All Forum Posts by: Will Barnard

How many deals have you done over the last 2 years? May I have the addresses? Do you have a POF you can send me? If I bring you a deal that fits your criteria, can you close in X days?

These are the questions you need answers to to prove they are legit buyers. There is another list of questions to ask for their criteria of course.

 I agree which is why I stated it would be "short sighted" of them and as such, a very low risk to take.

Good advice above which is good to hear because so often on BP regarding wholesaling, you hear people giving bad advice like lying to sellers, violating laws, etc.

One thing I would add to the above, when finding your cash buyer(s), have your title company look up all cash closed transactions with entity names in your area and find the entity names that repeat multiple times in 1 year. That is a real cash buyer (proven by public records).

Next, when you have discussions with these buyers as to what they want, make sure you get the financial feedback from them as well. In other words, if you find a deal that needs $60k in repairs and after repairs, it would sell for $350k, what would they be willing to pay for that type of deal. If you find a deal with $100k in repairs and exit would be $450k, what would they pay, etc, etc. Once you know their numbers, you know where you offer amount needs to be to meet their needs and still provide you a spread in the deal.

Once you know that and know your market (which includes how to accurately and properly identify rehab costs and exit values (after repair values), you can then contract with this "partner" in any number of legal ways. Option 1 would be to have a finders fee contract with them, you simply bring them to the deal and they write the offer direct to the seller with their proof of funds, their EMD, and in the name of their entity. The risk to this is if they circumvent you and not pay you. Of course that would be short sighted of them as you would never do a deal with them again. Option 2 is to form a new entity naming you and your buyer as owners of the entity. Then at closing, you simply sell your shares in the company for your agreed upon fee. Doing any of these options allow you to go to sellers and say "my partner" without lying because you actual do have a partner and it allows you to avoid violating brokering laws without a license as you are actually a real buyer with a money partner.

I was able to make $1M on one single family flip (documented here on BP years ago). I was also bale to do so buy flipping a few (3-4) SFR luxury homes in a year. While making that kind of cash is great, I made the mistake of NOT flipping the smaller $50k-$100k profit flips throughout the year. As such, I lacked the cash flow throughout the year on the $1M flip which actually took more than a year to complete. I can also state that holding multiple luxury priced homes (multi million) with debt leverage all at once is one hell of a stress factor and not something I will repeat again. I have since gone to one luxury flip at a time with the rest being the smaller $40k-$100k profit margin flips. Less stress and easier to manage.

Managing 30-40 flips as J Scott did is no easy undertaking either and you need SYSTEMS to do it right!

To all the points above about buying and holding, I agree, but everyone should know that it takes a lot to buy and hold enough to earn $1M a year in cash flow/appreciation pull from refi's. Don't expect to make that happen in year one whereas you could make $1M in year one flipping.

Then there is the tax issues. I won't regurgitate what was stated above but will simply agree that flips will have a large bite taken out by that mean uncle of ours.

Flipping incomes and RE commission incomes are taxed the same, so it doesn't matter where you put them. The only exception is in your broker split you have to pay. So if a home is listed for say $700k and the listing agent is offering a 2.5% commission to selling agent, then you as a RE licensed flipper can either negotiate the price down $17,500 and run the buyers side paperwork without commission or you can offer the $700k and collect your $17,500 commission less the broker split and fees. Depends on your situation which would work out best.

On the selling side, again you have two main options, list for $1M with a listing commission % (of whatever you choose) and still offer selling agent commission as standard for your area, or option 2, list with no list commission and lower your price by the commission amount it would have been to attract more buyers at a "lower list price".

I have done both and it was all situation dependent.

This is EXACTLY what I did in my "The Truth About Wholesaling" thread. It was an educational real life piece to show what not to do and then describe what to do. I have spent literally thousands and thousands of hours teaching and helping others on this site for free for over 15 years now. If some can't see that, not my fault. If some want to accuse me or others of "bashing", that is certainly their right to hold that opinion of me or others. That said, I am not saying anyone in this thread is accusing me of this, just saying in general.

You are providing information above that is not correct. IF you broker without a license in CA, you are subject to up to $20,000 in fines and/or jail time. I have not looked up all 50 states, but many of them I have have penalties which include jail time. 

It can be very harmful to pass along false information regarding the legality issues so please do your research before posting things like this. Others could read it, take your advice and end up in jail or with a huge fine.

I can appreciate your comments. I can’t speak for everybody but I can speak for my intent and as you noted in my thread, it was all about education. There were several who took even that post the wrong way claiming it was bashing and I corrected their impression. I can only guess, but would say that much of the “bashing” from the higher ups is what you said, annoyance with the repetitiveness of stating the same thing over and over to different newbies who post before they research and read.  It can get frustrating when 300 people ask the very same question and expect some step by step how to of making easy riches - what the gurus preach to fleece the desperate of their cash.

Additionally, wholesalers often take large portions of seller equity because the seller is naive, lied to, or some other reason. Of course there are the deals where the seller knows their options and still chooses to go with an offer from a wholesaler over listing on the mls, but truth be told, in almost every case, they could have likely got more by listing with an agent.

I was just about to lock a deal with a wholesaler at $1M. Their contract was for $950k and the seller could have easily listed on mls for $1,050,000 and got over asking in 1 week, and I mean easy! The wholesaler ended up getting another offer of $1,050,000 making them $100k profit with no risk. I find that absurd and greedy for nothing more than finding the deal. If the sellers eventually find out that they made $100k when a 5% commission (or 4% if double ended) and sale price of $1,050,000 could have netted seller $50k or more. That’s a lot of cash to leave on the table for a no risk proposition of The wholesaler. This is where I really have a problem with wholesalers as I am use to their rehab and exit value numbers being consistently way off (usually intentionally to make the deal look better).

It is certainly my hope that more continue to educate and even more so that new members looking to wholesale spend some time researching and reading rather than taking the easy road of asking the same question already posted and answered 1000 times on BP.

Unless you are licensed, most assignment deals are done illegally in just about every state. Any unlicensed person negotiating a purchase price with seller, marketing the property (or the contract) to bring buyer and seller together and receiving compensation for it is brokering without a license. That is the most common means wholesalers use and it violates most state licensing laws. 
Double closings cost more and eat up profit margins, although they temporarily hide the wholesalers profit margin until after recording. 

The third way to do this as an unlicensed individual is to have your buyer in place in advance, ship for their criteria, have a new entity formed naming you and your buyer as owners and make the offer in that entity name, then at the closing table, you simply sell your shares in the company. No laws broken, no lies needed, no weasel contingencies needed, and no additional costs to transaction other than the entity formation (which comparatively to the other options is cheaper).

To Don's point, a good wholesaler finds a motivated seller where the property is not publicly being marketed currently (MLS or online FSBO) and locks the deal (with intent and means to close of course). The fact that you are competing with another buyer tells me this is on the mls and you are wasting your time and that of the seller on this one.