Wholetaling...

33 Replies

I am working a wholetale deal right now and I have no idea what I am doing! But I dont care. I know the house is move in ready, the seller wanted to sell at a little bit of discount and she wasnt in a hurry, so I went for it. Im not sure how I am going to close this once I find the end retail buyer, I am concerned that a lender wont pay a 15k "consulting fee". How do I make my money on the difference? I also dont want to use transnational funding. 

If the numbers work you can tie the property up in a contract and wholesale it to an end investor.   Once you have it on contract you can market it here on Bigger Pockets.   Here is a link that will help you out.   Its for New Investors

Good Luck to you!

http://www.biggerpockets.com/forums/93/topics/1362...

Gerald, I understand that. This doesnt work as a wholesale, hence the reason why I titled the thread "wholetale". More than likely the end buyer will be a retail buyer since I have it listed for retail value. 

I'd suggest finding a lender who will allow you to mark up the price and then make your end-buyer use that lender.  Most lenders won't go for this, so if you allow your end-buyer to choose their own lender, you're likely going to end up wasting a lot of time.

I'd try to find a private money lender who won't charge you an arm and a leg. Or, because your seller "isn't in a hurry", have them seller finance the deal. 

Your "fee", since you will not use transactional funding and actually 'get the deed', will show up on the buyer's HUD-1. You call it a "consulting fee" but where do you propose to put said "fee"? The default "fee"s on a settlement statement are "broker fees", "appraisal fee", and "Settlement or closing fee". All three of these fees are for licensed activities. Licensed broker, appraiser, lawyer.

Just so you are prepared, I expect 100%  of lenders to question your fee. Read the Fannie Mae selling guide to see how they handle such "fees". It's only 1326 pages, but it should give you a hint to if your fee will fly.

https://www.fanniemae.com/content/guide/sel041514.pdf

The more I look at the wholesaling or Flip part of the business it looks like if an investor doesn't obtain a property at 50% ARV, then they don't have enough headroom to preserve an above average profit margin.

This is what you do.

Lease Option Deal.

If the house has no loans tell the seller that you will pay them in monthly installments for 2 years then pay the difference as a lump sum amount. But first they will need to quit claim deed the property to you.

if the home is still under a mortgage tell the seller you will take over the payments for 2 years and then buy it from them.

Get a tenant to make the payments and price the rent at peak market value to pocket some cash within that time. 

@Garrett Zander   

The term 'wholetailing' as I've seen it applied may resemble the project I am working on now. The wholetailer works as a middleman in taking a property from 'wholesale' (yes, I do hate that word) to 'quasi-retail'. In our case, a $71K acquisition with $120K ARV... but requires about $6-8K and a few weeks to 'set the stage' for a quasi-retail buyer.

The middleman closes, does enough to eliminate impairments, then sells below retail but not at  wholesale levels.  Our sale price, if we were to wholetail, would be about $95K. Remaining items for the retail buyer would be final painting, appliances, flooring.

This is my experience with the term... but unlike typical 'wholesaling', it involves buying the property.

Originally posted by @Ricardo Sandro:

Lease Option Deal.

If the house has no loans tell the seller that you will pay them in monthly installments for 2 years then pay the difference as a lump sum amount. But first they will need to quit claim deed the property to you.

 

If the house is quit claimed, it's not a lease option -- the quit claim relinquishes any interest the seller would have.  And I don't imagine any seller with knowingly quit claim a free-and-clear property without a security agreement (mortgage or deed of trust).

@Garrett Zander  the only way I've heard that this can be done (never actually did this) is to have the seller allow your fee to be recorded as a mortgage (not one that necessarily secures a loan but maybe one that guarantees or secures 'performance') against the title. That way you get paid off at the closing as a lender.

I would suggest that you at least perform enough repairs on the property to get a certificate of occupancy from the municipality. My experience is that it will be a nightmare trying to sell to a retail buyer using a traditional lender and the house doesn't have a CO issued. Next to impossible.

I'm new here, and don't want to sully the atmosphere, but...

"I have no idea what I am doing! But I dont care."

It's a testament to this community that people are STILL offering you (OP) free (and very valuable) financial advice, even after you come right out of the gates swinging with that egregious comment.  

Bravo BP.

@Michael Q. gives his 'wholetailing' formula in reim podcast #3 i think (google joe mccall podcast).

I imagine you need some private financing to close on this thing.

@Jeremy T.  let me rephrase this, I have no idea what I am doing with a "WHOLETALE" deal...

@Jeremy T.  and by the "i dont care" line, I mean, I am still pushing forward with the transaction and figuring it out along the way. 

@Ibrahim S You may be on to something with me putting a lien on the house for the difference... The house needs no repairs, its move in ready. Hence the reason again why my end buyer will be a retail buyer. 

@Chris Martin  Correct, thats why I asked the question. No lender will pay me 15k for anyt "fee" or anyway I title it... In a cash transaction thats no problem. But the buyer on this deal will be a retail buyer, probably with a loan. 

My limited knowledge of wholetale deals, is that if you have equitable interest in the property you can sell it. Which is what I am doing. I am "buying" it for 165k, and selling it for 190k. Collecting the difference. I am just trying to see if there is an option for this, without me actually buying the property. 

Would a double close work on this? Can I use the end buyers funds to fund my purchase? I would think not, with the end buyer using a lender. But maybe you can. 

Also although my seller may not be in a hurry, she isnt interested in any creative financing deals, like owner finance or lease options. She wants to make some money and move on.

Garrett - 

See my post above...you need to find a lender first who will do this and then ensure that the buyer uses that lender.

Typically, wholetaling involves actually closing on the house and then doing some minor work before reselling; what you're suggesting is just wholesaling to a retail buyer.  It's possible, but you need to find the lender first, as that's going to be the hard part.  After you find the lender, the rest is easy(er)...

@Russell Ponce  crazy timing, but he just did the Podcast for BPs episode 77. LOL this weeks episode. Guess I need to listen to it! 

Garrett,

"I am concerned that a lender wont pay a 15k "consulting fee"." 

We are new too but typically if your end buyer is a retail buyer then he/she already paying your price (190K).  So what is this 15K "consulting fee"?  You get Assignment fee or "consulting fee" when you sell to other investors/rehabbers.  

You must put the property under contract and then as Gerald Harris said market it to your buyers or here.  Also if they are retail buyers they will need a mortgage.  Lender will do his own appraisal on the property for that.  No lender will allow to mark-up the price.

You are confusing wholesaling with retail buying.

Originally posted by @Helen Kolton:

We are new too but typically if your end buyer is a retail buyer then he/she already paying your price (190K).  So what is this 15K "consulting fee"?  You get Assignment fee or "consulting fee" when you sell to other investors/rehabbers.  


 He is planning to double close, so the lender will see the A->B transaction and know that the property is being marked up.  The lender will have to be okay with the double close (and any title risks associated with a double close) and also be okay with the mark-up.

If he purchases the property and then turns around and sells it, the lender will see the previous purchase price and will likely want justification for the increase at resale.

Either way, he'll need to find the lender himself first...

@Garrett Zander  It's all good, thanks for clarifying.  Since wholesaling is my chosen avenue to get involved with real estate investing (due to my desire to scale my business based upon being self-reliant in finding deals for fixing-and-flipping in the future), I'm a little sensitive to (perceived) acts of disregard for the profession. 

Good luck with the deal.

Originally posted by @Russell Ponce:

@Michael Q. gives his 'wholetailing' formula in reim podcast #3 i think (google joe mccall podcast).

I imagine you need some private financing to close on this thing.

Here's a link from that interview I did with @Michael Quarles ...  It is a little old, but still very relevant:

http://www.realestateinvestingmastery.com/episode-...

Joe

@J Scott Gottchu. Time to find a lender. 

I like using an option strategy for these type of situations. Double closings can be problematic in this area.

Congratulations on taking action.

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