People that completed at least 20 wholesales, do you double close or you do an assigment of the contract?

53 Replies

What do you guys do, double close so the end buyer doesn't see how much profit you made or you do an assignments of a contract?

I typically do double closing (and pay extra closing fees $500-$1000) for double closing (transfer tax, deed tax, etc.)

What do you do?

I've heard that many sellers flip out when they see how much money you are making as a wholesaler on the HUD.

Want to hear from people that specialize in wholesaling and do at least 20 deals per year.

I sell the LLC holding the contract before closing. One sale, one closing, one set of closing costs.

Joe Vileneuve

I do both.  I try to assign the contract when I can, but sometimes the deal will not allow for that.  

I agree with John. I try to assign when I can but sometimes I have to double close or just have our buyer sign their name on the contract with us. You can also sell the LLC or put the property in a Land Trust and sell the trust. Check with your local title co because some states wont let you sell trust or LLC's.

@Wayne Woodson You don't actually sell the LLC. The new "buyer" becomes a member, and buys out the old...it's an internal action. No state that I know of has anything to say against it.

Joe Villeneuve

@joe villeneuve That's a good idea!!!! Way to think outside the box

Originally posted by @Joe Villeneuve :

@Wayne Woodson You don't actually sell the LLC. The new "buyer" becomes a member, and buys out the old...it's an internal action. No state that I know of has anything to say against it.

Joe Villeneuve

If I understood you correctly Joe, you close under new LLC and then you sell the interest of the LLC to another party, correct? It's probably not very beneficial for an end buyer, because potentially your LLC which you are selling shares of could have other liabilities. I would be hesitant to buy interest in any Co because of this risk. What is the advantage of doing that rather than do a double close or assignment of the contract?

@Pavel Sakurets  Not correct in your assumption.  Here is the order of appearance:

1 - Offer in the name of an LLC

2 - Offer accepted...meaning the LLC must close

3 - "New owner/buyer" Buys into the LLC and becomes an additional member

4 - New "member" buys out original member(s) leaving the new member as the only member (this is the substitute for the assignment)

    Note:  The cost of the assignment fee is split between steps #3 and #4

5 - New member/owner (now the ONLY member/owner) NOW closes on deal

One closing. The LLC and the seller had the agreement, and that is who closed. Who the members/owners are of the LLC at closing is immaterial.

Joe Villeneuve

double close always...it's the easiest way...no one sees anything so no one has questions....personally the I've never had a buyer interested in any of those others methods like selling my LLC...to much to get an LLC time after time..anything over 5k is a double close....after the start up cost of an LLC you'd save alot just payin for a double close and offering that incentive to the seller and buyer...

Personally Ibe never heard of a real person in real life selling an LLC to get a properate...it's kind of guru hype to me...although It can be done....

A double close woth your funds or the sellers funds is the cleanest way everyone's happy. I Just got a wholesale deal from a very seasoned investor le that had over 250 doors here in So Cal....he dosent even know the wholesling world really exsist... he's an old school...buy and hold guy....and he was very impressed with how fast and smooth my process was....he gets a lot of letters for some reason he liked mines...most of it came through the closing process...what u promised wad what he saw on oaoerwork.  So he's giving me a chance to unload a hand full or properties.....I just personally love the double close it fixed the impression you did actually what you promised...the same name and terms you go under contract with are the same names and terms you close with....anyhoo...that my opinion on both. ..

excuse the misspelled word and Grammer mistakes...auto correct isn't so correct after all

@Jason Farmer The LLC transfer method I described above is used all the time...and is very successful. It's our standard way of "assigning". Every state is different though as far as cost and LLC rules. In Michigan it works perfectly. The cost is only $50 to start, and $25/year to keep current. Realize Pavel was asking about assigning contracts, not selling the property. LLC's work find for both, but as a substitute for an assignment, especially when the original seller is a bank, Fannie, or HUD, there is no better way.

Joe Villeneuve

Sorry for the mistake, Joe is right the ownership is transferred and not sold per se. I do know they are cracking down here on people transferring trust. It isn't illegal to transfer LLC's but I have had title companies here locally refuse to do it. Also there has to be some tax consequences if you open and transfer a dozen LLC's. I mean that has to throw up a red flag somewhere.

Double close 99% of the time.  This is so the seller does not know what my profit is and the buyer does not know how much I'm making.   

@Wayne Woodson You don't transfer the LLC at the closing, you do it before.

IF the title company has trouble with it (happened only the first time with one, and have had no trouble with the same company since), the original managing member always shows up at closing. The LLC can be transferred right after the closing then. Either way, all that's happening is an ownership of the LLC buy out. The value of it is based on what the two parties agree on...which is the assignment fee.

Joe Villeneuve

Double closing would be very expensive in jurisdictions with high transfer/recordation taxes and fees.  For properties in Washington DC, the transfer/recordation tax is between 1.1-1.45% of the sales price.  If you double close, you're paying that amount twice.  

My rule of thumb is that if my profit is above $25,000, I double close. If it is below, I am OK with assigning the contract. Better to double close than to lose the whole thing when they realize what you are making.

@Barton Wallace  Thats very similar to my rule as well. I keep it to $20k and under for assignment. However in the last year I have been using double close as my primary way of closing on a deal. I feel that its much more cleaner and easier than just assigning it. 

Another thing to consider is the deal itself and the buyer. For example if you have a deal for $50K, ARV $140K, Rehab is $15K, and you add on $20k for yourself, you may think that the deal is solid at under 60% off ARV - rehab BUT....what if you have a buyer that you don't have a relationship with and he sees that assignment for $20K and the rehab is only $15K?

Now you have a buyer that has to think about the logic of that deal. I pay the person who contracted the offer $5K more than what I have to put in to fix it up? That's how deals get crushed at the time of closing. As wholesalers I think we can agree that it takes less effort to contract a property than to rehab said property. Doesn't make much sense to get more out of the deal than how much it needs to be fixed up....even if the numbers are still solid.

We always Double Close.  The company we paid to train us on working with Real Estate in USA cost us over $25,000- for training alone, and they said that Assignments are hard over there now so we went with that figuring we can trust what they say at that price.  So we haven't even looked at trying to do Assignments. 

Our profits go between $5,000 and $7,500 for Double Closes.  Anything below that we don't bother with unless it is going to be super easy.  Anything above that we look at buy and hold to rehab and sell ourselves, or rehab and rent.

I got very excited to hear @Barton Wallace   and @Ken King  speak of such big profits on Double Closes though and want to beg you to mentor us!

Originally posted by @Linda Quinton :

 The company we paid to train us on working with Real Estate in USA cost us over $25,000- for training alone

 $25,000 for training? That amount can buy me a whole property!

I know right????  Sigh.  But we are hungry for learning here.

Thank you to everyone that has participated: from 12 people-9 do double closing,

1 person does assignments, 2 persons do both assignments and double closing (depending on the profit level).

Linda, who spend 25k, I spent over 200k on my seminars over the course of 5 years.

I finally stopped now, I do not spend more than 13k per year anymore (its' a membership fee to be in a commercial pull of buyers). I joined BP 4 days ago and found all the info that I was looking for within 3 hours spent on BP. I wasted a lot of time on boot camps and other seminars. Thus, my advise- stop spending money on courses, you can find all info here. Just ask questions and follow what successful people have done, I'm sure they will be happy to share for FREE.

Great discussion on this topic and just the forum I needed to read.

For all you double closers, how did you find the investor friendly title company to handle your double closing? I'm struggling with that right now since I've heard that only attorneys can do it in my state.

Also @Barton Wallace  and @Ken King  suppose your buyer is also a real estate agent who has access to the listings because many are, won't they find out eventually what your profit was? And by your reason for double closing in the first place (buyer not liking how much you're making on the deal) possibly jeopardize future business with that buyer? Just curious what your thoughts are on that.

Originally posted by @Linda Quinton :

I got very excited to hear @Barton Wallace   and @Ken King  speak of such big profits on Double Closes though and want to beg you to mentor us!

My guess is they make more because the property values are higher in their areas. The ARV's for SFR's in most of my area are around $150k - $200k. Is that a reasonable assumption, and if not I would also like to be mentored...haha!

I agree with the general assessment... it depends on the situation.

However, I would say, that if you spend time cultivating some good relationships with buyers.... ones you can trust and you go to again and again (rather than mass marketing your wholesale deal), then it is so much easier to just assign.

You can always use a blind HUD so the seller doesn't see assignment fee as long as you have a good enough relationship with the buyer.

When you get a good buyer, treat them well!

At any rate using a double close will be ideal if you don't feel that comfortable with the spread in the first place, and you have a hunch that the buyer may back out based on that. 

If you know the deal and the numbers still add up if you make $20k on assignment, then most buyers won't have a problem with it. It's just really the deal that you are putting together. 

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