsky · Answer

For what it's worth, the Real Estate Commissions of this country are on a mission to shut down non-licensed real estate practitioners.

If you cultivate relationships with a few key investor buyers and essentially become a deal finder for them, bare in mind that the Commissions across America are going to consider that brokering which requires a real estate license.

Under scrutiny, a Commission is going to deem the Joint Venture approach as brokering as well since technically your Joint Venturing to find a buyer on behalf of the person who has the equitable interest (unless you can throw some serious money at legal research to find the case law to support it and even then you may not find it). For those that have done the Joint Venture approach in the past, chances are, they haven't been investigated by their state's Real Estate Commission yet.

In many states, these Commissions have hired people full time to scour Craigslist, looking for what they call "perpetrators of unlicensed real estate activity."

If you have your license, you can disregard what I have just shared. If you are not licensed, you may get lucky for a while and get away with it, but keep in mind that the Commissions are on the hunt right now, like never before.

Phil Pustejovsky · Answer

If you could get a contract in place with the original seller, then you could attempt to wholesale the deal to a new buyer without the need for a real estate agent since you would have obtained equitable interest by virtue of the fully executed bi-lateral contract.

However, if the wholesaler will not allow you to go into contract directly with the original seller (or the wholesaler demands his/her fee to assign his contract to you prior to closing to which you would have to come out of pocket a significant amount of cash with no guarantee the deal would close which is typically not a good idea), you would need a real estate license to avoid the appearance of brokering the deal (practicing real estate agent without a license). Assuming you were licensed, then you would attempt to get a commission for bringing the buyer to the deal.

Alternatively, you could buy the property with cash or a hard money loan and then try to flip it.

One lesson you can obtain from this experience is that the key to wholesaling is to get to the deal before anyone else does. That wholesaler is in the position in this deal that you want to be in.

Account Closed · Answer

So is that in a sense getting rid of wholesaling altogether, without RE licensing?

Brian Gibbons · Answer

The DRE of California wants you to be licensed to talk to any home seller about selling their house.

I believe it is smart to get licensed in California.

Andy Wong · Answer

I would agree with what George here has already stated, and I'll even venture to make some additional recommendations. If you can provide something of value to the table - such as bring in an end cash buyer who can close - I suggest simply offering a no-obligation joint venture agreement to be able to market his property with a 50/50 split of the wholesale profit if you do bring in a buyer. If you do so, the spread is obviously much more appealing to a potential buyer than marking up the price and involving multiple middle men into the deal.

I would focus primarily on building relationships with cash buyers; and a few quality ones, doesn't have to be hundreds. I've learned that cultivating a few of these types of relationships are much more beneficial in the long run as you know exactly what they want AND you'll end up essentially 'shopping' for them, which we all know is a much more streamlined and methodical way to approach the hunt for deals than doing it backwards. Learn the numbers that work for them, the types of properties they'll close on, and most importantly…the specific areas in which they're looking for new acquisitions. With this 'shopping list' you will position yourself 10 steps ahead of your competition by zoning in on your market and knowing EXACTLY what you need to offer on a particular type of property in order to make your desired profit.

Forgive me for going off in a tangent. Moving forward, the reason I'll reiterate the topic of AREAS is because areas are also very crucial to the overall VALUE of the property - it isn't simply the numbers. The best advice anyone can give you regarding this deal is this: Do your due diligence! Ensure the specific area is one that is flourishing, or at least one that would attract decent tenants. If it is located in a part of the city that is overwhelmingly unfavorable then I suggest not wasting too much effort on this deal as there will more than likely be a deficit of cash buyers, but more importantly, there will be no one interested in purchasing properties in this area no matter what the spread.

Bill Jacobsen · Answer

I find that it is not too difficult to find houses in St. Louis for sell that meet the so called 2% rule.  So as an investor a price of $32,900 + $10,000 in rehab is not exciting to me, let alone paying you a premium.  An investor who believes he could resale the house to an owner-occupied for $80,000 might be willing to pay above the $32,900.

Just be careful that this is really a good deal.

Bill

George Maka · Answer

@Kelly Miller I would call the investor and just ask them. Tell them you're a wholesaler and you have a buyer. Ask them how much they want to make on the deal and if you are able to get anything over that price, would they be fine with you taking that spread. Ask if they'll give you 1-2 days to find the buyer. If you can bring in a quick buyer, I would think the wholesaler would be fine with it as long as they make their original spread.  Just make sure you keep your word and bring in that quick cash buyer.

George

Kelly Miller · Answer

I haven't contacted the seller yet because I was not sure if it was worth the time. The way the ad was written, it seems like it was written by a wholesaler.

Tyrus Shivers · Answer

@Kelly Miller

Kelly, do you mean that this deal is already under contract by another wholesaler and you are trying to buy from them and then sale to another investor? If that is the case you should attempt to joint venture with the wholesaler who already has the contract. You bring the buyer and split the wholesale fee.

If you are simply saying the numbers make this a good deal for wholesale, then you must get the property under contract and market your interest in the contract. You may not market a property you do not own especially if you do not have it under contract.

Wholesaling a Wholesale deal?

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