Dangerous to wholesale in an LLC

Wholesaling
8yFollow

Dangerous to wholesale in an LLC

Will Stahl
Rochester, NY · Member since 2017 · 58 posts · 10 votes

Hey everyone,

I'm starting a wholesaling business In New York and just formed an LLC. I've been doing some research regarding the legality of it and I'm a bit concerned. A lot of the forums I read seem to deal with this topic on an individual level, not from the perspective of doing it in an LLC with the sole purpose of making it a business.

Here is a quote from Billy Gulley's website:

"Where the clouds of the storm move in, acting as an individual in one transaction is much different from a legal standpoint than building a business model that does nothing but assign contracts. Being “in the business” of doing something will require licensing to be legal conducting any business, your local jurisdiction most likely requires a business license as well.

This also goes to the intent of someone entering into a contract where contract law requires a “meeting of the minds” for a valid and enforceable contract. Agreeing to purchase without the intent to purchase is simply fraudulent." - Quote from 'general real estate academy dot com'.

To me, it almost seems like by forming an LLC where the main purpose is to assign contracts, I'm requiring myself to have a business license and am opening myself to a greater possibility of being fined. I also don't have a real estate license but now plan on getting one after educating myself about the legality of wholesaling a bit more. Again, since I'm operating in an LLC i'm not sure if my 'business' is licensed in real estate or only me as an individual. The reason I formed an LLC is for extra legal protection and so I can write off the thousands of dollars of marketing costs I'm going to be spending on sending out mailers. Again, the mailers are being sent out on the behalf of my LLC - I am marketing to buy properties. 

When I created the LLC I specifically made my area of business 'Wholesaling Real estate'. Now, i'm wondering if forming an LLC at all was the right idea or if I'm opening myself up to trouble since I'm acting as a business. I'm just trying to start my first legitimate business the proper way and the last thing I want to do is get in trouble. I have a consultation with a lawyer in 2 weeks and will be touching on the same topic along with more focused questions about what I'm allowed to say in my mailers and phone calls to the homeowners I'm targeting.

Any thoughts BP community? I could really use the feedback. Everything was progressing well but now I feel that my goal might be in jeopardy.

1Reply
375 views

Most Popular Reply

Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
8y

Every business, that sells products, buys them from a source with no intention of personally using them.  They sell them.

Every "drop shipper", sells a product from a source, and never sees that product (or touches that product).  The "seller" buys from the source, sells it to the end buyer.

The stock market has its "option trading", where you can sell a stock, and not have bought it yet.

I have never, in my 25+ years of using this method, ever had anyone attempt to legally call me on this...and that includes HUD, Banks, Fannie, etc...who knew what was going on as it happened.

The LLC makes the offer, gets the offer accepted, and the Wholesaler sells the LLC to the buyer. The contract is between the LLC and the Seller...from beginning to the end. This is simply a sale of a business, with the asset of that business being the purchase agreement for the property. Businesses are sold all the time, with existing contracts included in the sale.

11Reply
See this reply in the discussion

53 Replies

Jump to latestLatest
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y
    Originally posted by @Joe Villeneuve:
    Originally posted by @Tom Gimer:
    Originally posted by @Joe Villeneuve:
    Originally posted by @Tom Gimer:

    @Will Stahl Real estate investment and business related thereto is a much better statement of purpose for a business than Wholesaling. Businesses may only do what they are expressly permitted to do in their founding docs.

    Aside from the limitations (and public record) that places on your own business, if you take Joe's advice and sell that LLC ... among other things the buyer would have to amend the articles to do anything else.

    Why would the buyer want to amend the "articles"...or do anything else with the LLC for that matter. The property is in its own LLC.

    OK so the buyer just bought an LLC that owns a piece of property, right? That LLC is only authorized to "wholesale" real estate. If it is going to rent the property, get a loan, do anything other than wholesaling, it needs to amend its statement of purpose.

    NO. That LLC is authorized to OWN real estate. The LLC isn't wholesaling anything...it's first buying the property, then holding it. Where do you see the LLC wholesaling anything?

    The original post is what I was responding to here, Joe. OP formed an LLC with the express limited purpose of wholesaling.

    Gimer Law516 Reviews
    WebsiteView Page
    0Reply
  • Will Stahl
    OP
    Rochester, NY · Member since 2017 · 58 posts · 10 votes
    8y

    @Joe Villeneuve, What @Tom Gimer is referring to is the fact that when I created the LLC I specifically wrote that the business purpose is 'Wholesaling Real Estate'. I now realize that this was a mistake. Hey Tom, any idea if I can chance the purpose of the LLC? I'd like to just declare it as 'real estate'.

    @Steve Vaughan Thanks for the advice on the S-Corp. Csn you explain why an S-Corp better suites my situation, I thought that the only difference between LLC and S-corp was the tax structure. Does an S-corp provide different legal protection or do anything else differently? Thanks!

    0Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y
    Originally posted by @Will Stahl:

    @Joe Villeneuve, What @Tom Gimer is referring to is the fact that when I created the LLC I specifically wrote that the business purpose is 'Wholesaling Real Estate'. I now realize that this was a mistake. Hey Tom, any idea if I can chance the purpose of the LLC? I'd like to just declare it as 'real estate'.

    @Steve Vaughan Thanks for the advice on the S-Corp. Csn you explain why an S-Corp better suites my situation, I thought that the only difference between LLC and S-corp was the tax structure. Does an S-corp provide different legal protection or do anything else differently? Thanks!

    Yes, you can change this. Not sure of local law where you are but around here we would file amended articles of organization. And FYI it much more common when creating businesses to use a broad description such as "real estate investment, all business incident and related thereto, and for any other lawful purpose" so you don't need to keep changing the LLC docs as your business adapts.

    Gimer Law516 Reviews
    WebsiteView Page
    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    8y

     As I said above, LLCs to me are for partnerships or just to own assets. It's more of what this is not. You are neither owning or partnering as a 'wholesaler'. I've had both entities for years.

    My s-corp is so much more versatile than my LLCs. They can also establish retirement plans and solo 401k plans.  It was advised to me early on by a very good but now retired attorney to operate as an s-corp for matters that involve actively earned income but don't own anything. Wholesaling fits both in my book.  

    Why the fear for asset protection anyway? No assets here. When I do wholesale with a homeowner I usually do it personally. Homeowners in distress are naturally afraid of entities. Who's this they will ask when they see your entity as buyer. I'd just go find a deal if I were you. That's the real hard part.  

    1Reply
  • Will Stahl
    OP
    Rochester, NY · Member since 2017 · 58 posts · 10 votes
    8y

    @Tom Gimer and @Steve Vaughan

    Thanks for quick responses and great information. I'm definitely going to amend my articles of organization if applicable in my area and I was actually just advised by a tax accountant about setting up my tax structure as an S-corp. I will be doing more research on both.

    @Will Barnard Hey Will thanks for the responses earlier. I think that's a GREAT tip you provided about giving them a cash offer and a full price offer to list on the MLS. Now I'm thinking that I want to model my business off of that idea. My website and mailers can convey that we provide both offer amounts, so now I have a wider audiance for the services I offer - both cash sellers And people looking to list on the MLS. Is this how you go about conducting your wholesaling business advertising or do you focus on the cash offer and just tie in your full price offer at the end as sort of a side thought?

    0Reply
  • Scott L.
    Investor · Flower Mound, TX · Member since 2017 · 182 posts · 198 votes
    8y

    For LLCs you can choose S Corp taxation with the IRS and they are generally easier to operate than corporations. If you want to pursue active business in an LLC, just make an S Corp election with the IRS.

    0Reply
  • Bill Krayer
    Landrum, SC · Member since 2018 · 17 posts · 11 votes
    8y

    When wholesaling you are not selling real estate, you are selling the 'option to purchase' that you bought. What is the fear here? You all seem to be seasoned professionals. I'm new enough, the dialog is nerve racking. Is this all about how we conceive our LLCs ... or is there a slew of real estate wholesalers being taken to task? I will always adjust to comply with the rules and regulations.

    So, I simply ask ... Where is the fear of persecution coming from? What are successful wholesalers doing?

    0Reply
  • Will Stahl
    OP
    Rochester, NY · Member since 2017 · 58 posts · 10 votes
    8y

    @Bill Krayer My concern mainly stems from two places:

    1) If I'm in the business of getting properties under contract with only an intent to assign the contract to another party it can be argued that I'm committing fraud since I'm entering a contract with no intent to exercise it. 

    2) When I perform the actions described in bullet point 1 it can be argued that I'm performing a net listing because I'm agreeing on a price with the owner of the property and then I am agreeing on a separate price for a higher amount with a 2nd party.

    The wholesalers I know in my area perform a double close so they don't have to worry about this since they are taking 100% ownership prior to listing and selling the property.

    0Reply
  • Bill Krayer
    Landrum, SC · Member since 2018 · 17 posts · 11 votes
    8y

    @Will Stahl I share any concern that regards the being compliant. So, the point is well taken ... however! This is very similar as to trading stock options. When I purchase an option to buy 100 shares of a specific stock, it is clearly understood that I am not purchasing the option with the intent of buying the stock, I am buying potential value and opting out when I find that value. I never want 100 shares of stock in a market this volatile. But like to have ... the option!

    So, with that said, I get that this could be argued. My next question is, "who do you see as being the person, or entity most likely to step in and accuse me of fraud?" When I buy an option to purchase, I am 100% up front that my intention is to market the property for a period of time. If I fail to assign the option, it reverts or I resign. I fully enter into the option, with the intent to assign it to a buyer who will buy the property.

    I like an "everybody win/win/win" scenario and would like to understand who my foes may be ... and why? Are they protagonist  who just want to make a point, or are my principles holding the chance to spring on me?

    You describe a net listing situation. I'm new, so forgive my ignorance. I am working with a double close and as you mention ... different. However, I see potential to work deals in many different ways and can see where straying from what I know could be dangerous without a strategy.

    If you can share an example, an article on someone gummed up by either of these situations, it would be really educational. I want to know my stuff; the good, the bad and the ugly. For every deal there must be a possible way, or there is no deal. 

    I do appreciate the advice!

    0Reply
  • Will Stahl
    OP
    Rochester, NY · Member since 2017 · 58 posts · 10 votes
    8y

    @Bill Krayer I like the comparison to option contracts. When I speak with my lawyer I'll use that comparison to get my point / intent across. I wonder if there a special licences that are required if your business main objective is to assign contracts to others? Again - for us wholesalers just starting out we shouldn't let this paralyze us from moving forward - most of all we need a deal first! Just like everyone else here, I want to be 100% clear and upfront with my client and convey to them what exactly I am doing so no one else like they're in the dark, being taken advantage of, or getting the short end of the stick. 

    I think most of us are in agreement that it's just good practice to have your RE License when conducting wholesaling (I'm currently in the process of getting mine) but the below article discusses current legal actions being take against wholesalers in the state of Ohio who don't have a RE license. Billy, I'm sure there are different examples on bigger pockets that talk about wholesalers encountering lawsuits. 

    https://www.biggerpockets.com/forums/93/topics/184...

    The two main questions I'll be asking my lawyer are:

    1) What language can I have in my contract that will help protect myself from a potential lawsuit. In the contract should I have a clause that states that I'm likely going to assign this contract to another, potentially for a higher price? 

    2) What am I allowed to say on my website, direct mail pieces, and to my customers regarding their situation? Can I address the fact that they are behind on payments for their mortgage or taxes?  Can I provide information regarding what happens if the bank forecloses on their home? (such as their credit being hurt, losing the current equity in their home, the long drawn out process) I don't know where the line is drawn.

    0Reply
  • Bill Krayer
    Landrum, SC · Member since 2018 · 17 posts · 11 votes
    8y

    I'm not so sure a RE license would really be to my advantage. I tossed simply being an agent and decided I'd like to learn on my feet, not in a seat. I do need to sort out some of this quickly, so I'll be pounding down the door of a good local lawyer. At this point, all indications are that I'm doing this correctly. I know I'm doing it honestly and with integrity, but know in our crazy system ... this can sometimes fall short. Thanks for the good word and link.

    For my information. I see you are a PRO member. What are the advantages?

    0Reply
  • Will Stahl
    OP
    Rochester, NY · Member since 2017 · 58 posts · 10 votes
    8y

    @Bill Krayer Below are some of the benefits that the promembership offers. I honestly don't take advantage of most of the benefits. The property calculator and report generations are something I've already used. Once my website is up I'll be attaching it to my signature which is only available to members. Also if you have a deal you can post it in the marketplace to help advertise - which is nice if you're wholesaling. The main reason I became a pro member is to support BiggerPockets. I've received so much from their free content I have no problem spaying them a few hundred dollars a year. I want them to have it so they can continue to improve the community.

    • Property Analysis Software
      Generate Unlimited Reports
      View all of your past reports
      Downloadable PDF
    • Private Messaging
      Message 10 colleagues at once
    • File Downloads
      Unlimited
    • Create Ads in the Marketplace
      2 posts per day
      Re-post every 5 days
    • Advanced Member Search
      Search within any Postal Code, by member name or member type
    • Forum Keyword Alerts
    • Private File Uploads
    • Exclusive PRO Forum
    • Track profile and blog visits
    • SMS Notifications
    • Webinar Replay Access
    • Forum Signature
      Contact Info, Company Name and Logo, Website Link
    • Profile Video
      Build trust and credibility by uploading an introduction video to your profile
    1Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Will Stahl @Bill Krayer Unless you are expressly purchasing an option, getting a property under contract and then assigning those contract rights to a third party is NOT the same thing as selling an option.

    The issue you will want to research is how to legally market your interest to buyers. State to state this issue is treated differently. In some states you can advertise your interest even though it is merely equitable. In others this is considered brokerage. 

    Gimer Law516 Reviews
    WebsiteView Page
    0Reply
  • Bill Krayer
    Landrum, SC · Member since 2018 · 17 posts · 11 votes
    8y

    I will certainly be asking. Thanks Tim.

    Anyone with wholesaling experience in NC that can share a thought ... it is appreciated!

    0Reply
  • Bill Krayer
    Landrum, SC · Member since 2018 · 17 posts · 11 votes
    8y

    Hey @Will Stahl ... I believe support is one of the best reasons to up the ante on a membership. I'm going Pro knowing I'll outgrow the tools, but never the networks.

    0Reply
  • Chris Purcell
    Investor · Philadelphia, PA · Member since 2010 · 739 posts · 372 votes
    8y

    @Will Stahl

    Go find a deal first and then worry about all this.  Getting way ahead of yourself

    0Reply
  • Todd Radus
    East Stroudsburg, PA · Member since 2018 · 12 posts · 8 votes
    8y

    Just my two cents for what it's worth. Each state is specific in their laws. While all run in similar ways the laws in each state do vary. Finding a real estate lawyer who can help you that knows your area is a great way of knowing you are legal and will operate legally. Until you sit down with a CPA you will likely not have a viable tax strategy and plan which is truly what establishes what business structure is best for your circumstances. Each situation is different what works best for me is not necessarily what is best for your situation. Uncertainty and guess work can slow you down. In my case I sought advice before starting the new business and an LLC was the way for me to go. The variables involved prevent me from saying whether or not and LLC is what's right for you.

    Most states allow for the re-structuring of a business or a change in scope if you have made a mistake. The CPA is going to help you develop a cash flow and tax plan and should have advice on what structure is best for your situation. The attorney will help you operate legally with in your state. Developing a relationship with an attorney and CPA can truly make running your business much easier. You will know who to call. You won't have to waste time seeking legal advice, drawing up contracts, filing taxes or developing cash flow strategies. I even gave up doing books, it's far more valuable to simply track your spending and income and send it over to your book keeper. With today's apps I simply forward my expense and travel app reports and my bank statement each month and I'm done with books. The freeing up of time and reduction of stress are well worth the cost. If I have a question about spending or taxes or need some payroll I simply call my CPA he can draw up the payroll if needed and the advice is free and only takes a few seconds to get.  It is truly freeing to know that you are doing things correctly, in my opinion these professionals are worth every penny you pay them, especially if they are good at what they do. 

    Again, just my two cents, best wishes to you in your new venture.

    0Reply
  • Russell Holmes
    Real Estate Broker · Apopka, FL · Member since 2017 · 492 posts · 528 votes
    8y
    @Will Stahl There is also a distinction between what is legal by state real estate laws vs what is allowed on the MLS. State laws are more lenient than MLS rules. I'm in FL, so different states may vary. In FL, net listings are legal (listings where "commission" earned is the difference between set seller proceeds and sale price, rather than a % of sale), however they are not permitted on the MLS. The MLS is cooperative in intent. All MLS listings must offer an agreed upon cooperative commission to the agent who procures a buyer. That amount can be variable by price or time on market, but that too is disclosed at time of listing. Sale price, and thus commission earned, is negotiable until agreed upon by buyer and seller, not listing agent. A net listing contract that is signed and will not appear on MLS must have a waiver of MLS listing signed as well and maybe some other disclosures I'm unaware of to ensure the seller understands the structure of sale proceeds. From talking with investors and attending a local REIA, I've realized that the wholesaling community is actually predominantly compliant with the law. There are licensed brokers who deal only in net listings and have agents "hang their license" with them doing the same thing. They often are not REALTORS but rather just comply with the state level license requirements. It is a different ballgame. They seek distressed and "junk" houses through all the known methods discussed here and elsewhere. However, instead of some shady hidden fee, they explain to their clients the net listing arrangement, the fact that marketing is more of a "grass roots" style and it won't be on the MLS, Zillow, etc. These are legal contracts, and ethical practices. Think of being a hoarder or the heir of a deceased hoarder. Do you want to try and clean that up and get it MLS and open house ready? or would you rather the also licensed agent who says "I'll do what it takes to find a buyer, and no matter what you'll get $65,000 or I'll walk away and not charge for some cleanup I do". I'm a newly licensed Realtor and planning on a more traditional clientele of MLS listed properties, but I've scratched the surface of the legal licensed "wholesaling" enough to realize I highly respect those guys and their hustle. They have brokers, attorneys, contractors, assistants, working like a finely oiled machine. They often flip some of the better deals and then list those with a transactional brokerage on the MLS. Some local groups are getting crazy 50% markups selling junk $50k houses for $75k to Californians with money to blow. They are admittedly making it hard for me to find good deals on the MLS for clients. In my opinion, if they are doing it legally and going through the work of finding buyers 3000 miles away, finding houses others can't, and making a profit, they deserve every dollar. With that said, I have yet to understand how wholesaling without a license is not in blatant violation of real estate brokerage law. Being unlicensed means if the real estate commission finds out, they have no authority to discipline and must file criminal charges. As a licensee, minor violations are handled in relation to their severety in relation to license status or fines. Things are only escalated to criminal court in extreme negligence circumstances. Get licensed, find a broker who does what you're looking to do, and then rock your niche!
    2Reply
  • Ramsin Jacob
    Realtor · San Jose, CA · Member since 2018 · 184 posts · 71 votes
    8y
    Awesome answer and the end. Currently in one of these contracts
    0Reply
  • Bill Krayer
    Landrum, SC · Member since 2018 · 17 posts · 11 votes
    8y

    I've got a lot to learn. I do everyday. Wholesaling is not new to the world, it is new to me. I'd love a real life example of a wholesale deal going bad. 

    Anybody got a war story!

    0Reply
  • Arn CenedellaPro Member
    Rental Property Investor · Greenville, SC · Member since 2008 · 786 posts · 1k+ votes
    8y
    Will: Bigger Pockets is an excellent site. That being said, the comments found here are sometimes/often not accurate or correct. I think when it comes to legal issues, you need to be very very careful. People may not fully understand your question. In addition, State laws vary greatly. Ohio for example looks at wholesalers differently than South Carolina. I have my opinion on your question. But your question is too important for you for me to pontificate off the cuff. My advice is to spend a $1,000 and consult with a local attorney who specializes in real estate and business law. Contact some local wholesalers and ask them for attorney referrals. Have an attorney knowledgeable on these issues set up your business properly. You probably should also consult with a real estate knowledgeable CPA and get that input. Get your business started properly, invest the money now to save you headaches later.
    [email protected]650-575-6114
    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y
    Originally posted by @Stephen Sheppard:

    That's a good thing if you have form your LLC. You want to mitigate the risk. We operate in residential investment and commercial lending so you don't need a real estate license unless you are in the states of Arizona, California, Idaho, & Oregon.

    the laws in each state read the same  FLA you can't do this either.. it just depends on who is going to enforce the laws on the books  OHIO does as well..  Just fyi..  and I bet if you contacted the state of Nevada they would say the same thing license required does not keep wholesalers from doing this.. they will keep going until told by the state to stop and even then could keep going..  

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y
    Originally posted by @Russell Holmes:
    @Will Stahl There is also a distinction between what is legal by state real estate laws vs what is allowed on the MLS. State laws are more lenient than MLS rules. I'm in FL, so different states may vary. In FL, net listings are legal (listings where "commission" earned is the difference between set seller proceeds and sale price, rather than a % of sale), however they are not permitted on the MLS. The MLS is cooperative in intent. All MLS listings must offer an agreed upon cooperative commission to the agent who procures a buyer. That amount can be variable by price or time on market, but that too is disclosed at time of listing. Sale price, and thus commission earned, is negotiable until agreed upon by buyer and seller, not listing agent. A net listing contract that is signed and will not appear on MLS must have a waiver of MLS listing signed as well and maybe some other disclosures I'm unaware of to ensure the seller understands the structure of sale proceeds. From talking with investors and attending a local REIA, I've realized that the wholesaling community is actually predominantly compliant with the law. There are licensed brokers who deal only in net listings and have agents "hang their license" with them doing the same thing. They often are not REALTORS but rather just comply with the state level license requirements. It is a different ballgame. They seek distressed and "junk" houses through all the known methods discussed here and elsewhere. However, instead of some shady hidden fee, they explain to their clients the net listing arrangement, the fact that marketing is more of a "grass roots" style and it won't be on the MLS, Zillow, etc. These are legal contracts, and ethical practices. Think of being a hoarder or the heir of a deceased hoarder. Do you want to try and clean that up and get it MLS and open house ready? or would you rather the also licensed agent who says "I'll do what it takes to find a buyer, and no matter what you'll get $65,000 or I'll walk away and not charge for some cleanup I do". I'm a newly licensed Realtor and planning on a more traditional clientele of MLS listed properties, but I've scratched the surface of the legal licensed "wholesaling" enough to realize I highly respect those guys and their hustle. They have brokers, attorneys, contractors, assistants, working like a finely oiled machine. They often flip some of the better deals and then list those with a transactional brokerage on the MLS. Some local groups are getting crazy 50% markups selling junk $50k houses for $75k to Californians with money to blow. They are admittedly making it hard for me to find good deals on the MLS for clients. In my opinion, if they are doing it legally and going through the work of finding buyers 3000 miles away, finding houses others can't, and making a profit, they deserve every dollar. With that said, I have yet to understand how wholesaling without a license is not in blatant violation of real estate brokerage law. Being unlicensed means if the real estate commission finds out, they have no authority to discipline and must file criminal charges. As a licensee, minor violations are handled in relation to their severety in relation to license status or fines. Things are only escalated to criminal court in extreme negligence circumstances. Get licensed, find a broker who does what you're looking to do, and then rock your niche!

    Key to this statement which was very good by the way is that Commission is negotiated.. when I started my sales career in 1975.. I specialized in selling land no one else could sell.. I did not put it on MLS and I procured the buyer in all instances ( double ended) for completely different reasons at 18 I was far to impatient to deal with lenders appraisers and banks. I wanted the quickest way between me and my commission... And selling land on owner contract was the way.. Much like wholesaling today.. or what many who endeavor to do it are looking for easy quick money ( although wholesaling is NOT easy by any stretch. ) And by specializing in dirt that regular agents could not sell because they ONE could not find it half the time LOL.. I was able to charge anywhere from 15 to 30% commissions.. all agreed to by the Seller up front and disclosed as a commission.. for an 18 year old kid in 1975 my first year I made 50k doing this.. Pretty cool in the day..

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    1Reply
  • Russell Holmes
    Real Estate Broker · Apopka, FL · Member since 2017 · 492 posts · 528 votes
    8y
    @Jay Hinrichs you mention being too impatient to deal with banks, but I think your strategy back then was more genius than you give it credit with that humble statement. I would imagine if you had listed the land under contract on the MLS as a direct listing agreement without any parcel splits or other tangible or intangible value adds, it probably would have continued to sit untouched. "Normal" home buyers using REALTORS and shopping from the MLS for their next house aren't looking for raw land. They don't want a gut-rehab, and they definitely aren't going to market to those leads in the first place. You didn't just earn the 15-30% by skipping the MLS, you figured out how to sell the potential value of the land rather than the land itself, finding more investor minded buyers to pay more than what others considered to be "market value" when they could see your vision that in fact it was a great deal. That's why I say wholesalers (legitimate licensed ones) are in a different ballgame. The ways they create value and demand their premiums are an art form. Building an MLS business is an art form too, but it's like comparing sculpting and painting. Some people can do both, but they are different skill sets in the same general business.
    0Reply
  • Vince Mayer
    Wholesaler · Arnold, MO · Member since 2013 · 348 posts · 183 votes
    8y

    @Will Stahl In regards to using a purchase of a stock option as an example of wholesaling, you have to remember that you are purchasing or selling the option by using someone who is licensed. A stock broker.

    Getting your RE license or using transactional funding for wholesaling is just a cost of doing business, much like mailing to get leads.

    I think your question is do I need an entity and if so, what kind and why.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free