Liberty Hill, TX · Member since 2016 · 85 posts · 96 votes
Hello BP,
Today I closed on my first wholesale deal and wanted to share the experience with you guys and also hope to encourage others who are getting started to continue their journey and not give up!!!
The Deal: My brother-in law is a realtor and recently sold his house via owner finance. The next door neighbors had asked him to help them do the same thing with their property but instead him and I got the property under contract and sold it cash for $16k more than the contract sales price. We split the assignment fee.
There are some many people who I would like to thank but unfortunately cannot tag anybody lol,
@SeanTerry, @JoeMcCall, @MichaelQuarles, @matttheriault, @benleybovich and of course Josh and Brandon Turner. You guys have all inspired me to do what I do and keep going every day.
My advice to all the newbies out there is to educate yourself, listen to podcasts, attend your local REIA and meetups, find a mentor and last but not least, talk to everyone you meet and tell them what you do because you never know where that first deal may come from.
@John Thedford There's no need to comment negatively on every single post related to assignments.
If he had double-closed on it the same day for a 16k profit, would it still be taking someone's equity? Do you know the property's condition and what the seller's motivation was? Ramon and his partner did this deal as investors and not agents, so yes they can split the profit. It's not a commission split.
@Andrew Martin Thank you, that was my intention with the post, to motivate others who are new to this business and let them know that hard work pays off.
@Michael Long You are absolutely right, when I got started in real estate I made a conscious decision to not get my real estate license because I did not want to be capped making 3-6%. My brother-in law is a realtor, my wife was licensed at one time and really didn't make much money and my mother-in law is also a licensed agent. I don't have anything against realtors and I believe there is a place for everyone in this business.
@Iverem Rose Thank you. My goal is to build up enough capital to be able to invest in commercial real estate, more specifically multi-family investing or at least get involved with a syndication to learn the ropes.
A state investigator recently told me the two most common victims of unlicensed broker frauds are elderly OR people with a poor grasp of the english language. This is coming from a state regulator charged with gathering evidence of unlicensed brokering-not a personal opinion. Florida is clamping down hard on these operators. There MUST be a reason! Bill Gulley offered the term "public nuisance" but "predator" may be a better term in many cases.
@Marian Smith Are you upset because you did not get the property or missed out on this deal? You have no idea what kind of relationship we had with the seller. Exactly, Round Rock is a hot market, we spend a lot of money marketing in the area and there is tons of investor activity. How do you know we convinced them not to go the MLS route? I had another gentleman in a similar situation a few months ago who decided to go the MLS route and guess what, he ended up taking the property off the market because he couldn't sell it.
When I had my bookstore and I sold books at retail, even though I paid wholesale price to buy them. This wasn't disclosed to every customer that walked through the door. I must have done something wrong?
Not at all.
However let's say you had a antique bookstore and I brought in my "whatever" and you said it was worth about $50 so you paid me $35. Then you laughed as you called the collector to whom you would sell it for $16,000. Did you do something wrong now?
I believe there is legal precedence to say you have.
@Michael Long commissions are negotiable... in my early years the stone age I had a niche of selling very hard to sell rural land in Northern CA...
my standard fee was 15% with some as high as 30%.... why because literally no one else could do it. 50 miles back into the national forest on dirt roads.. pre google earth.. find the property with a USGS quad map figure out where it lies on the ground and then present and close.
I also took a net listing in WA where its legal from a builder who was in trouble with brand new duplexs 22 of them... I took the net fee at 300k Per and went to San Jose spent 50k on a one weekend seminar that brought in 400 buyers and sold them all in that weekend for 330k.. so made 660k in one weekend.. minus my expense's of course.. so no as realtors we are not capped.
so I am all about making big dough on real estate.. in the timber business if I detailed the profits in that business there would not be a tree standing all you wholesalers would be out there buying trees LOL Carry on
@Jay Hinrichs lol yea we'd be gasping for air. I believe a person should make what they can negotiate to get. If you're informing someone of all their options, you've done your job. I believe someone said it in a prior post. Who honestly owns a home and doesn't know it's value? If you don't then honestly that's shame on you, especially if you're trying to sell. But I have no problem how much someone makes and that always seems to be the brokers and realtors problem. How much a wholesaler made on the deal.
@Michael Long of course I don't want to be a total hypocrite ... having dealt with distressed sellers for UGH going on 4 decades you have three types.
normal
semi normal
and delusional
Normal probably has a good handle on value.
Semi could be off a tad either way
Delusional could think there home is worth 2 X anyone else because they have a screened in porch and a new water heater..
I bought a land deal years ago were the seller was out of state and in CA.. assessed value on your tax bill is usually about 40% under FAIR market value.. so when asked what they wanted they just said assessed value.. now in many parts of the mid west and deep south.. Assessed or tax value is FAR above FMV espically in Hoody type areas... but that's what they wanted and it was bare land that could not be built on at the time.
So that was 1994.. non buildable 4 acres I paid 27k for it tax assessed value.. FMV maybe 40k at the time they inherited it and just wanted to dump it.. I make my disclosures as a broker etc etc.
Fast forward to today. and well Geez the city grew out to me and right across the street is the largest Indian Gaming Casino in CA... called Graton.... and my property came into the city after 26 years zoned mixed use resi... and I have of course listed it for 3 million... no takers yet.. but who cares what I make... as long as I disclosed up front paid cash... the city limits are one lot away and lots on the other side are still non buildable and value is not much.. ( won't perc)
When I had my bookstore and I sold books at retail, even though I paid wholesale price to buy them. This wasn't disclosed to every customer that walked through the door. I must have done something wrong?
Not at all.
However let's say you had a antique bookstore and I brought in my "whatever" and you said it was worth about $50 so you paid me $35. Then you laughed as you called the collector to whom you would sell it for $16,000. Did you do something wrong now?
I believe there is legal precedence to say you have.
And what exactly is that 'legal precedence'? Also, does that 'legal precedence" apply if I (willingly) bought the book for $16,000 and then was only able to sell it for $35?
Congrats @Ramon Cuevas! As long as everybody was truly happy, then it's a big win!!
@Jim Kent Difference is that homeowners are often not in the business of buying and selling houses. Often times they aren't even business people at all. So these folks should be viewed differently and afforded different protections than suppliers/manufacturer/distributors/stores that a "salesperson" would be dealing with...if a business allows itself to be ripped off that's very different than preying on regular citizens.
In a perfect world yes, but in the real world no such thing. And sales persons are everywhere, they just have different names, they still sale you. I have never had protection as a buyer and ignorance costs me a lot of money. I have only been in USA since 1995 and even I know better, so I am sure you know all these already but here it goes in case you are interested in the way I see it.
In the real world an iphone production cost probably about 200 dollars and then they turn around and sell them to you for 795 dollars. Guess what I am a regular person, but I am smart enough to go with a cheaper smart phone brand. The pork meat in Florida cost about .80 cents per pound but here in Austin, Texas they sell it for 2.00 dollars. Again, regular person here; I feel rip off every time I buy pork chops. A taxi driver charges you a lot of money just to take you around the corner. If you choose to ride on a bicycle you could die because those drivers that can't even see a car for sure are not going to see you, so instead I bought a car, cash, and take myself places. Now why did I buy a car cash? Because when I go to the dealership no matter how hard I look I never see anyone there trying to protect me from the sales person, and if I pay for the car in payments they charge extra thousands of dollars. In case you are wondering everyone sales you on getting a regular J.O.B. nice, indoor, you know 9-5, stable, where they are never going to laid you off, then I realized that getting a degree, or even showing up on time doesn't guaranteed any of that, again ripped off. My solution, educate myself that way I am better and not expect anyone to protect me from anything. I take personal responsibility.
“Don't wish it was easier wish you were better. Don't wish for less problems wish for more skills. Don't wish for less challenge wish for more wisdom” -Jim Rohn
@Jim Kent it's on you as the buyer to negotiate what you can from the wholesaler. If the deal fits your numbers, why then count the wholesaler's money when you see the contract price? If the deal works for you, the deal works for you. I mean the wholesaler isn't counting your money when he sells it to you, why count theirs?
I know you said you wouldn't deal with a wholesaler again in the situation you stated, but I know plenty of wholesalers that would remove you off of their list if you start counting their money, when you had no problem or agreed on an the offer price from the beginning.
Also, I don't know about Austin, but wholesale fees where I am can run up to 100K & these are assignments not double escrow. The highest I've ever done is 35K, which I co-wholesaled & my buyer raised his offer to get the deal.
When you flip a house are you not trying to make as much as you can on the deal, or if your property is in a bidding war are you taking the lowest offer? I'm just saying!
Wow, two people make quick, easy money and one of them is supposed to be wrong?? Mind boggling to me...
When I had my bookstore and I sold books at retail, even though I paid wholesale price to buy them. This wasn't disclosed to every customer that walked through the door. I must have done something wrong?
No one has an issue with your scenario as that is how business operates. However the scenario presented by the OP is similar to this:
You have a bookstore and you are perceived to be an expert in your field. You additionally offer a service to appraise people's book collections for a fee. Mr Smith brings in his collection of books as he is in need of money and needs to sell his books asap. After your review, you appraise his collection at $2000 knowing that the book collection could easily bring $18,000. Mr Smith, needing the money, sells his collection to you for $2000 and you proceed to turn around and sell the collection for $18,000. Wouldn't we all have an issue with this ?
I don't know the OP or his process but it all depends on how he presented his offer. With us we walk them through what home are selling for in their market. We walk them through the condition of those properties. We walk them through the cost of those updates. We then try to create a mutually beneficial scenario with the seller. We don't lie, play down their values, or play games.
We also don't get their hopes up like some of these uneducated retail brokers do either.
I personally would rather educate a new investor.
I would rather teach a new wholesaler how to act ethically than bludgeon them for what I perceive as mis doings.
I've had great talks with both folks on different sides of this dilemma.
You can always act as principle. Close (with a partner, private money, hard money, or your own cash) and there is no gray area.
Individuals throwing out stories of states with different laws, puffing their chest, and making accusations aren't going to win the original poster over.
@Dimitri Lopez Every single example you gave regards consumer protections. Which is another animal entirely but sure, there are those protections by law in extreme cases when it is necessary. What I was talking about however was protecting sellers who are unaware of what they are selling. See the example given by someone earlier about antique collectibles. Or selling your organs. It's already illegal anyway but supposing it wasnt, would it be alright for a middleman to prey on people with no access and resources rather than pay a more standard fee and earn a commission?
In any case, I have no issue with the concept of wholesaling, and like I said earlier, no issue with my wholesalers making large sums of money. I do, however, understand where the naysayers are coming from. It is important for a wholesaler to be clear and transparent to their sellers not only in what they are doing but also what they are promising ($10 EMD and/or shady loopholes are BS).
In my opinion, since the brother who is an agent was first contact about selling the house, he is subject to an even higher standard. I tried to find whether it was from NAR or TAR(Texas Assoc of Realtors, but while surfing through my continuing education class online. the agent now needs to provide the seller with a CMA and net sheet in cases where they are contacting regarding a potential listing and then become a principal
For the record, I have no problem with the OP making 16K. Hopefully for all involved, it was done the right way
What good are whatever laws you are mentioning when everything I said it is still true? And, are you telling me that a guy from Cuba, with English as second language, has access and resources that Americans don't have access to?
I really can't believe that in this country people are freaking out about a guy making a 16 K profit on a legit business transaction. Everyone is acting like he scammed someone or stole it. Truly unbelievable. And he definitely didn't break the law.
Congrats @Ramon Cuevas! $16k is awesome. With the time put into wholesaling: marketing, taking and returning calls and emails, going out to see properties, negotiating, etc. the amount you make is on the HUD and since investors don't want to do all of that work themselves you can charge what you want. I give my buyers a copy of the original contract as well as our assignment contract so they can see what I'm making and if they want to back out of it then I let them. Again, congrats!
I grasp why many wholesalers get a bad wrap, I do. But what I can't wrap my head around is why the moment someone states they are one, it's a feeding frenzy? Granted, many of the more educated and seasoned individuals in this thread have a more moderate approach to this method of RE. Speculations of "college kids thinking they deserve something" "willing to do anything to make more money" as being a general method of describing wholesalers. That's quite an arrogant stance to just assume that someone enters a job with nothing but greed on their mind.
I know plenty of upstanding individuals leaving very respectable and well paying careers to get into RE. Some choose the wholesale method to build up more capital to work with, with the intent of transitioning into flipping. This is the category I fall into. However while you were busy generalizing us as dirt bags you didn't bother to ask about my military background, or my time as a defense contractor, or that I am taking a giant pay cut to have more flexibility to spend time with family. Circumstances are often overlooked by those who have preconceived notions about individuals they have never met.
Wow, two people make quick, easy money and one of them is supposed to be wrong?? Mind boggling to me...
When I had my bookstore and I sold books at retail, even though I paid wholesale price to buy them. This wasn't disclosed to every customer that walked through the door. I must have done something wrong?
No one has an issue with your scenario as that is how business operates. However the scenario presented by the OP is similar to this:
You have a bookstore and you are perceived to be an expert in your field. You additionally offer a service to appraise people's book collections for a fee. Mr Smith brings in his collection of books as he is in need of money and needs to sell his books asap. After your review, you appraise his collection at $2000 knowing that the book collection could easily bring $18,000. Mr Smith, needing the money, sells his collection to you for $2000 and you proceed to turn around and sell the collection for $18,000. Wouldn't we all have an issue with this ?
Well, I guess it depends whether Mr. Smith has done his Due Diligence then?
Your over complicating the story. Generally, an appraiser is not a retailer. Mr. Smith would first take the book to an appraiser. An appraiser has a moral and LEGAL obligation to find the fair market value of the book, car, coin, house, widget, etc. The appraiser does not buy the book. He gives it back to Mr. Smith, who in turn, can sell it to whoever he wants. He can sell it at a flea market, online, EBay or a pawn shop. Mr. Smith is desperate to sell the book to pay off Child Support liens. He goes to the pawn shop....
Had Mr. Smith NOT had the appraisal done, the pawn shop would have been very happy to tell him what the book is 'worth' (you see where I am going). Is the pawn shop set up legally as an appraiser? No they are not. If the pawn shop told him it's worth $2000, he has a choice to make. There is no gun to his head.
Just like in the OP. The seller had every legal right to NOT sell the property to the wholesaler, get a professional appraisal done, list it with an agent and get the $16000. Obviously the buyer would not have got a deal, so he loses.
I recently bought a 78 Trans Am Y88 Gold Bird. Oh, I buy and sell cars (I have to be careful sharing any of my success stories though...apparently there is a 'cap' on how much money a person can profit). I gave the seller (original owners) what they wanted (although they could have take it to a dealership). I had the car professionally appraised. No, the appraiser did NOT buy my car (it's called Conflict of Interest...a VERY legal term). I then sold the car to an overseas collector in Kuwait. He got a really good deal and was happy. Kind of a win, win, win. Did I do anything illegal? Nope. Do I fell guilty? Nope. Did everyone get what they wanted? Yep
To all of you who are new to Real Estate Investing, and may be following this thread, don't be discouraged by haters and naysayers. Having owned and sold many different types of businesses over the years, I've always had people there to discourage, complain, deflate and just want to wreck your every day pursuit of trying to rise above. Now, in all fairness, there are genuine concerns that have been brought up. There has to be checks and balances. One trick, learn to differentiate, fact from opinion...huge difference.
However, above all that...do it properly! Do not lie, cheat, steal or break the law. Many of us have put in much time, study, effort and money to invest in RE the right way. There does not seem to be anything illegitimate done in the OP and wholesale deals and RE transactions happen everyday across the country...legally. Of course, there are bad apples in every applecart. Throw them in the garbage and keep moving on. Bigger Pockets is a great venue to learn to from successes (and honest failures). Whether you bird dog, wholesale, flip, loan or rent out, do it well and keep striving for your goals!
