All Forum Posts by: Erik Fisk

The ways I have seen it done: where (a) wholesaler offers to buy via contract, then, (b) during the closing period actively markets the property for sale as his/her own, (c) at the closing assigns the contract to actual purchaser, takes his/her cut, and finally (d) title transfer is actually made to third party, is in violation of the Iowa real estate license requirements and, frankly, is very dishonest.  People who operate like that turn me off to the whole concept.

Let me clarify.  I am in Iowa, obviously, but I am trying to give my perspective on when I get approached by investors seeking legal advice.  If someone approached me and said, I am looking for alternative financing, I would ask if he had the money lined up (or at least a source in mind).  If he did not, I would perceive it as a brain picking request.  Not necessarily bad, but I have a time for that kind of stuff, and it's not when I am trying to earn my living doing legal work.  If someone said, "I have a funding source, and I'm trying to figure out how to draft a contract/business docs to effectuate our intent," I would know he is ready for the lawyer.  

So, that said, I guess my question would be - do you know what you have to work with, or are you more in the range of looking for suggestions? If it's the latter, only attorneys who are themselves investors - or who do a lot of work in the industry - are going to be able to help you out.  So what specific stage are you at?

Finding a deal in Des Moines is a challenge. There are just too many people out there with straight cash (or close to it) once a piece of property hits the conventional channels (MLS, craigslist, zillow, etc.). Over the years, I've found you need to either: (1) look forever and get lucky (fall into a good deal - it *does* happen); (2) find something no one else wants but that you believe has potential (e.g., something in a marginal market you think will turn OR something that's TONS of work if you've got the sweat equity and/or cheap labor to throw at it); or find it before it hits the conventional channels.

Getting outbid sucks.  Been there, done that, tons of times.

As an attorney who frequently gets flybys, I can tell you that a very odd, out of the blue request is never all that attractive, especially if it's from someone I've never spoken with before.  You'll need to get very specific about what you want from the deal and find someone who lives in real estate law.  It is a very limited practice area, at least in my neck of the woods.

Similar to an earlier story.  Bought this 1895ish house:

That's what it looked like about three years before I bought it.  Looked worse when I got into it.  Had been foreclosed.  It was amazing to look through the abstract and to see how the people who owned it before it went into foreclosure had borrowed in excess of $75,000 on it.  I paid less than $10k for it.  Height of the boom and all.

I figured it was a good first, and tore into it.  Three layers of pee-stained carpet, 2-3 layers of subfloor, frozen pipes, ruined social life later, was down to the crawlspace and foundation and learned that yes, people did occasionally build a house on a row of fieldstones and mortared brick that was set just right on top of the dirt.  

Initially, I figured I would try to jack it, brace and put a post and beam foundation in it, but life got complicated (as it often does) and I had not only no money but no time.

I sold it on contract to someone who took 5+ years to pay it off.  She would occasionally creep out of the woodwork to try to get the title, and I would remind her that she owed me money.  

She tried getting snarky with me once.  Once.  Then she paid up.  I learned a lot.  Wholly recommend.

Two things. 

Most of the wholesaling strategies I've seen, aside from making you come across as dishonest (personal opinion - shoot me, but remember Des Moines specifically, and Iowa more broadly is a small world) would violate the rules of the Iowa Professional Licensing Bureau.  

That said, Iowa defines a real estate broker thus:

As used in this chapter, “real estate broker” means a person acting for another for a fee, commission, or other compensation or promise, whether it be for all or part of a person’s time, and who engages directly or indirectly in any of the following acts:

1. Sells, exchanges, purchases, rents, or leases real estate.

2. Lists, offers, attempts, or agrees to list real estate for sale, exchange, purchase, rent, or lease.

3. Advertises or holds oneself out as being engaged in the business of selling, exchanging, purchasing, renting, leasing, or managing real estate.

4. Negotiates, or offers, attempts, or agrees to negotiate, the sale, exchange, purchase, rental, or lease of real estate.

5. Buys, sells, offers to buy or sell, or otherwise deals in options on real estate or improvements on real estate.

6. Collects, or offers, attempts, or agrees to collect, rent for the use of real estate.

7. Assists or directs in the procuring of prospects, intended to result in the sale, exchange, purchase, rental, or leasing of real estate.

8. Assists or directs in the negotiation of any transaction intended to result in the sale, exchange, purchase, rental, or leasing of real estate.

9. Prepares offers to purchase or purchase agreements, listing contracts, agency disclosures, real property residential and agricultural rental agreements, real property commercial rental agreements of one year or less, and groundwater hazard statements, including any modifications, amendments, or addendums to these specific documents.

Iowa Code Section 543B.3.  Make sure whatever lawyer you use has experience in real estate law generally, and investment real estate specifically.  Ask specific questions to weed out imposters.

The crux of the issue is the first part of the definition, where it includes anyone "acting for another for a fee, commission, or other compensation or promise" and that person either (a) markets or (b) sells real estate s/he doesn't own.

I'm sure Chase has turned a lot more deals in Iowa, but my experience has been mixed.  I've had purchases where the taxes aren't revisited until the normal yearly cycle, and I've had sales where the assessor's office will hound me with information about value (especially if they think it may be undervalued).  I'm looking at you, Polk County.

However, I haven't seen the assessor's office (even if they get information from you suggesting it's grossly over- or under-assessed) actually changed the assessed value until the time they usually get to change it.  

Craigslist can also be a good resource.  At least in Des Moines, you can restrict by zip code and look at rental prices by map.  You need to then know how to adjust for things like whether it's a house or complex, garage, driveway, condition, level of finish, etc.

I agree it's both art and science.  Get as much data as you can, though, to make the decision from a position of knowledge.

I don't know if the deal is even still possible, but I would get out there and walk it before I considered any.  I've driven MLK daily for years and years.  I would (personally) never buy a house there from between Douglas/Euclid to the north and University to the south.  There is just too much junk, and the property will never be easy to sell.  It's a busy, loud, fast street.  I went to Drake, went to law school at Drake, and have been somewhat involved since I left.  No Drake student I knew ever lived east of 25th.  This was years ago, and it may have changed, but whenever I drive those neighborhoods, they are still plagued by blight.

Pitch of the roof, access, decking quality? Generally (very, very general), I was able to find capable people (with insurance, who gave me a tax ID so I could deduct, etc., etc.) who were around $300/square.