Ferndale, MI · Member since 2014 · 12 posts · 2 votes
Hi all! Everyone here is such a great help. Does anyone have any assignment contract resources that I might be able to use for a starting point for my own? I have found a few, but I can't get any clarification on exactly what is required for these contracts in Michigan. Seeing a contract that is in use will help me to feel confident upon moving forward. It is understood that any contract should (and will be) looked over by a Lawyer as to avoid any legal ramifications.
@Michael Heal I'm in Michigan too. We're very lucky here as real estate investors for many reasons. First, we have a number of markets that have low cost (not garbage areas), low tax, and high rent....can you say easy cash flow?
That means it is pretty easy to have houses set up to wholesale to other investors as rentals. When we do this, in Michigan, we just make all of our offers in the name of an LLC. This way, instead of having to deal with double closings, "assignments", etc..., we just sell the LLC (this is our wholesale) with the purchase agreement still to be executed. Then the new owner of the LLC executes the PA.
This is the second "lucky" thing for REI in Michigan...our LLC's only cost $50 to setup...with EIN number. We have at least 10 "on the shelf", ready to go at a moments notice to make offers.
@Michael Heal I'm in Michigan too. We're very lucky here as real estate investors for many reasons. First, we have a number of markets that have low cost (not garbage areas), low tax, and high rent....can you say easy cash flow?
That means it is pretty easy to have houses set up to wholesale to other investors as rentals. When we do this, in Michigan, we just make all of our offers in the name of an LLC. This way, instead of having to deal with double closings, "assignments", etc..., we just sell the LLC (this is our wholesale) with the purchase agreement still to be executed. Then the new owner of the LLC executes the PA.
This is the second "lucky" thing for REI in Michigan...our LLC's only cost $50 to setup...with EIN number. We have at least 10 "on the shelf", ready to go at a moments notice to make offers.
While I cannot speak for Michigan entirely, I must say that whatever you do, should be done with an LLC. if it's an astonishingly cheap $50 then get, like Joe said, 10. that is cheap protection - you never know what might happen down the line...better to have someone go after the assets of the LLC than your personal assets - assuming you don't sell the LLC.
Laws are starting to clamp down here in WA especially for wholesalers and EVERYONE has an LLC - at the high price of over $400 each.
This is the first I am hearing of (correct me if I'm understanding this wrong) getting a property under contract with an llc, then selling the llc and all of its assets (in this case the property) to the buyer of said property. Does anyone have any resources or sites that can tell me more about this strategy?
@Michael Heal Not quite right. You are going to sell the LLC before you close on the property. The new owner of the LLC closes on the property instead of you. The only asset the LLC owns is the PA to buy the property.
This is something we do all the time. It eliminates the dbl close, it allows us to "assign" HUD, FMA, etc... without having to write the words "and or assigns" (which the aforementioned sellers won't allow.
It also allows you to gain the effect of selling quickly after you buy, since there would be only one actual sale of the property.
@Rob K. can you elaborate on that? Does it matter what area of RE? Thanks.
It's in the "Red Book" of Michigan real estate laws. You're also not allowed to sell more than five properties per year without using either a licensed broker, or being a broker yourself.
@Joe Villeneuve, I would really appreciate if you would elaborate a bit more on the precise procedure of selling the LLC before closing on a property and how does this procedure eliminate the need for Double-Closing. I'll be more specific, if I have a buyer for a property that I have located, what exactly must I (my LLC) do in order to assign this property to my buyer? Also, I presume this method entails forming an LLC for each property I wish to assign. Are there any implications and/or limitations to using this method (legal or otherwise)?
@Joe Villeneuve I am not sure I follow... I am not familiar with the precise steps take, based on your suggestion, hence my request for further detail.
@Joe Villeneuve, I would really appreciate if you would elaborate a bit more on the precise procedure of selling the LLC before closing on a property and how does this procedure eliminate the need for Double-Closing. I'll be more specific, if I have a buyer for a property that I have located, what exactly must I (my LLC) do in order to assign this property to my buyer? Also, I presume this method entails forming an LLC for each property I wish to assign. Are there any implications and/or limitations to using this method (legal or otherwise)?
When we make offers, we have a different LLC make each offer. One LLC, one property, one offer. When we get the offer accepted, we can sell the LLC before the accepted offer is closed. Thenew owner of the LLC closes on the accepted offer...which is between the seller and the LLC...not the seller and me. No limits. This is how we "assign" bank, HUD & FMA deals too.
@Joe Villeneuve Thank you for the clarification. If I understand correctly, the profit lies in the value paid for the LLC. Is that correct? If not, please explain and if so, could you please provide an example of how this is broken down? Say, for example, you have an offer accepted with your LLC on a home for $50K (you signed the PA, using the LLC "ONETWOTHREE MAIN, LLC", of which you are the owner). Now you locate a buyer for it and wish to profit $5K on the deal. Where do you for from here?
@Joe Villeneuve Thank you for the clarification. If I understand correctly, the profit lies in the value paid for the LLC. Is that correct? If not, please explain and if so, could you please provide an example of how this is broken down? Say, for example, you have an offer accepted with your LLC on a home for $50K (you signed the PA, using the LLC "ONETWOTHREE MAIN, LLC", of which you are the owner). Now you locate a buyer for it and wish to profit $5K on the deal. Where do you go from here?
Also, @Joe, reviewing the information in this link, would the LLC sale be of the entire business entity or just of its assets?
@Joe Villeneuve Thank you for the clarification. If I understand correctly, the profit lies in the value paid for the LLC. Is that correct? If not, please explain and if so, could you please provide an example of how this is broken down? Say, for example, you have an offer accepted with your LLC on a home for $50K (you signed the PA, using the LLC "ONETWOTHREE MAIN, LLC", of which you are the owner). Now you locate a buyer for it and wish to profit $5K on the deal. Where do you for from here?
In the above scenario, I would sell the 123 Main, LLC for $5k. The new owner of the LLC would then close on the deal for the agreed upon price of $50k. The total cost for the entire deal to the new owner is $55k, but it is split between the cost of the LLC, and eventual the cost of the property.
Thank you, @Joe Villeneuve, for clarifying that. Reviewing the information in this link, would the LLC sale be of the entire business entity or just of its assets? Also, are there any taxation issues (advantages, disadvantages or limitations) when selling an LLC, as opposed to income from assignment fees?
This is a genius strategy. I assume that you are selling to other investors, as a cash or commercially financed sale? If I was going to wholesale a non REO property to a retail buyer, what contract would I use for that?
Actually, not as genius as you might be lead to believe. This type of dance is nothing more than a shell company, forget about anyone telling you you have limited liability, I'd suggest asking an attorney, but that usually goes over here like the sound of passing gas in church. You're also NOT avoiding license requirements yourself in contracting under any business entity.
No, it may not be a commercial sale, depends on the buyer's status and the intended purpose.
So, you're going to sell an LLC that was filed 2 months ago, how do you know that LLC didn't conduct other business, told a few lies, incurred debt or obligations, that in 3 more weeks the LLC buyer has a law suit on their hands? How do you know? Because a wholesaler who operates under the radar told you so? LOL
Instead of trying to find some flim flam strategies, why not just deal on the up and up, learn how to partner with your buyers, close the purchase and then earn a fee as a member of that LLC and resign from that LLC, then move on???
Doesn't matter if you signed as an LLC or personally, if you don't have the intent to purchase and ability to buy your contract is as valuable as used toilet paper in court in any state. At least the toilet paper might stick! :))
I talked to couple of RE attorneys here in MI for reviewing my contracts including Purchase Agreement, Assignment Contract and Joint Venture Contract with another wholesaler.
They asked for $250 to review these documents instead of drafting new ones.
This is a genius strategy. I assume that you are selling to other investors, as a cash or commercially financed sale? If I was going to wholesale a non REO property to a retail buyer, what contract would I use for that?
Not genius, not uncommon either. Yes, selling to other investors. There is no reason to use this strategy for Non REO selling to retail buyers. Just do the usual "...and or assigns" as the buyer.
I understand what you're saying. However, if you don't have, or don't want to spend, the funds to purchase, then I think this is a great strategy. If you are dealing with investors, then I assume you would be on the up and up anyway, and they would have no issue buying the LLC for rights to the property.
I will have to take the plunge and spend that money on my contracts in the near future. Have any good Michigan specific contracts that you'd like to share?
Thank you for the input. Do you know if conventional lenders will lend on an assigned contract, or am I pretty much limited to cash buyers on the retail side?