Wholesaling to a non-cash buyer?

Question

Wholesalers - would you wholesale to a non-cash buyer?

It seems like most wholesale deals are sold to cash buyers. I'm asking before I approach a local wholesaler looking for a BRRRR deal (only to be shot down).  I'd much rather go in with financing than look for hard money for my 1st deal.  (Who would lend hard money to a 1st timer anyway?) $30K properties in my area are teardowns or in areas that I wouldn't feel safe in.  I have some cash on hand, but not the $100K+ that it would take to get what I am looking for in my area.  In this scenario my goal would be to buy with minimal cash down using financing and use some of that cash balance to pay for the rehab.

Pratik P. · Answer

That's a tough one.  As a wholesaler,  I would only assign a contract to you if I know you can close on it quickly without issues.  So if it was between you and one of my cash buyers,  I would assign it to the cash buyer.

You could do one of 2 things.

1. Build a relationship with a wholesaler and let them know exactly what you're looking for. Have all your financing in line from your lender,  ready to go.  So as soon as your wholesaler has something,  you can close fast without issues.

2. Market for the property yourself.  Read into marketing strategies and start sending out direct mail. I'm sure you'll eventually come across something that works for you.

I'd personally recommend the second option.

Suzanne Mark · Answer

It's not so much as would the wholesaler sell to you even if you are financing...but can you get that particular property financed. 95% of wholesaling deals don't qualify for lending. There's a fine line between a fixer upper that will qualify for financing and one that won't. Hope that helps a bit :-)

Chris Mason · Answer

@Brandon Shewbridge,

Fannie, Freddie, and FHA, will not go for assignment contracts (relevant to you @Pratik P.).

So the wholesaler will need to actually take ownership for a few weeks so that the contract, appraisal, and preliminary title report, can all be accurate. Which in turn means using transactional financing, a niche product that @Shari Peterson offers. This in turn means the wholesaler is incurring additional costs which, finally, means your purchase price as an end-buyer needs to be stronger.

But, yes, in theory you can purchase a property offered by a wholesaler using Fannie Mae's money and 30 year fixed financing. I've done it.

Josh Caldwell · Answer

Chris Mason  You can get paid to release a contract to fannie and freddie, and you can show it right on the HUD 1, You are correct that they wont pay an assignment, but if you register you notice of contract with the county, it will appear as a cloud on the title and they will pay to clear it like the do with a lien.

Not a well known technique but it does work all over the country, as long as your closing attorney knows how to do it.

Pratik P. · Answer

Chris Mason

I actually didn't know Fannie, freddie wouldn't do assignments! Thanks for letting me know.

The fact that I would have to use transactional financing and wouldn't actually make money on the deal till later makes wholesaling to non-cash buyer a bit more unfavorable.

Josh Caldwell · Answer

You need to find a wholesaler who can negotiate owner finance deals for you.  Then you need to pay them to release their position in a contract.  Be honest with all of them, tell them that you buy owner finance and sub-to deals.  This makes you a niche buyer, and might make you their go to buyer when they find a terms type of deal  I sell a lot of deals this way, and i am not the only one.

To your success

Josh

Brandon Shewbridge · Answer

Thanks to all.  I appreciate the feedback.

Gordon Cuffe · Answer

If you want to buy from a wholesaler ,you will have to use a private lender or hard money lender. You can then do the work and sell it or refinance out of it.  There are hard money lenders all over the place. You just have to buy the property at the right price so that you can make money or have equity after the work is completed. You can use a conventional lender if you find a property on the mls as long as the property is not in too bad of shape.

Brandon Shewbridge · Answer

For clarification, I could put down 20% on a 100k deal and still have money for rehab.

My ultimate goal is to buy and hold.  I'm trying to figure out an entry point to get the most bang for my buck with cash on hand.  Suggestions on where could I use that cash elsewhere to build up more cash so that I can make a cash offer on a higher cost deal?

Wholesaling to a non-cash buyer?

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