How do you wholesale houses with little equity?

Question

Like if you had a home that was (ARV) $100,000 from a homeowner who has only lived there for a year so very little equity.

Bryan Hancock · Answer

1.  You don't

or

2.  You use their financing and write an option with a proper contract that you can assign to a new buyer.  In Austin this is called a wholesale owner finance (or WHOF) or mortgage assignment

The new SAFE Act stipulates that you can't originate loans without being licensed so it is unclear whether or not this constitutes non-compliance with the law.  The lawyers I have talked to are split on whether or not this is the case and it will likely need to be litigated to decide for sure.

You can pay a MLO to originate the loan for as little as $500 and keep your nose clean.  This will come out of your assignment fee for finding the WHOF buyer.

Michael Zajac · Answer

Please send me your low equity leads - I would be happy to take a look at them. Motivated bueyr!

Michael G. · Answer

I've had those come across my desk before. The thing to keep in mind is that every deal is not a deal if you know what I'm saying. Some of them will be duds. If the deal is thin sometimes its best just to turn it down. If its not attractive to you at first glance, it probably wont be attractive to any other investors. Like Andrew mentioned it may work for a buy and hold investor but again there has to be cash flow there.

Andrew Massaro · Answer

This probably wouldn't apply to this deal, but with some low-equity deals...

Buyers may not always look to instant equity as their #1 criteria for buying.  They may be more interested in long-term investment return.  If that's the case, and you can offer him a double-digit CAP rate and cash-on-cash rate of return, he may pull the trigger.  A savvy buy and hold guy will look to the return on his investment...

How do you wholesale houses with little equity?

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