How to Wholesale my Landlords Property

Wholesaling
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How to Wholesale my Landlords Property

Kimberly S.
Real Estate Agent · Los Angeles, CA · Member since 2019 · 30 posts · 14 votes

Would love some advice from all you masterminds:

My previous landlord is a sweet older lady who owns a multi-unit building here in LA. I can tell she is having a hard time keeping up with finding new tenants and is not interested in doing any type of renovations to the property. (It’s quite outdated and needs TLC)

It’s clear she is living off the rental income for her retirement but it’s becoming more difficult to keep up.

I’d like to help her sell it and wholesale the property to someone who can rehab it and get more value out of the property. She could live off what she makes from the property sale or reinvest it into something easier to maintain (less tenants). I’ve tried to help her find new tenants but the building needs love.

Most of the wholesale conversations I’ve seen are between a wholesaler and a seller they didn’t know.

I’m looking for some advice about the best way to approach this scenario seeing as how I would need to have her assign the property to myself to execute the contract. Do I approach her as if I want to buy the property myself? Or bluntly explain to her the process of wholesaling.

I would genuinely like to help her while also building my experience in wholesaling and real estate.

Perhaps you would have a completely different approach? Thanks for your advice.

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George W.
Investor · NJ · Member since 2018 · 869 posts · 921 votes
7y

Why don't you just ask her if she is interested in selling the property to you. Maybe she'd even owner finance it to you. 

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  • George W.
    Investor · NJ · Member since 2018 · 869 posts · 921 votes
    7y

    Why don't you just ask her if she is interested in selling the property to you. Maybe she'd even owner finance it to you. 

    6Reply
  • Joe P.
    Philadelphia, PA · Member since 2017 · 824 posts · 1k+ votes
    7y

    Lots of ducks to line up here. I'm not a wholesaler but the point is to buy it low enough, and flip it low enough, for everyone to make money.

    If the ARV is 200k, and it needs 100k of work, you would need to wholesale within a range to satisfy her, satisfy you, and then satisfy a buyer. That's a lot of satisfaction going on.

    This is why wholesaling is easy to get into but doing so properly is truly an art.

    What would the end-buyer be looking to do? Flip it? BRRRR? You have to think through every aspect of this to see if its even a wholesale opportunity. She needs enough money to sell it to you (and you better have the funds in cash to give it to her, or a great agreement everyone is on so she gets paid), and an investor needs to have the room to bring it to market shape and make their money. And you'll want an assignment fee for the in-between.

    I truly believe you want to help her, but frankly the only way I see you helping her with zero experience is just buying the property off of her outright, and then you can dick around with what to do next. She needs the money, probably.

    4Reply
  • Kimberly S.
    OP
    Real Estate Agent · Los Angeles, CA · Member since 2019 · 30 posts · 14 votes
    7y

    @George W. That’s an interesting option I would need to run the numbers. I don’t have the capital to update this property though unless a bank would give me a loan for that?

    This property would likely go for $900k before repairs. ARV upwards of $1M

    I don’t want to miss out on a potential opportunity to both help her out and seize a great RE deal. What would you do in that scenario?

    1Reply
  • Kimberly S.
    OP
    Real Estate Agent · Los Angeles, CA · Member since 2019 · 30 posts · 14 votes
    7y

    @George W.

    Unless what you’re suggesting is to get a seller financed deal and then work on finding the next buyer?

    0Reply
  • Kimberly S.
    OP
    Real Estate Agent · Los Angeles, CA · Member since 2019 · 30 posts · 14 votes
    7y

    @Joe P.

    Thanks for all your input Joe.

    I did think about the end result of this property and I think for an investor that has capital they could do some necessary updates to the units and make much more cash flow from the rents. She is not interested nor does she have the capital to make such updates which is hindering her ability to charge more rent and to even rent the units out.

    I didn’t consider buying the property myself because I don’t have that much cash available we’re talking a $900k approximate value for this property before repairs.

    Unless I am missing something.

    George did mention a seller financed option, which i didn’t think about before I will need to analyze those numbers and see if it make sense for me.

    I’d still need to find a way to update the property.

    0Reply
  • Joe P.
    Philadelphia, PA · Member since 2017 · 824 posts · 1k+ votes
    7y

    900k BRV, upwards of 1mill ARV - doesn't sound like much room to improve for a flip? Unless we're talking like, 1.2 million. I don't know what flippers would be looking for out there.

    Do you have experience in this market? How many flips, BRRRRs, wholesales have you done?

    0Reply
  • George W.
    Investor · NJ · Member since 2018 · 869 posts · 921 votes
    7y
    Originally posted by @Kimberly S.:

    @George W.

    Unless what you’re suggesting is to get a seller financed deal and then work on finding the next buyer?

     Well personally, I wouldn't try and sell the property to another person/wholesale it. Is it a multi-family? If it Is and it can produce monthly cashflow then it's a solid long term investment possibly. It sounds like you're already paying this lady rent, so if it's distressed maybe she'd sell it to you at a discount. 

    As far as needing work, you can get a hard money loan. Which can help pay for repairs then refinance it and keep the place. If you wholesale the place you might sell it to someone who doesn't want a existing Tennant. 

    Another option would be a 203k loan possibly. I'm not sure with the price of the property though. I think there's limits to what you can borrow.

    Maybe she would owner finance the building to you. If you are paying rent to her now anyways, you might be able to handle a loan to her with interest. This would be good if you can afford the repairs. That being said there's loans for repairs. 

    I think the best first step is to ask the landlord If she would consider selling the building to you. Don't get too specific about your plans with it to her. Worst case scenario she says no and that's okay too there are always other deals to be had. 

    0Reply
  • Kimberly S.
    OP
    Real Estate Agent · Los Angeles, CA · Member since 2019 · 30 posts · 14 votes
    7y

    @George W.

    Thank you that’s a very interesting strategy. I just spoke with her and she is open to selling, she is wanting to do a 1031 exchange and move to another state. But she kept emphasizing that she is not in a rush to sell.

    I need to do some more research on 1031 but I’m pretty sure she can sell whenever she wants and the funds will stay there until she finds her new property that she wants to buy without being taxed.

    I’m going to meet with a bank tomorrow and see what my lending options could be.

    It is ALOT to borrow and at $900k - $1M I might not be qualified to borrow this much.

    Maybe I should look for a cash buyer and see if I can squeeze a deal together.

    I think there would be room for a profitable deal if I can get her to the lower side of $1M if the ARV Is closer to $1.7M or $2M

    Again I’m in LA so the numbers escalate quickly

    0Reply
  • Kimberly S.
    OP
    Real Estate Agent · Los Angeles, CA · Member since 2019 · 30 posts · 14 votes
    7y

    @Joe P. I’ll be honest Joe I’m just getting my feet wet. And as I’m starting to study real estate, this scenario presented itself and I want to make the most of the opportunity and also help.

    I finally got ahold of her and she said she is considering selling because she wants to move to a different state. But she is concerned about making sure it goes through a 1031.

    Like I said she is very old and it’s actually very difficult to hold a full conversation sometimes she will forget what we are talking about mid way through.

    Her current rents are waaaay below market and that’s because the building needs updating.

    I think my best move right now would be to get a professional opinion of the BRV and ARV. Then if it makes sense I can connect some buyers.

    0Reply
  • Pavel Shemyakin
    Rental Property Investor · CA · Member since 2018 · 135 posts · 174 votes
    7y

    I believe 1031 gives you 45 days to find a deal. Definitely not unlimited.

    2Reply
  • Kimberly S.
    OP
    Real Estate Agent · Los Angeles, CA · Member since 2019 · 30 posts · 14 votes
    7y

    @Pavel Shemyakin

    That’s good to know. Hence I need to strategize the deal around when she finds her next property. And thoughts on this?

    I’m in CAlifornia but she is looking to move to Arkansas or Texas.

    0Reply
  • George W.
    Investor · NJ · Member since 2018 · 869 posts · 921 votes
    7y

    Just out of curiosity, did she say that she wants 900k for the property when you talked to her? I'm not familiar with LA so I couldn't even guess what a good price to buy a rehab there would even be there. Figure out the price she wants for the place. Find comparable sales in the area to try and get a rough idea of arv. 

    As far as the 1031 time is more on your side in this scenario and the advantage for both of you is that you can close on the deal whenever she wants. 

    1Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Kimberly Schaid. I find it highly unlikely that you wholesale this or close on it, for a plethora of reasons, most of which aren’t worth getting into.

    By far the easiest thing to do here would be to list the property for sale and sell it for her and take your commission. Trying to wholesale this is going to be really messy, and will have a lot of moving parts

    1Reply
  • Kimberly S.
    OP
    Real Estate Agent · Los Angeles, CA · Member since 2019 · 30 posts · 14 votes
    7y

    @Caleb Heimsoth hey! Thanks for your input!

    Do you mind breaking down for me more ask to why wholesaling it is a bad idea?

    If it’s too much for here maybe you can message me. I’d like to learn more about the pros and cons of trying to wholesale this.

    Unfortunately I’m still working on getting my RE license. I’m still pretty new to all of this, but I knew this could turn out to be a deal somewhere.

    Maybe I’ll just have to see if I can get a referral kick back for giving the deal to a realtor friend.

    0Reply
  • Kimberly S.
    OP
    Real Estate Agent · Los Angeles, CA · Member since 2019 · 30 posts · 14 votes
    7y

    @George W.

    She didn’t seem to have any idea how much she wants for the property. She mentioned she saw properties going for $1.7m but I’ve studied the area and i know those sales were for properties in much better condition than hers.

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y
    Originally posted by @Kimberly S.:

    @Caleb Heimsoth hey! Thanks for your input!

    Do you mind breaking down for me more ask to why wholesaling it is a bad idea?

    If it’s too much for here maybe you can message me. I’d like to learn more about the pros and cons of trying to wholesale this.

    Unfortunately I’m still working on getting my RE license. I’m still pretty new to all of this, but I knew this could turn out to be a deal somewhere.

    Maybe I’ll just have to see if I can get a referral kick back for giving the deal to a realtor friend.

    Accepting a referral fee if you’re not licensed is illegal in most states.  

    I think it’s rather unlikely because 1) you don’t really have a motivated seller.  You even said she wants to sell when she wants to sell 

    2) let’s say you get it under contract for 900k or 1M you then have to find someone with that kind of liquid cash, which isn’t easy.

    3) you are new and you can't nail down an ARV or rehab numbers or lots of other stuff.

    Wholesaling is not easy, it’s actually really difficult  

    1Reply
  • George W.
    Investor · NJ · Member since 2018 · 869 posts · 921 votes
    7y
    Originally posted by @Kimberly S.:

    @George W.

    She didn’t seem to have any idea how much she wants for the property. She mentioned she saw properties going for $1.7m but I’ve studied the area and i know those sales were for properties in much better condition than hers.

    Hmm well again not sure the scope of work that it needs but if you don't have any cash reserves or a loan and good income a project like this could easily sink you financially. 

    0Reply
  • Joel Thompson
    Investor · Kirkland, WA · Member since 2017 · 121 posts · 53 votes
    7y

    @Kimberly S. this could be an excellent candidate for owner financing.

    If I was in your position, I'd find a more experienced investor to partner with, one who has specifically purchased by including the seller in financing, and find out exactly what the landlord is looking to accomplish. Sounds like she's aware of her tax liability from the sale and wants to avoid that. That's a great starting point. You may find that she's looking for a way to maintain income, but doesn't want to manage the property any longer, this is definitely something you can accomplish through owner financing.

    You could also partner with a wholesaler in your area that specifically is finding buyers for distressed multifamily properties.

    Since you truly want to help her, DO NOT try to do this on your own. There are a lot of ways to make this work, but there are also an equal number of ways to hurt this woman. Find out as much info as you can on your own, and call some local property managers to ask for referrals for investors looking for the type/size of property that she owns.

    1Reply
  • Kimberly S.
    OP
    Real Estate Agent · Los Angeles, CA · Member since 2019 · 30 posts · 14 votes
    7y

    @Joel Thompson wow Joel thank you.

    I need to do more research on seller financing.

    Since I never even considered this before.

    0Reply
  • Kimberly S.
    OP
    Real Estate Agent · Los Angeles, CA · Member since 2019 · 30 posts · 14 votes
    7y

    @Joel Thompson thank you! I want to gain experience from this and I also want to protect the seller too, that is the whole point of me getting myself involved.

    Thanks again I’ll look forward to your PM

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Kimberly Schaid. Most of the strategies you have suggested typically go against a sellers best interest. Just FYI..

    0Reply
  • Kimberly S.
    OP
    Real Estate Agent · Los Angeles, CA · Member since 2019 · 30 posts · 14 votes
    7y

    @Caleb Heimsoth I appreciate your contributions but you haven’t been giving any constructive suggestions besides me buying the property or selling the property myself which aren’t options for me. At least not outright.

    It’s still in the sellers best interest for her to sell the property.

    Something I like about Bigger Pockets community is their encouragement for people to get involved in real estate, build experience, and get creative. That is what I am looking to do. So if you have any other suggestions I welcome them. Thanks.

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y
    Originally posted by @Kimberly S.:

    @Caleb Heimsoth I appreciate your contributions but you haven’t been giving any constructive suggestions besides me buying the property or selling the property myself which aren’t options for me. At least not outright.

    It’s still in the sellers best interest for her to sell the property.

    Something I like about Bigger Pockets community is their encouragement for people to get involved in real estate, build experience, and get creative. That is what I am looking to do. So if you have any other suggestions I welcome them. Thanks.

    Your best option is to become an agent, list the property and take the commission.  

    Wholesaling is going to be tough for all the reasons I mentioned above.  Seller financing can work but she will want a down payment.  Let’s say it’s 10 percent (which is low), that’s 90k, do you have 90k? 

    BP is great and has lots of good ideas and strategies but it also glosses over the fact that these strategies are extremely hard to implement.  

    0Reply
  • Victoria Bonhomme
    Real Estate Agent · Palm Springs, CA · Member since 2018 · 16 posts · 6 votes
    7y

    @Caleb Heimsoth

    100% agree!

    1Reply
  • Quito Keutla
    Real Estate Agent · Renton, WA · Member since 2017 · 204 posts · 151 votes
    7y

    @Kimberly S.  Looks like you do have an opportunity to help her out and make it a win for everyone involved.  Look at it as if you're a problem solver for her and get other people who are experience to help.  There are many options if she is open. Feel free to reachout. Happy Investing!

    0Reply
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