All Forum Posts by: Don Konipol

Quote from @Jay Hinrichs:

Oregon finally passed legislation to reel in unlicensed wholesaling its in this months publication from the state RE agency.

Highlights:

Goes into effect  July 1 2025

Requires:

On line application to become a licensed wholesaler  ( RE agents exempt from this of course they already have licenses)

Name of company and individuals who will be performing these services.

Each one needs a full criminal background check and approval prior to receiving the license.

300.00 annual fee for the license.

Written Disclosures in Bold 10 point.

These must be given to Buyer and Sellers prior to entering into a wholesale contract and signed for.

Also RE brokers assisting wholesalers need to give these to potential buyers and sellers.

This is a big one  this disclosure must also be in all advertising of the wholesaler including SM.

The disclosure must include:

1. that this is an equitable interest

2. if wholesalers does not have legal title and may NOT be able to transfer title.  ( keep buyers from wasting money on DD i suspect)

3. Is not a licensed appraisal specialists and therefore is not permitted to provide an opinion of value . ( keep wholesaler from telling seller their 500k prop is only worth 300k).

4. the disclosure goes on and on about how to terminate it who to file complaints with etc etc. complaints go to the DRE.

Right of recession:

Buyer and Seller may rescind within 3 days of signing contract all all EM must be returned this is a blanket rescission.

If Buyer or Seller never get the Disclosures and sign for them they can cancel right up until the day of closing with all EM returned.

this should level the playing field keep bad actors at bey and give Buyers and Sellers some rights if they think they have been hood winked.

Personally see these laws sweeping the nation..  Like Iowa , SC IL and more to follow..  

Interesting that this seems to cover all property zoned residential, with no apparent carve out for a transaction of residential property between two investors. 

I keep coming across posters asking for advice on how to “scale” their investment or business activities.  What they’re missing is that they first need to ask “Is my business / investment process scalable?  Here’s, the hard truth I’ve found in 45+ years in the industry; the vast majority of real estate investors, practitioners and business owners do not have a scalable activity.  Sure, they may be able to grow to a very moderate size,  add a few units, or trade up to a larger investment, but as for real scalability: NO.

Why? Because their investments do NOT have a higher enough ROI adjusted for risk. After paying a competitive rate for the property management and ASSET management that the small operator does himself. So, what is required to scale?

First, most investors and owners of real estate related businesses are in one or more of the following situations

1- they're unable to duplicate their expertise that drives the ROI and they are at their personal max capacity as to time

2- they're obtaining high ROI by use of excessive leverage

3 - they're obtaining high ROI by taking excessive risk

4- they hit correct timing in the correct market, and this is not necessarily repeatable with any probability

In order for an investment or business to scale, we need the ROI (on a risk adjusted basis) to be sufficient to cover a PREMIUM risk adjusted return to passive investors; all expenses of managing the assets and the business, and a significant return to the "sponsor" providing compensation to him making the work, risk and time worth while.

Here's an example. Let's say your filed of expertise is purchasing c type apartment t complexes and upgrading them to b, then holding to stabilization and once stabilized offering for sale. Investors in these type deals look for say 12 - 14% annualized return. You normally handle the whole project yourself. And you're able to confidently predict an 16 - 18% annualized return COMPOUNDED ROI. Well, guess what? Your Not scalable! First, 4% of that ROI is because you're doing the
asset management” work yourself without direct compensation.  Second, as sponsor you want a 1 - 2% annualized return asset management fee AND 20% of the profits after the investors get their money back.  So a MINIMUM 22% Gross ROI is needed to “scale”.  

There are lots of REALLY GOOD investments and businesses out there - but that doesn’t mean they’re scalable. 

Quote from @Diane Tycangco:

Hello!  I have a question.  If I got a home equity loan for Property 1 and used the proceeds as downpayment for Property 2 and then got a 2nd loan for the remaining 75% purchase price for Property 2, when I sell Property 2, can I use the Property 1 loan as part of the cost basis for computing Property 2 capital gains?

Every month, property 2 has been paying most of the mortgage on that Property 1 home equity loan. The only part that Property 1 pays on that loan is the escrow for property tax & insurance for Property 1.

Thank you for your insight.

You need to look at purchase price to determine cost basis, not how you financed the purchase. Your closing statement should have the purchase price and you add any capitalized costs.  

Quote from @Godsheritage Adeoye:

Hello, I’d like to know how investors typically handle Subject To contracts. Do they use a servicing company to make the payments directly to the , or do they make payments directly to the seller and hope they pass them on to the lender?

There are actually THREE kinds of subject to transactions
1- subject to existing mortgage without lender approval
2- subject to existing mortgage WITH lender approval
3- subject to existing mortgage as part of a seller financed wrap around mortgage.

with #1 and #3 it’s in everyone’s interest to utilize a third party servicer, who collects and then distributes payments.  In the “old” days, people would have the seller pay the lender so as to not “alert” the lender that a property sale had taken place, so that the lender def wouldn’t trigger the so called “due on sale” that’s a part of almost every mortgage or deed of trust document.  With online access to almost every jurisdictions property recordings, lenders today use software that automatically searches property transfers for transfers involving their loans.  Whether the lender decides to do anything, and exactly what they decide to do depends on the lenders particular strategy, target ROI, risk tolerance, current interest rates, interest rate of subject mortgage loan, etc. 
My experience has been that most lenders don’t immediately move on this, many don’t take action for 6 - 12 months.  An investor who has participated in a subject to transaction without lender approval should NOT assume that they are safe from note being accelerated because a certain amount of time has passed.  Often, lenders will not act until the differential between current interest rates and the interest rate on the subject loan reaches a certain point.  So the lower the interest rate on the subject to loan, and the higher the prevailing rate, the more chance that a lender will initiate action.  

Quote from @Torianne Baley:

Quote from @Bill B.:

I think you meant to type was… 

Thanks @Jeff S.for your free professional advice. You’re right. I should have figured out it was a scam because of every reason you listed. Thanks for saving me from getting scammed. I love this site and all the professionals that give away free advice with no strings attached. You’re part of what makes BP great. 

I think that’s what you meant to type. Maybe I’m wrong and you just don’t appreciate your questions getting answered quickly for free by professionals. But if you’re not going to show appreciation there’s certainly no reason to shoot the messenger. 

Now that’s he’s saved you $3,000 and told you how to avoid it happening in the future. You can move forward. Good luck. 

 No, no, no. What some people on BP don't seem to understand is to stop making the assumption that everyone is not working their best at this

if you have to provide negative comments or any sort of negativity when providing advice, then advice or recommendations shouldn't be your forté

As i mentioned before. If you have to provide negativity with your comment, then please refrain from commenting

With 21 posts, you don’t get to tell people what they can and can not post. 

Quote from @John McKee:

What are your successes, failures, and aha moments?  What are your goals for 2025?

What a GREAT question.
Why is this a great question?  Because it causes one to think about the way they invest, the reasoning behind their investments, and the success and failures their investment tactics and strategies have produced.

I make a decision to pursue a real estate investment (or really any investment) based on an evaluation of risk vs return.  But as often happens, a certain percentage of my investments “go off the rails”, in other words don’t proceed as planned.  Sometimes these are minor glitches, other times a major “realignment” is necessary.  Although I’ve been investing in real estate, both directly and indirectly for 45+ years, I still get a “queasy” feeling when an investment does not perform as expected.

My “aha” moment occurs when we reach the point when, despite the investment problems, we’re able to still show a good/substantial profit at the end of our holding period.  Not ALL the time, but far more than not. Because real estate is FORGIVING.  The real property investment can be repositioned if it proves disappointing in its original form; it can be refinanced or recapitalized if it has too much or too e pensive debt; inflation over time bales out many bad purchases, and finally the investors knowledge, experience and abilities can be leveraged to turn around a cash flow negative property.

I’ll provide an example
Three years ago we purchased a note from a bank secured by two auto repair facilities with a large amount of excess land.  The notes, being in default had an unpaid balance of $3.2million.  We paid $1.775 million for the notes, worked out a modification with the borrower, and received the first 5 monthly payments relatively on time.  Unfortunately that was the last $ we saw from the borrower.  

So, we file to foreclose, the borrower file BK, and we go through 2 years of BS.  During the 2years we’re spending $ on attorney fees, and I’ve got that “queasy” feeling, especially since it’s questionable whether or not the properties are worth the amount we are owed. 

Then, about 4 months ago, we reach an agreement with the borrower. He’s to pay us $36,000 immediately and we. Give him 60 days to sell or refi the property.  He can pay us off in full within 60 days for $3.2 million.  He acknowledges he owes us $3.8 million and signs a deed to us to be filed if he doesn’t perform.  Further, BPOs and appraisals show the properties have increased 50 to 60% in value during the last 3 years. Further, he can extend his “grace” period a further 30 days by paying us an additional $50k.

So far, we’ve collected two $50,000 payments in the last i0 days plus the $36,000, or $136,000. Since our legal billed were $36,000, we’re $100,000 ahead.  If the borrower doesn’t pay us every$3.2 million by Jan 15, we file the deeds, and have two offers for the properties in the $3.9 - 4 million range.  

Obviously, two factors are responsible for what will likely be more than doubling our money in 3 years.  1. We purchased the note for a 40% discount. 2. Rising values of the properties bailed us out of a potentially disappointing investment. 

Quote from @Jonathan Grzeszczyk:

Soon I am taking a job with a wholesaling company on the acquisition side of the deal. Their business model is interesting and has a couple different exits strategies when getting a property under contract. So, coming in to the real estate field with no capital it seems like a good first step to get my feet wet and get a better understanding of real estate investing as a whole.

Since I will be on the buying side of the deal, obviously negotiating will be a big part of my job. Therefore, I have been trying to study up on techniques used to make good offers and over come objections. However, I have not found much on the subject relating to wholesaling. 

Pretty much everything I have seen and read is:

Find out the sellers motivation/problem and speak to solving that issue.

Give an offer but explain how you got your numbers.

Other than that, it seems pretty limited for negotiating information. For those of you who are wholesaling, what are some other ways you go about the negotiating phase? 

(Further context on the role, the business has solid marketing and network established. So, I will not be needing to source leads as much. Most of the work will be following up with warm leads already.)

When you say you’re taking a job, will you be an employee on salary + commission or an independent commission only “contractor”.  If the latter you may just be an independent “bird dog” for a wholesaler competing with everyone else. 

Does this wholesaling company you’re going to associate with actually purchase the property and then resell, or do they just “flip” the contract?  and only close IF they find a buyer to either pay for the contract assignment or pay a higher price for the property?  If the latter, depending on the jurisdiction, YOU may need to be a licensed real estate agent/broker to engage in what’s commonly called “wholesaling” but is actually “flipping”. 

Sorry if I’m discouraging, but I’ve seen this movie before. My personal experience after 40 + years in the real estate industry is that “wholesaling” is a very INEFFICIENT AND INEFFECTIVE way to gain knowledge and experience relative to real estate. People most successful in all aspects of real estate investing and the real estate BUSINESS, gain knowledge and experience n three areas: (1) real estate principles, (2) real estate law, and (3) real estate finance.  At best, wholesaling may require that you obtain a minimal understanding and experience in these three “foundations”.

Look, I wish you luck in your endeavor, and I sincerely hope you end up in the 1% that find wholesaling  to be a profitable business.  But I’d be amiss if I did not suggest that instead you gain knowledge of the aforementioned 3 foundation by studying for a real estate agent/broker license, and then seek employment with REITs, real estate operating companies, real estate managers, or real estate brokers.  Any of these will leave you in a much better position for success, and provide a greater income while you learn. 

Quote from @Dan Deppen:

Quote from @Don Konipol:

Quote from @Peter Walther:

Quote from @Don Konipol:

Quote from @Peter Walther:

I think you'll find most, if not all title insurers, will require the DIL to be dated and executed subsequent to default in order to insure.  In addition, the Grantor will probably be required to sign the same seller's affidavit that are needed for a non DIL closing.  Here's a short treatise by a title insurer:

A deed in lieu of foreclosure is a deed given by the owner of mortgaged property to the holder of the mortgage or its designee where the mortgage is in default and foreclosure is a possibility. A deed is given and accepted as an alternative to ("in lieu of") foreclosure. Unlike a foreclosure, a deed in lieu of foreclosure does not extinguish any of the liens and encumbrances affecting the property.

Most courts recognize the execution of a deed in lieu of foreclosure in a transaction subsequent to the original mortgage transaction as a legitimate alternative to foreclosure proceedings. However, deeds in lieu of foreclosure can be subject to judicial attack by their grantors and their grantors' creditors.

Grounds for attacks on deeds in lieu of foreclosure include the following:

• That the deed was an equitable mortgage - that the parties intended the deed to be given as security for a debt and that the deed was not an absolute conveyance.

• That the deed is either a preferential or fraudulent transaction within the purview of the provisions of the federal Bankruptcy Act or any other related state law.

• That the deed is a device to clog a mortgagor's right of redemption.

• Unfairness of the consideration.

• Coercion, fraud, oppression, duress, and undue influence.

• That the deed is not subsequent to the execution of the mortgage but contemporaneous with it.

• That the grantor/mortgagor was insolvent at the time of the execution of the deed.

An estoppel affidavit (executed and acknowledged by the grantor/mortgagor, attesting to the fairness of the transaction, the consideration exchanged, the value of the property, and other factors showing an intention to make a genuine transfer) or a recital (inserted directly in the deed) are supporting documents used to forestall challenges to these transactions.

State law and local title standards must be consulted in regard to the consideration and treatment of deeds in lieu of foreclosure.

What a GREAT post!   

Thanks. To expand a little on what is mentioned the underwriter's guideline, a DIL does not extinguish subsequent liens, so if the borrower has judgments against him/her/it that attach to the property, the DIL grantee takes title subject to them and may have difficulty getting them released later without payment. In addition, a DIL does not automatically satisfy the underlying mortgage/DOT so if you accept a deed from the DIL grantee you may find a title insurer will require a release or sat of it before insuring.

We have often used a “friendly” foreclosure instead of deed in lieu when we needed to “wipe out” liens junior to ours before taking property title. 

 What's a friendly foreclosure process? I had a non-performing loan once where a borrower would do a deed in lieu, but there was a deceased co-borrower, and my attorney required me to go through the foreclosure process to clear title.

The borrower knows you’re foreclosing and does not contest the foreclosure and “turns over the keys” to the lender. 

Quote from @Eli Edwards:

I am hitting a roadblock in finding deals... I have been on New Western's deal list as well as another bigger local company and everytime I underwrite these deals there is very very minimal left on the bone let alone contingency funds for going over budget on the flip... Does anyone have any contacts they wouldnt mind sharing that can add me to their buyers list?

Welcome to the club!  No matter whether you are looking at commercial or residential property, the deals that “pencil out” at OFFERING price are few and far between these days.  

Look, we’d all like to search the internet, find a deal for sale, analyze the property as having a great cash flow at current interest rates, with lots of upside potential in a gentrifying market.  Problem is it doesn’t exist as a “public” offering.  

So, as an investor you have three paths to follow to try to “capture” the rare property that meets the above characteristics. 

1. Contact potential sellers who are not actively seeking to sell their real estate holdings.  Since most people who are not actively seeking a sale are not motivated to sell at anything other than a top of the line price, this is going to be a numbers game of x thousands of contacts for every potentially doable deal.  That’s why the successful wholesalers and flippers I know spend $10,000 and more MONTHLY on marketing.  

2. Use your superior knowledge, experience and analytical ability to spot something in a property being offered for sale that everyone else has missed.  This requires a dedicated effort sourcing and analyzing hundreds of deals to find the one or two worth pursuing.  Further, it probably would also require the ability to “reposition” the property to have the below market value you seek.

3. Use negotiation to lower the price from the “no go” asking price to a “go” lowerpurchase price.  Again, large commitment of time, patience, and ability needed.

The amateur of “semi pro” investor should realize that the professional investors (such as myself) spend ALL DAY EVERY DAY doing the above.  We have education in real estate principles, real estate law and real estate finance.  We have used every strategy, technique and tactic that the gurus teach as their own.  So, the chances of someone trying to find the TRUE below market deal in their “spare time” is not great.  40 years ago you could. But times have changed. 

So, what does this leave the part time investor?  Actually, they’re in pretty good shape.  See, the majority of profit in real estate is NOT made by below market purchases.  While the rare “killing” can be done, the vast majority of deals, even ones by professionals, are done within market pricing parameters.  

Real estate wealth is built through long term price appreciation, property becomes (usually) more valuable over time, especially if purchased in areas that have either gone through development or redevelopment.  As rental rates increase, cash flow becomes strongly positive.  Real estate purchase using reasonable leverage, at todays interest rates, will build up equity through amortization.  Finally, even as the landlords cash flow increases, depreciation should keep a major portion tax deferred. 

Here's an example of what I'm speaking of. While I often "trade" properties, a friend of mine is a buy and hold guy. He purchased a SFR from me in 1979 for $55,000 with $5,000 down. Through the years he enjoyed positive cash flow with the last ten years cash flowing at about $17,500 annually. The house is worth at "quick sale" about $360,000. So, setting aside the cash flow he enjoyed for the last 40 years, he has a profit of $305,000. If he had negotiated a bargain price of say $40,000 on the purchase, his profit would be $375,000 instead of $360,000. The vast majority of wealth accumulation is through appreciation, cash flow after rents increase, and amortization.

I have 40 years experience as a real estate syndicator/sponsor and investor in other syndicators deals. I read Brian’s book and still learned more than a few things.  Excellent book !