Wannabe wholesaler newbie with questions...

Wholesaling
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Wannabe wholesaler newbie with questions...

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Real Estate Investor · Mendocino County, CA · Member since 2011 · 93 posts · 2 votes

I have a been eyeing a few deals which my birdog client seems to have no interest in, I thought maybe I would look in to wholesaling one of them (at least) thus, I have the following questions.

1. When I send a letter to the owner do I offer to buy the home, or explain that I'd like to put the house under contract?

2. I don't really have a buyers list yet. Is that a major issue? I do plan on asking for mls listing permission in the contract and of course advertising on craigslist and to the few people I do have in mind.

3 transactional funding verses assignment. Can an individual get transactional funding or do I need a company.

4. I am thinking of asking for a partner/mentor in the area on BP as I really could use the guidance and help in finding a buyer and possibley in getting transactional funding. 50/50 split on the deal. is that a good idea?

5. Any other tips? I am only about a month into the the newbie stage

Obviously I would get a home inspection, a few contractors estaments, and a price opinion before I put it under contract.

I am in northern california, deals are in sacramento county california.
Thanks for the help!

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Sean D.
Investor · Oklahoma City, OK · Member since 2011 · 18 posts · 9 votes
15y

Kevin,

Foremost, clarify what you mean by “bird dog client?†A bird dog should simply bring you deals that you’ll decide whether or not to pursue. Thus, a bird dog is not a client…more of an independent contractor. You don’t work for him or her.

1. Whatever you send, (letter, postcard, handwritten note), it doesn’t mean the seller will give it a second look, and it could very well end up in the trash. In fact, most will. You always want to let sellers know that “YOU BUY HOUSES.†The average seller will have no clue what you mean by putting their house under contract or what a wholesale deal is. You should be up front and let them know you may bring in an investor partner to close the deal, and make sure your contract is assignable.

2. MLS Permission? For what? Not necessary in a contract. The purchase contract gives you equitable interest in the property and you can advertise it as you see fit. Do you plan on listing it with a Realtor? That’s not what wholesaling is about. Some wholesalers will use a MLS Flat fee service for their deals but that’s roughly a couple hundred bucks for a Realtor to place your FSBO in the MLS and you pay them 2-3% commission if they bring you a buyer. If the property works and the numbers are right, end-buyer investors will ring your phone off the hook, and that’s how you start to build your buyer’s list.

3. Just do a Google search for transactional funding and you’ll find out those companies' requirements. You’ll most likely find that you need a legal entity and an end-buyer in place…and of course the numbers have to work! Not sure why you’d need transactional funding though unless you’re doing simultaneous or back to back closings. As a wholesaler, you really don’t want to have to close on a property, unless necessary. It’s best to just assign your contract to your end-buyer and collect your assignment fee at closing. REO and short sale deals typically require the use of transactional funds for reasons too long to explain here.

4. Good idea. Look for a mentor in your area, or partner with another experienced wholesaler. Try to connect with a local real estate investment club if you have one.

5. Home inspection? A few contractor estimates? Price opinion before you put it under contract? Kevin, you’ve got a lot more to learn, so don’t be afraid to take your time to learn the business and what a real estate deal entails from start to finish. As a wholesaler you don’t want to pay a few hundred bucks for an inspection. You want to get in and out of the deal ASAP. As for the price opinion you don’t need that either. Most Realtors will charge you for that. Run your comps yourself so that you know the numbers work. A more experienced investor can teach you how to do comps. (It’s basically averaging, which we all learned in elementary math) Do a visual inspection and estimate repairs yourself. This is where experience comes in. Interested investors (your end-buyers) will want to see the house too and can determine what repairs will cost more accurately.

Good luck

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  • Account Closed
    OP
    Real Estate Investor · Mendocino County, CA · Member since 2011 · 93 posts · 2 votes
    15y

    No one, really could use the help?

    0Reply
  • Sean D.
    Investor · Oklahoma City, OK · Member since 2011 · 18 posts · 9 votes
    15y

    Kevin,

    Foremost, clarify what you mean by “bird dog client?†A bird dog should simply bring you deals that you’ll decide whether or not to pursue. Thus, a bird dog is not a client…more of an independent contractor. You don’t work for him or her.

    1. Whatever you send, (letter, postcard, handwritten note), it doesn’t mean the seller will give it a second look, and it could very well end up in the trash. In fact, most will. You always want to let sellers know that “YOU BUY HOUSES.†The average seller will have no clue what you mean by putting their house under contract or what a wholesale deal is. You should be up front and let them know you may bring in an investor partner to close the deal, and make sure your contract is assignable.

    2. MLS Permission? For what? Not necessary in a contract. The purchase contract gives you equitable interest in the property and you can advertise it as you see fit. Do you plan on listing it with a Realtor? That’s not what wholesaling is about. Some wholesalers will use a MLS Flat fee service for their deals but that’s roughly a couple hundred bucks for a Realtor to place your FSBO in the MLS and you pay them 2-3% commission if they bring you a buyer. If the property works and the numbers are right, end-buyer investors will ring your phone off the hook, and that’s how you start to build your buyer’s list.

    3. Just do a Google search for transactional funding and you’ll find out those companies' requirements. You’ll most likely find that you need a legal entity and an end-buyer in place…and of course the numbers have to work! Not sure why you’d need transactional funding though unless you’re doing simultaneous or back to back closings. As a wholesaler, you really don’t want to have to close on a property, unless necessary. It’s best to just assign your contract to your end-buyer and collect your assignment fee at closing. REO and short sale deals typically require the use of transactional funds for reasons too long to explain here.

    4. Good idea. Look for a mentor in your area, or partner with another experienced wholesaler. Try to connect with a local real estate investment club if you have one.

    5. Home inspection? A few contractor estimates? Price opinion before you put it under contract? Kevin, you’ve got a lot more to learn, so don’t be afraid to take your time to learn the business and what a real estate deal entails from start to finish. As a wholesaler you don’t want to pay a few hundred bucks for an inspection. You want to get in and out of the deal ASAP. As for the price opinion you don’t need that either. Most Realtors will charge you for that. Run your comps yourself so that you know the numbers work. A more experienced investor can teach you how to do comps. (It’s basically averaging, which we all learned in elementary math) Do a visual inspection and estimate repairs yourself. This is where experience comes in. Interested investors (your end-buyers) will want to see the house too and can determine what repairs will cost more accurately.

    Good luck

    1Reply
  • Account Closed
    OP
    Real Estate Investor · Mendocino County, CA · Member since 2011 · 93 posts · 2 votes
    15y

    nevermind the client you were exactly right. I just met I sent him the list and he's got no interst. As for the price opion and contractor estimants that would be done after its under contract of course. Anyone else want to way in?

    Originally posted by Sean Danley:
    Kevin,

    Foremost, clarify what you mean by “bird dog client?†A bird dog should simply bring you deals that you’ll decide whether or not to pursue. Thus, a bird dog is not a client…more of an independent contractor. You don’t work for him or her.

    1. Whatever you send, (letter, postcard, handwritten note), it doesn’t mean the seller will give it a second look, and it could very well end up in the trash. In fact, most will. You always want to let sellers know that “YOU BUY HOUSES.†The average seller will have no clue what you mean by putting their house under contract or what a wholesale deal is. You should be up front and let them know you may bring in an investor partner to close the deal, and make sure your contract is assignable.

    2. MLS Permission? For what? Not necessary in a contract. The purchase contract gives you equitable interest in the property and you can advertise it as you see fit. Do you plan on listing it with a Realtor? That’s not what wholesaling is about. Some wholesalers will use a MLS Flat fee service for their deals but that’s roughly a couple hundred bucks for a Realtor to place your FSBO in the MLS and you pay them 2-3% commission if they bring you a buyer. If the property works and the numbers are right, end-buyer investors will ring your phone off the hook, and that’s how you start to build your buyer’s list.

    3. Just do a Google search for transactional funding and you’ll find out those companies' requirements. You’ll most likely find that you need a legal entity and an end-buyer in place…and of course the numbers have to work! Not sure why you’d need transactional funding though unless you’re doing simultaneous or back to back closings. As a wholesaler, you really don’t want to have to close on a property, unless necessary. It’s best to just assign your contract to your end-buyer and collect your assignment fee at closing. REO and short sale deals typically require the use of transactional funds for reasons too long to explain here.

    4. Good idea. Look for a mentor in your area, or partner with another experienced wholesaler. Try to connect with a local real estate investment club if you have one.

    5. Home inspection? A few contractor estimates? Price opinion before you put it under contract? Kevin, you’ve got a lot more to learn, so don’t be afraid to take your time to learn the business and what a real estate deal entails from start to finish. As a wholesaler you don’t want to pay a few hundred bucks for an inspection. You want to get in and out of the deal ASAP. As for the price opinion you don’t need that either. Most Realtors will charge you for that. Run your comps yourself so that you know the numbers work. A more experienced investor can teach you how to do comps. (It’s basically averaging, which we all learned in elementary math) Do a visual inspection and estimate repairs yourself. This is where experience comes in. Interested investors (your end-buyers) will want to see the house too and can determine what repairs will cost more accurately.

    Good luck

    0Reply
  • Jimmy C.
    Flipper/Rehabber · Seminole, FL · Member since 2010 · 859 posts · 316 votes
    15y
    Originally posted by Kevin Coffman:
    I have a been eyeing a few deals which my birdog client seems to have no interest in, I thought maybe I would look in to wholesaling one of them (at least) thus, I have the following questions.

    1. When I send a letter to the owner do I offer to buy the home, or explain that I'd like to put the house under contract?

    2. I don't really have a buyers list yet. Is that a major issue? I do plan on asking for mls listing permission in the contract and of course advertising on craigslist and to the few people I do have in mind.

    3 transactional funding verses assignment. Can an individual get transactional funding or do I need a company.

    4. I am thinking of asking for a partner/mentor in the area on BP as I really could use the guidance and help in finding a buyer and possibley in getting transactional funding. 50/50 split on the deal. is that a good idea?

    5. Any other tips? I am only about a month into the the newbie stage

    Obviously I would get a home inspection, a few contractors estaments, and a price opinion before I put it under contract.

    I am in northern california, deals are in sacramento county california.
    Thanks for the help!

    #1: Skippin it...

    #2: Study proactive ways to build your buyers list. Networking - Courthouse auctions and REIA meetings are swarming with cash buyers and people cashed up. Also, call every We Buy Houses and Bandit Sign, newspaper and online ad you see for your area. Talk to people and make friends!!

    But you dont have to wait to get a property under contract either. If its a deal you can sell it on the MLS, Craigslist, and every other method imaginable. This will get people coming to you for the deal, and add buyers to your list.

    #3: I would imagine that transactional lenders do not care if the contract is in your name, or the name of a corporation. But I have never used one, only created them from people I knew already.

    #4: You will meet many people to learn from if you follow my advice in step #2

    More tips:

    Complete your profile on BP

    Replace entertainment with reading these forums as far back as you can go.

    Create a to do list and an action plan to get started. Update your to do list every evening, rinse and repeat.

    Good luck, hope I helped some!

    0Reply
  • Account Closed
    OP
    Real Estate Investor · Mendocino County, CA · Member since 2011 · 93 posts · 2 votes
    15y

    Thanks Jimmy, I have looked at comps and it seems to be worth about $150.000 (a house with the same lay out built in the same but about 200 sqft smaller sold for $183000 on 2/25) sold I'd like to contact the owner. (I go to college in that city but I am home for the summer and about 3 hours drive away, I would make the drive for a meeting but it's to far just to knock on the door.) any tips in that regard anyone?

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    15y

    This is a numbers game. You seem to have augured in on this one specific house. Send the owner of this house, and 100 more a letter. Hopefully you will get a handful of responses. Followup periodically with more mailings.

    Read in the Wholesaling and Real Estate Investor marketing forums about strategies people have used for marketing to find deals.

    You say you're "eyeing a few deals". What does that mean? If would mean something if you've actually spoken with the owner and they have some interest in selling. If they're just houses you've identified from the MLS, public records, driving around, etc, then you really have nothing yet. You have to take some action to turn these into deals.

    Why are you looking at houses so far away. I agree that driving three hours to knock on a door is a waste of time. But what if you send a letter and they call you? Your goal in that call should be to set up an appointment. What if you get there and they throw out a ridiculous price? You have to expect that, after all you're going to throw out a ridiculous price from their point of view. Maybe you want to look closer.

    0Reply
  • Account Closed
    OP
    Real Estate Investor · Mendocino County, CA · Member since 2011 · 93 posts · 2 votes
    15y

    My area is very very small but I do a great experinced realtor in the area so I will look. thank you jeff.

    0Reply
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