Why Wholesale?

53 Replies

I live in Washington state, about 2 hours west of Seattle. I have about $1,000 and some books I received at a Rich Dad 3-day workshop. I don't have a job, I separated from the military in March and have been getting paid to go to school, along with my disability and unemployment which all totals out to about $4000/month. However I am told I cannot use the GI Bill or Unemployment as a proof of income, leaving me with $700/month. This may seem unimportant to the wholesale topic, but it was brought to my attention after I called numerous real estate agents looking for one to work with. They told me it was going to be hard to get a loan even though I have a 700+ credit score. The reason why I would be interested in getting a loan is because everyone here seems to agree we are in a sellers market and agents have told me to my face that they tell their sellers to avoid contracts that say "and or assigns on them." Which means I would need to do a simultaneous, or double closing (at least to my knowledge). Anyways, between BiggerPockets and the agents I spoke with, wholesaling already gets a very bad reputation as is. So what am I to do?

I feel stuck. I have no money. I don't know any one/investors (other than an agent who is willing to work with me). And I have to take my son with me almost everywhere I go. My wife is still in so she has to stand post at night and sleeps during the day. I have about a 3pm-6pm window on the days she works, but the days she does work is even screwed up because there's no "set" schedule. She is so against putting him in daycare and we have no one we trust to watch him [being in the military puts us 3000+ miles away from our family and friends]. I feel 50/50 about putting him in daycare because I agree there's a lot of crazy things going on in the world, but at the same time I'm so ready to make some money! Either way, I don't think I would go against my wife with her having such strong feelings.

Putting yourself in my shoes, what would you do? There was a Satelitte meeting for my local REI club this past Thursday and I was left contemplating whether or not to take my son with me because my wife was already at work. I didn't go. My son is only 10 months old and can be very loud and very needy (obviously), I felt like it would've been very unprofessional, not to mention I wouldn't have been able to focus anyways.

Thank you.

Welcome to BP,

I think a lot of people have circumstances just like yours and still succeed in real estate. There will always people that say you can't do it... even other investors saying you can't get in without having money for marketing. The amazing thing about human potential is that you can do anything that you take massive action on. 

In Washington State FYI, you can't do a double closing no more. No title or escrow will do that here. So, you'd be doing a contract assignment. 

Here are the typical costs associated with wholesaling:

1) Direct Mail. You can wholesale without doing direct mail or online marketing. I'm mentoring 3 people right now that are doing it with no money out of pocket.

2) Business Cards. Business cards can be a very cheap and effective way to market, but you don't need them. Pick up the phone and have conversations a day. I literally get deals every day by calling people. 

3) Earnest Money. 

4) Attorney Fees for Assignment Contract, Subject To Contract, Lease Option, Purchase and Sale Agreement, etc.

5) Educating Yourself. Bigger Pockets is awesome. 

For #3, #4, and #5, find an experienced wholesaler or flipper and partner with them 50/50 to have them pay for Earnest Money, provide contracts and show you the ropes. 

Now, it's possible to wholesale without any money. But the real question is, are you the type of person who makes excuses or doesn't follow through or get distracted? Do you have the right mindset for success? Do you take massive action? If you don't take massive action with the right mindset and don't focus, then you will not be able to make money in real estate (or in anything for that matter). 

If you can take massive action, anything is possible. If you can't, you'll be the 9 out of 10 that check out real estate and move on. 

Good luck with your real estate adventure!

@Devon Woodson

Get a license! Then you can "wholesale" your heart out and won't need money to buy or get a loan!

Ready, Fire, Aim.......is that how you did it in the military?

Learn real estate before you just take massive action, shooting blind. 

I've not seen real estate basics discussed much on BP, which is why half the folks on BP are totally lost trying to piece strategies together. BP is great for getting specific answers and advice, networking, problem is, who do you listen to?

Would have helped to mention what you're going to school for, I'll assume a business degree. If that's the case, you can take a college real estate class for credits and they may qualify you to take the test for your license!

Economics 101, Chapter One, Factors of Production. Doesn't matter if your transaction is selling apples or houses or shopping malls, what is required will be: Land, Labor, Capital and Entrepreneurship! Land can never be substituted as it will always be part of any transaction, you have to be on somewhere on this earth to conduct business!

All of the other factors can be substituted, less capital may require more labor and/or entrepreneurship. 

You can bust your butt with more labor, dig that ditch or carry that load. 

In my mind, it's better to provide more management or entrepreneurship in a business transaction than just working harder.

So, entrepreneurship, where do you get that stuff? From a good education!

Is there an app for that? NO! Is it easy? NO! Is it hard? NOT Really, but it takes time to develop skills, the basics in real estate takes about 3 weeks but it puts you years ahead of others who just attend the school of hard knocks!

Regardless of what you deal in, you must know your product to be successful. 

It takes discipline to learn or succeed at anything, to know your industry and your product.

When you learn the real estate industry, you'll learn that real estate is not like any other product we might deal with, it is unique and therefore can not be treated as other widgets or products.

We get tied up in the mechanics of doing deals, but if you don't understand the theory behind the mechanics you'll always be in the dark trying to use some strategy or work in some niche. 

Those that choose to jump into some strategy learning the mechanics of a deal are pretty much the dream chasers. They lack maturity, judgment, knowledge and discipline to learn. 9 out of 10 will fail. The one out of ten that makes some money probably does so by a leach latching onto them "helping" them, usually teaching enough to be a bird dog bringing them deals. "Leach" is not meant to be derogatory, it's accepted practice where those with more skills latch onto deals brought in by those with less knowledge, part of business. (The marketing types are the best at leaching, IMO).  

Those that start by wanting money next week lack good judgment, that isn't realistic, it's naive and that comes from a lack of maturity, they lack the knowledge even to recognize what is realistic and what is not. There is always a lot of money that can be made in real estate, but it doesn't happen overnight!  

So, if you have no money you can either dig the ditches or, wise up, get a real education, your choice.   :)

  

Originally posted by @Brent Coombs :

@Ryland Taniguchi, when you wrote "in Washington State FYI, you can't do a double closing no more. No title or escrow will do that here. So, you'd be doing a contract assignment", it seemed a bit counter-intuitive, until I read about their Real Estate Excise Tax:-

http://dor.wa.gov/content/findtaxesandrates/othert...

Is that what you were getting at? Hmmm. Lots to learn...

 What is counter-intuitive? I didn't understand the comment here. We simply cannot do it in Washington state as no title or escrow will do a double closing (aka simultaneous closing or A to B and B to C transaction). I used to do these in the past but after 2009 we can no longer do it. The dept of financial institutions started shutting down the title companies that performed the double close.

You can do a back-to-back closing (close twice and pay two excise taxes and two escrows) if the end buyer is cash or using a portfolio lender without 90-day title seasoning. 

@Ryland Taniguchi , {counter-intuitive

adjective

contrary to intuition or to common-sense expectation.

  1. "this explanation sounds perversely counter-intuitive"}

I had never heard of a situation where you could ASSIGN a Contract, but NOT do a double-close! Didn't make sense. And even now, you have at least provided an "out" for those who can't get an Assignable Contract, but who can instead do what you call a back-to-back Closing (same thing in my book as a double close) - but TWO excise Taxes - that has to hurt!...

@Devon Woodson

You got great advice from two very smart investors.  One I've met and had long conversations with, another who is a pillar of BP!  The tone of your post was negative, if you broadcast negativity you are only going to receive negativity!  Wholesaling can be done with little to no money, but instead of money it means you need to hustle.  I'll assume that you having once been in the military, you know a lot about discipline, and motivation, and hustling.  

Start with what Bill said, learn about Real Estate, buy the Real Estate Test Prep books, read up! So when you talk to people (investor, sellers, agents) you come across as knowing what you are talking about! I've found that very few people who go through the first one or two stages of a REI bootcamp have enough knowledge, it takes the whole kitten-kaboodle to learn enough. But prepping for the State Licensing is going to make you smarter, better, faster, and cheaper. Maybe even use the GI bill to get your license!

To address @Ryland Taniguchi 's post, hustle.  Drive for dollars, knock on doors, cold call prospects, all things you can do with a baby strapped to your back. 

But most of all, break through the I Cant's and get to the I Will Not Lets

Originally posted by @Brent Coombs :

@Ryland Taniguchi, {counter-intuitive

adjective

contrary to intuition or to common-sense expectation.

  1. "this explanation sounds perversely counter-intuitive"}

I had never heard of a situation where you could ASSIGN a Contract, but NOT do a double-close! Didn't make sense. And even now, you have at least provided an "out" for those who can't get an Assignable Contract, but who can instead do what you call a back-to-back Closing (same thing in my book as a double close) - but TWO excise Taxes - that has to hurt!...

Thanks for the clarification. I think we are having different definitions of the  term "double close." By "double close," I am referring to the "simultaneous close," where you actual close the deal and use the end- buyers cash to purchase the property. An assignment contract (by how I am using the definition) is not a double close/simultaneous close. We assign contracts all the time. An assignment is still just one closing, but you are swapping buyer A for buyer B with the "and/or assigns." Only one excise tax is paid on an assignment. I've never heard anyone in the Seattle refer to an assignment contract as a double close, that is why I didn't understand your reference to "counter-intuitive." But I realize that different states may refer to things differently. 

@Brent Coombs   many states do not allow the double close... IE using C buyers funds to close cash out the A  seller and B middle man makes the delta.

WA state can be a little tough for wholesale type buyers.. not only do you have excise tax  ( which most sellers who are wholesaling their props don't want to pay) you must also have all tax's current before you can transfer title. 

In my pre foreclosure days in Clark co... this was a made scramble trying to save houses from the court house steps.. and many folks would owe htousands in tax's so you had to cure you had to pay their tax's and you had to pay excise tax  all usually within 24 to 48 hours of foreclosure sale  LOL...

Wow! I specifically told myself I wasnt going to check back in here until I woke up because I didn't think anyone would be posting at 2am. Boy was I wrong! This site is awesome! I really appreciate the feedback from you all.

@Ryland Taniguchi, I have already purchased a lot of business cards, but didn't really know if I should be handing them out to EVERYBODY I see; including the greeters at Walmart or the guy standing next to me at the gas station. You mentioned calling people, could you elaborate? Where do I get their numbers? My next step was to go to city hall and get a list of homes in the foreclosure process. I went friday but they were already closed so I have to wait till tomorrow.

@Bill Gulley, I'd say I'm getting the basics down. I mean, I can only learn so much in 3 weeks. But you're right, who DO I listen to? Because the speaker for the training was very adamant about not obtaining a RE license. She's owned one for 25 years now and says it's not worth it, it's just a waste of money. But now you are the second one since the training who have told me I should get one. Also, I'm not sure I understand what you mean by knowing the theory of RE vs the mechanics. Obviously you mean the moral principal, but what of it? Elaborate please. I did find it interesting that I can take classes to get my real estate license though, that's cool!

@Troy Fisher, I'm no stranger to hard work/discipline, dedication/motivation and hustling. Detroit (my home town) = hustling. Working with Marines for 4 years = discipline. Making it past my goal of 300lb bench/showing over 400 people my Network Marketing company; they both = dedication & motivation. I'm sorry if you found my post to be negative. I'm not the type of person who believes in obstacles holding you bad, but I am also not oblivious to the fact that they do exist. Just shine light on them and figure out how to handle them as you come across them. Which is why I am here!

I have done my fair share of learning (for a beginner). I finished my book that I received from the workshop. I've been listening to various podcast from the BP show for a week now. Not to mention the countless web surfing and BP isn't the only place I ask questions. I feel that I have learned enough to jump in and start getting things going. I'm more the type to learn as I go. I can't really learn from the book that I read or the podcasts I listen to. Those only get me fundamentals, not the "theory" as Bill would suggest. So I guess what I'm asking is should I whole sale? Or is it a lot of work just for fools gold, in the Washington market? And if not wholesale, where should I start at? I've been looking at buying and holding without any cash down. The RE agent I'm working with has me a property in Tacoma that will be cashflowing $300. Sounds good but that's if I get a loan at 4.125%, and it also doesn't include a property manager.. But I'm sure I wont need a property manager for my first home.

Thoughts? 

Thank you.

Originally posted by @Troy Fisher :

@Devon Woodson

You got great advice from two very smart investors.  One I've met and had long conversations with, another who is a pillar of BP!  The tone of your post was negative, if you broadcast negativity you are only going to receive negativity!  Wholesaling can be done with little to no money, but instead of money it means you need to hustle.  I'll assume that you having once been in the military, you know a lot about discipline, and motivation, and hustling.  

Start with what Bill said, learn about Real Estate, buy the Real Estate Test Prep books, read up! So when you talk to people (investor, sellers, agents) you come across as knowing what you are talking about! I've found that very few people who go through the first one or two stages of a REI bootcamp have enough knowledge, it takes the whole kitten-kaboodle to learn enough. But prepping for the State Licensing is going to make you smarter, better, faster, and cheaper. Maybe even use the GI bill to get your license!

To address @Ryland Taniguchi's post, hustle.  Drive for dollars, knock on doors, cold call prospects, all things you can do with a baby strapped to your back. 

But most of all, break through the I Cant's and get to the I Will Not Lets

Troy the Vegas hustler! I can just see you knocking on doors with a baby strapped on your back (oh wait! maybe you're the baby being strapped on the back of your mom in this analogy... LOL).

All kidding aside (because I know Troy), I don't like the word "hustle" because to me it implies taking more than you give in value. Hustler to me connotates take, take, ask, ask. As opposed to Napoleon Hill's concept of always adding more value and service than you expect to receive in monetary compensation. In other words, always make 10x more effort than you expect to be paid back.

I like the word "applied faith" better as it is daily consistent and massive action that weathers the storms through persistence. Add value and help others get what they want and Emerson's law of compensation says the higher powers will repay you.

I had a conversation yesterday about some people making some unethical decisions that are making them a fortune. When I see people taking ethical short cuts, they always seem to lose their money. The law of compensation is a LAW. You always reap what you sow (regardless if anyone is looking). 

How do I tag someone in my post? I thought I did, but my tags aren't highlighted like everyone else's... Anyways @Ryland Taniguchi (I did it!), when I use the term hustle, I relate it to grinding or hard work. Not taking advantage of others. But I get it, I'll definitely take that into consideration next time I think about using the word. Thanks

Originally posted by @Devon Woodson :

I live in Washington state, about 2 hours west of Seattle. I have about $1,000 and some books I received at a Rich Dad 3-day workshop. I don't have a job, I separated from the military in March and have been getting paid to go to school, along with my disability and unemployment which all totals out to about $4000/month. However I am told I cannot use the GI Bill or Unemployment as a proof of income, leaving me with $700/month. This may seem unimportant to the wholesale topic, but it was brought to my attention after I called numerous real estate agents looking for one to work with. They told me it was going to be hard to get a loan even though I have a 700+ credit score. The reason why I would be interested in getting a loan is because everyone here seems to agree we are in a sellers market and agents have told me to my face that they tell their sellers to avoid contracts that say "and or assigns on them." Which means I would need to do a simultaneous, or double closing (at least to my knowledge). Anyways, between BiggerPockets and the agents I spoke with, wholesaling already gets a very bad reputation as is. So what am I to do?

I feel stuck. I have no money. I don't know any one/investors (other than an agent who is willing to work with me). And I have to take my son with me almost everywhere I go. My wife is still in so she has to stand post at night and sleeps during the day. I have about a 3pm-6pm window on the days she works, but the days she does work is even screwed up because there's no "set" schedule. She is so against putting him in daycare and we have no one we trust to watch him [being in the military puts us 3000+ miles away from our family and friends]. I feel 50/50 about putting him in daycare because I agree there's a lot of crazy things going on in the world, but at the same time I'm so ready to make some money! Either way, I don't think I would go against my wife with her having such strong feelings.

Putting yourself in my shoes, what would you do? There was a Satelitte meeting for my local REI club this past Thursday and I was left contemplating whether or not to take my son with me because my wife was already at work. I didn't go. My son is only 10 months old and can be very loud and very needy (obviously), I felt like it would've been very unprofessional, not to mention I wouldn't have been able to focus anyways.

Thank you.

 The VERY BEST guy in WASH State is @Steve Vaughan

Read everything he has posted.

@Ryland Taniguchi and @Jay Hinrichs , I have always understood the "double close" to be where Seller A gets paid by Wholesaler B; Title then is transferred to B; B then is able (even in Washington?) to sell it to Buyer C and is paid by C (so then B can pay back whoever lent them the money to pay A to obtain Title).

The only reason I brought up that in relation to Assignable Contracts is that there are lots of Forum threads about Wholesalers having great difficulty in many States getting permission to Assign Contracts, but NEVER having difficulty buying the property and taking Title - THEN Selling again straight away (ie. double closing)...

@Brian Gibbons Brother, please!

@Ryland Taniguchi 's first post is WAY better than I could have stated.  Great ideas how to get started and motivation.  Perfect!

@Troy Fisher , along with Ryland are the pro's on the west end.  Listen to what they be sayin' @Devon Woodson

If all the 'smart' agents are looking for "and/or assigns' after your name at the top of your PSA, don't use it, but line out and initial the word "NOT" in the Assignment paragraph of the NWMLS PSA.  If you have your own contract, just don't put that it's not assignable.

Excise taxes in WA are a bear!  In my 2 counties they are 1.58% and 1.78%, each time the title transfers.  That's x2 for wholesaler and a killer.  Assignments are the only way to go here.

I am not a wholesaler full time by any means.  I just assign properties that are not a fit for me.  Thank you for your service, Devon, from a fellow veteran!  

@Brent Coombs   no problems if   C brings funds to close and B brings funds to close and A gets paid... double close for most means that only C brings funds and they are used to put B into title long enough to pay A and then B gets the delta.

Originally posted by @Jay Hinrichs :

@Brent Coombs  no problems if   C brings funds to close and B brings funds to close and A gets paid... double close for most means that only C brings funds and they are used to put B into title long enough to pay A and then B gets the delta.

 Yes, and I know there is a whole industry aimed at DISGUISING the fact that B is often actually using C's money to pay A rather than an independent source in order to get Title, before handing that Title off to C - thus tricking even Washington State!

@Devon Woodson

Sounds like you need a simple game plan and to start small. I think one reason "wholesaling gets a bad reputation" is because many don't understand it. Overall it is much easier than being a real estate agent. So many added legalities for a licensed RE agent because they are representing someone else. Super easy and simple to begin as a wholesaler buying inexpensive property (for yourself) and selling for more.

For example: see the post about the gal that bought 8 acres for $600? Not hard to repeat, market, and sell for double or more - then do it again! And again. Before you know it, you are on your way.

Hope that helps!

Jill

Your association with WorldVentures, probably the biggest scam outfit in the travel industry, does not bode well for your future in real estate. Even less does your association with a wholesaling guru who tells you that having a license is a waste (which is outrageous.)

You describe yourself as having little money, and perhaps two-three hours a day of uninterrupted time. For someone in such a position, becoming a licensed agent and doing some part-time real estate sales is by.FAR the safest route to success in real estate.

You should definitely get a Real Estate Attorney. Then you want to find sellers and find cash buyers. There are different ways you can do that. It's all marketing. 

@Jill DeWit you state "buying expensive property and selling for more". Most of these "wholesalers" are actually contract brokers. They don't buy the property. They get it under contract and assign it.

John Thedford, Real Estate Agent in FL (#BK3098153)
239-200-5600
Originally posted by @John Thedford :

@Jill DeWit you state "buying expensive property and selling for more". Most of these "wholesalers" are actually contract brokers. They don't buy the property. They get it under contract and assign it.

John, it is "INexpensive property" that Jill was recommending for wannabe Wholesalers, not "expensive property". And that was her point, as against "most of these 'wholesalers'" that you refer to who are actually brokering. Cheers...

Sorry, missed the mention earlier @Devon Woodson

Can you define what real estate is? 

Do you understand the physical, economic, legal and social concepts of real estate? 

Can you name the different rights a property owner holds?

Can you tell us just 4 ways any of those rights are conveyed to others? (Hint: We are under the Allodial system of law and no, none of these are "strategies")

Can you name just 4 common types of deeds of conveyance to gain property rights?

Do you know the difference between an abstract of title and what a title search is? (Hint: Unless you are a title attorney or a title company, you can't do a proper abstract.)

What are two common exceptions to a title policy, matters that are not insured?

What is the difference between a "Lien State" and a "Title State"?

Name just 3 types of liens and what is a lien?

What is an encumbrance to title?

What is an encroachment?

What is the difference between a granted easement and an easement with permission? 

 What ownership rights may and may not be conveyed to a residential tenant?

As to contracts, at the time of signing a contract, what are the necessary conditions for the contract to meet in order to establish the doctrine of equitable conversion? (Comment: I've not seen one wholesaler on BP that understands this!)

What is the difference between "legal title" and "equitable title"?

How does an HOA use social factors to increase value of a project?

What is a single family attached dwelling?

What is a zoning variance?

Why can a zoning variance increase the value of real estate?

Do easements have value?

What is meant by "the fruits of the land"?

What is a "Super Lien"?

What is meant by "Lien Priority" and how can that be changed?

As to "the bundle of sticks" (ownership rights) possession is granted to a tenant, what other right attaches to the right of possession?

Can you contract to obtain only part of an owner's title rights, if so, what can you do to obtain full title? 

Can an oral agreement be enforced under the Statute of Frauds? 

What implied warranties are made in a sale agreement?

Basically, what is negligence?

How is an agency relationship formed under the Laws of Agency?

What are "intentional torts"?

What are "negligent torts?

What is meant by "good faith" in contracting?

What is "Predatory Dealing"?

After giving full and complete disclosure to a seller are you relieved of responsibilities related to that disclosure?

What is the difference between an appraisal and a broker's price opinion?

What elements are generally required to define market value?

Can you adjust the value of the subject property to bring the value in line with comparable sales?

What is used to access value using the Market Approach?

What is used to access value using the Income Approach?

What is used to access value using the Replacement Approach?

Which approach to value relies more heavily on depreciation?

When selecting comps, is it best to use those in the same neighborhood? 

What legal obligations does a person acting under a power of attorney have in representing the principal?  

Who is the client of a listing broker?

Can a Realtor represent both parties in a sale contract?

What does an "open agency listing" allow an owner to do?

A Broker has "vicarious liability" with the respect to who in an agency relationship?

What is a "net listing" and why may the be viewed as predatory?

How might an investor use an "Authorization To Show" ?

How do you find the loan-to-value and combined-loan-to-value for a loan?

Is the "note rate" usually the same as the APR with a private mortgage?

What does "TILA" stand for?

If you see an advertisement for by a "Private Lender",  are they a private lender?

How is "Bank Fraud" different than common fraud and when do the statue of limitations begin with respect to bank fraud?

Who is the "Maker" of a mortgage loan?

May a lender always invoke the due on sale clause in a transfer of title?

What tax matter arises with a zero percent loan?

Is crediting rents to a purchase contract a financing agreement subject to federal law?

What obligation or requirement can be made for an optionee to perform before an option can be taken, besides paying the option fee?   

What is a "Lease-Option"?

What is an "Option to Purchase"?

Now, there are 60 questions, if you get 54 or more correct then you know enough to hit the streets as an investor. 48 or more, you need to take some reference material with you, use technology to jog the memory in some situation. 42 or more, go with a mentor. Less than 42, you need to study. 36 or less, you need to start your education over. Less than 30, you don't know jack, start over, stay away from gurus! Less than 20, you have bad luck, LOL.

Yes, you absolutely need to know this junk to be involved with real estate. 

Asking these simple, basic questions was the best way to show folks what they don't know. 

Almost every question relates to the value of a property. If you can't relate to the utility of real estate you can't value it! If you don't know the interests held, you can't value it. 

Instead of trying to find "investor friendly Realtors" (or any other profession) how about being a "Realtor friendly investor" that might work better for you, right now, most can't even carry on an intelligent conversation with other real estate professionals and the thought is, it's the professionals fault........DUH!

Why do you get taken by gurus, lose money in deals, chase your tail and spin your wheels, get in trouble, lose credibility. look silly or like a fool, not understand industry ethics or requirements, unknowingly mess over a property owner or a buyer??????  Because you don't understand the fundamentals, basic theories and accepted practice of real estate!

Learn the basics! No, it's not really fun if all you focus on is money, it takes determination to suffer through the learning process so can can make real money. Knowledge is power, it makes you more money! You think doctors or lawyers learn their profession by listing to podcasts, reading forums and blogs........really? Then why are folks so naive thinking they are learning a profession in real estate doing those things?

After you learn the basics, then you can learn new tricks, ways to do deals, take advantage of opportunities and be creative. That's where BP comes in. :) 

  

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