What is the next step for my wholesale venture?

6 Replies

Hello!

I have been learning extensively about the different vehicles of real estate and “how to start”. I am leaning toward wholesale transactions and I am wondering what my next step should be. I have a general understanding of wholesaling but I have plateaued and feel like I need advice on final preparations upon actively looking for a deal. Do I need to be preparing an assignment contract?

I have been developing and preparing the following:

1) Buyers list composed of realtors, investors, and other active buyers.

2) An acquisition model mostly catered toward the internet and social media.

3) General knowledge of the market (I am located in Memphis, TN)

4) A business entity for my real estate transactions.

Thank you so much for your time and knowledge,

Taylor Morton

Hey @Taylor Morton

Sounds like you've done some solid preparation for your first acquisition. I'd get together with your attorney you plan to use for the closings you coordinate. Run through your model, whether you plan to assign contracts or use transactional funding to double close, and make sure you have a system in place for disposition. I began my REI journey with the wholesale model, but only marketed my contracts to a handful of heavy hitting buyers who I knew could perform. I know many people have issues with their contracts getting sent out all over the internet by people they've never met, and the sellers come back to them confused why they are getting calls from investors trying to undercut the wholesaler. This is where your honesty and disclosure are crucial. Sellers have to know your intention to assign the contract to an end buyer. Don't blind side them any closing when they realize your entity isn't on the buyer's side of the settlement statement

For each transaction, you'll need to decide if you want to Assign the contract or plan on a double close using Transactional Funding. As a general rule, if you think another buyer will take it from you for less than 10% of the purchase price, or less than $10,000, your best route would be to Assign the contract. For example, if you get a property for $100,000 but you know a rehabber will think buying it for $110,000 is a good deal for them, then Assign it.

However, if you get this same property for $70,000 and you know that a rehabber will be happy to get it at $110,000, then double close using Transactional Funding. The reasoning behind this is that if you ask for a $10,000 Assignment Fee as shown in the first paragraph, most rehabbers will think this is reasonable. If you ask for a $40,000 Assignment Fee as shown in this second paragraph, many rehabbers will balk or worse, walk away. 

The safe way to preserve your profit margin is to buy and close at $70,000, then schedule another closing an hour later for $110,000.