Wholesaling Portfolio's - How to protect myself?

Question

Hi I am putting together an 80 unit rental portfolio and I need to know how to protect myself from the investors going straight to the seller.  I am sending out a detailed list of properties to my VIP investors so I'm worried about them looking up the business and calling directly... any advice would be great!  FYI I do not have any type of agreement with the seller as of now!  Thanks

Michael De Rosa · Answer

Is there a reason you do not want to go through your brokerage? If you are worried about the fees then find a broker that will have lower fees and switch. Another option would be to weigh out how much the fees are vs what you could loose if someone poaches your deals.

Another option would be an assignable contract that you get the sellers to sign.

Lastly you could see if your broker will allow you to get a listing that you keep off the MLS and not have to pay anything on that.

Not all of these options will be available in all areas so you will want to do further research in your market but it will be a good start.

Robert Lum · Answer

@Amanda Williams

1. secure the property by having SELLER sign and notarize a purchase and sale agreement for the property. This will give you exclusive rights to the property.

Side note: Make sure to include an assignment clause in the agreement so you do not have to worry about double closing (more fees), and you can just assign purchase and sale agreement to your investor. But check with your State whether assignment clauses in real estate transactions are allowed.

2. assuming assignment clause is effective, create a separate assignment agreement with BUYER for him/her to assume the rights to the property. If assignment clause is not allowed or not included, you will have to double close. This meaning, you will close on the buyer and then close on the seller. This effectively means you will be owning the property for a brief moment and will be paying more closing fees.

These steps apply to an individual property. There is no way you can legally prevent investors from moving in on the list you provide them.

Amanda Williams · Answer

I have a real estate license. My question is which document do I use to tie up the deal?  I'm not running this through my brokerage nor am I listing the properties so I cannot use a normal listing contract.  Do I use a LOI or another type of agreement?  And do I have that agreement with the seller or the buyer or both?

Thanks

Jay Hinrichs · Answer

get a RE licesne and a valid listing.

Allen Fletcher · Answer

@Amanda Williams

The only way you can keep your wholesale deals from being sold to someone else is to get them under contract. Otherwise, there are no legal barriers to another investor to go directly to the seller and work out their own deal.

Allen Fletcher