first off, I would like to take a moment to introduce myself to the commuter 8th. My name is Chris. I'm 37 years old and I live in Minnesota. I would like to get involved in the real estate game but honestly I don't come from a rich family and I really don't have much money to my own name but that should not stop me from what it is that I want to do. I want to get involved in real estate as I mentioned and build up a business that I can then pass along to my children and set them up. I have been doing different types of research and I see that the big thing for people to get involved in real estate without money down or money out of pocket so to speak is to do wholesaling.
I would like to reach out to people in Minnesota that have either done this or are currently doing this and find out if they have any insight on which direction I should take to get started. Having said that, one of the things I've seen is that some people believe that wholesaling could be kind of a gray area or some what type of illegal activity so I was wondering if anybody can weigh in on that as well. There has to be some type of legal way that you can present yourself as a wholesaler with clarity so that no party is kept in the dark and nobody is trying to second-guess what it is that you want to accomplish. can this be done with different types of documentation or maybe the closing company that you use or anything like that? I want to do it and I want to make it so that people trust what it is that I'm trying to do. If I was to take time and build up my own investment so I can invest my own money then maybe I could do that in 15 or 20 years down the road but I want to get going like yesterday.
I'm not one to just sit around and wait for something to happen. I want to make money and I want to make money now. I don't want to wait for 15 or 20 years down the road. That's exactly how long it would take me if not longer. I want to start with the wholesaling like I said use that to build up some capital and then take that capital and invest in property. Can anybody point me in the right direction?
I'm certainly no legal expert, but I totally get where you're coming from. It depends on your state, as well as title companies and other stuff in your area. I'm sure there will be some RE agents/brokers that you will see saying wholesaling is illegal, immoral, or whatever. Those come from biased opinions where they are either misinformed, feel wholesalers are taking business away from them, or had a bad experience with an unscrupulous person (which exist in every industry, licensed or not).
I would reach out to some real estate lawyers in your area, ask them first if they work with investors, then if they have worked with wholesalers, and ask some questions. If you keep it to less than 10 minutes per lawyer, you shouldn't have to pay anything. If any of them have no idea what you're talking about or say it's illegal, just thank them for their time and call another.
Also, start attending local meetups and REIA meetings, and start talking to people wholesaling in your area. They can tell you great info specific to your area.
I live in Illinois, where due to SB 1872 passed in Aug 2019, they have flat out stated that you cannot wholesale more than 1 property per year without a broker license (our lowest RE license in the state, as we don't have agent licenses). Now, reading that law many are saying "I can't wholesale without a license". Maybe that's true, maybe it's not.
Instead of saying 'I can't do wholesaling' instead ask 'how can I do wholesaling?'. For those that don't understand the service it provides, there are a lot of people out there that do not want to go the typical retail sales route through a Realtor. Most are motivated sellers that either cannot wait the average 120 days from on market to closing, or do not want to show the house or have pictures of the house online, maybe they inherited the property from a hoarder in their family that passed.
RE agents can certainly still sell these properties, but many don't know how or would rather deal with retail market they know and love, rather than find and grow a network of cash buyers, coordinate clearing out a place with a dumpster or whatever might be involved, and/or various types of creative financing. So I'm not ripping on RE agents or brokers WHATSOEVER, in fact I will likely become one in Illinois in the future. I'm just saying the ones that rip on wholesaling just don't understand all the circumstances where we can provide value.
Now if your state was as strict as Illinois, there are a few options for me to wholesale with little to no funds. I can do 1 wholesale deal a year, I can do two separate closings using transactional funding, or I can get my broker license. There are other methods I've heard of where property is transferred to an LLC and the LLC is transferred, but I feel like that is asking for trouble since the intent of it is to skirt around a law rather than do something legitimate in the state's eyes. With that said, the law is stupid to me, and some feel it cannot be enforced. But I'd rather operate in such a way that is completely legitimate in everyone's eyes for my state.
But don't worry, wholesaling is a valid and completely legitimate way to operate. Just operate with integrity, don't take advantage of anyone, and make sure you're helping people out instead of convincing them to wholesale when sometimes retailing their property is a better choice.
Thank you for your input. There was a lot of good points there that I just read. So I think what I'm probably going to do then is take you up on your advice and contact some different lawyers and find out if they work with investors and then ask them if they work with wholesalers and see if they can shed any light. I also think that it's a good idea like you said to do meetup groups and things like that nature. The other thing that really likes that you said which definitely correlates with what I said which is that it's best to operate with integrity and my take away from that is like I had said that I want to have transparency with basically every transaction that I do so I want to go into a transaction and tell the homeowner my intent is to purchase this property through the means of whatever type of funding but if I can't then I'm going to sell this noteto an investor or rehabber or whatever somebody that's willing to buy it and then tell the buyer that I'm wholesaling the property and I definitely want to try and stay away from doing a double close if I can because to me that just feels like I'm hiding something and instead I want to see on that paper so that the buyer and the seller both know how much I'm making off of that deal and if the deal goes sauce or if I think the deals going south and possibly do the double close but if I can avoid doing that I think that's the best route to go but I guess I also probably have to find out if I need a brokers license if I do more than one property a year.
I do know that what I just said sounds a little vague with my terminology and that's just because I'm new to the process and I have to do some more digging so I can figure out the logistics and all that because I know that there's courses out there that you can pay you no $1,000 or $5,000 or $10,000 for but honestly I don't have that kind of money laying around so I'm sure there's other ways that I can get that type of information. Once again, thank you so much for your input it is much appreciated.
I'm interested in wholesaling as well. I just found this video last night from a guy who is explaining his method from A to Z including links to documentation at no charge. I hope this help.
that video that you posted is not a clickable link
I agree with Michael Kramer..... It’s a stupid law. The real estate community won’t have that much positive from this because there will be a bunch of licensed agents doing wholesaling and not contributing to the local board. They will meet just the minimum licensing requirements and continue with business as usual. The state on the other hand will get their pound of flesh, like they do for everything else in Illinois. I hope the rest of the states learn from the failed policies of Illinois. Taxes for the sake of... well just because they want to and can’t find another way to do it.
Lincoln said it best... “you cannot tax people into prosperity”! Best of luck to you in Minnesota.
@Christopher Kinnaman ironically the nee IL law forces unlicensed wholesalers to do 2 wet closings, hiding the fee and lowering the amount to the sellers since the law specifically calls out contract assignment and double dry closings aka fund AB close with funds from BC.
So they claimed it was to protect sellers the reality is now sellers will get less money due to twice the closing costs, and won’t know what the wholesaling fee was due to separate closings.
I have not heard that term yet. Could you please explain the difference between a wet and dry closing?
Welcome @Christopher Kinnaman ! I'll PM you a local wholesaling contact.
@Alyssa Strom, thank you.
@Christopher Kinnaman yeah just wet meaning funded vs dry or not funded. It used to be you could pay the seller in the AB transaction with money from the buyer in the BC closing. Instead we would have to do two separate closings so we bought and fully funded AB first, then we can do the BC closing. So you’re no longer brokering, you’re buying property then selling it immediately.
Could you pm that contact to me as well? Thanks!
Ok @Christopher Kinnaman , it looks like I am going to be the first direct answer for you here.
Yes, I have done, still do, and will continue to do, wholesaling deals. I have done everything from little waste-of-time $20k dump deals too large scale land development deals, all on wholesale. So in summary "been there, done that". So I want you to pay X-tra close attention to my summary for you Christopher; you're gonna fail! Ok, wait, let me be more correct; if you ever manage to ever actually start and successfully do "a" deal (about 4% chance of such), it's then a 99.98% certainty you will fail.
Why? Because your singular focus is to make money. That is an epically worthless strategy and business plan. A wholesaler is an intermediary, horse trader of horse traders, a wholesaler does not exist without the horse seller and the horse buyer. So, your focus of "making a ton of money", yeah, exactly why does that inspire a horse buyer or seller to work with YOU? Because wholesaler's are as plentiful as mosquitos in MN, and generally speaking about as useful.
If you want any chance at being a wholesaler, try actually doing something of value because that's how the money comes. And yes, it will take time, the "get-rich-quick" is 100% BS built to sell books and programs to lazy people, I know because I used to sell these for about $25K a pop to "rainbow chasers" when I first started in REI (yup, you caught that right, when I FIRST started I was selling over-priced BS "learn to get rich too" programs for $15k-$25k and people ate it up with a shovel).
Next, contract law is very technical, and real estate a lot of money, add the 2 and what do you get? Reality!
Depending on how you do a wholesale in MN decides if it's legal, illegal, a misdemeanor or a federal felony. I would think a person would kind'a care a bit on if that money is gonna earn a trip to club-fed, or a time share in Cancun, the difference is in the details. It's also for this reason that all states are moving closer and closer to banning wholesaling without a realty license, and honestly they are right because it's the simplest means to impress the most persons in the biz to do it correctly and legally. If getting a realty license is too much a burden, or too hard, lol, there is 0 chance that person would ever actually succeed in realty if the easiest part is too hard to do.
Lat reality check, Investment Real Estate is a business, it is founding and building a business, plain and simple. Being profitable and earning a basic median wage in 5yrs time from starting is light speed in the world of business, so a person has to re-think the reality of things if the thought is you can just jump in and be picking out your yacht by year 2. It takes years, years upon years, or hard work, smart work, dedication, vision, fortitude, buckets and bukets of sweat, tears, and doing the tough work one dosn't "want" to do all just to build a company to "ok", to a place where it can really start and take off. That's reality. "I want it all and I want it NOW!".... that's just a child stomping their foot about day dreams, and that's all they will ever be with that attitude.