All Forum Posts by: John K.

@Tyler Weinrich

I put these together quite often for a few clients of mine.
The procedure is the same, as if you are doing just one. Make sure all of the numbers are accurate, and more importantly, verified. Make sure all of the documentation is in order. 
My title company allows me to create an Exhibit for the remainder of properties, then I just reference the Exhibit, in the initial contract. 

When I put these together my biggest challenge is the lack of bookkeeping. Many of the OG landlords are from the old school of bookkeeping, which are journals. This makes it very difficult to establish critical numbers that any buyer would want to know. 

Just create a word doc and put Exhibit A at the top. Then reference it in the actual contract. That is all I do. 

@Austin Works

When I put together package deals, my title company allows me to attach the remaining properties, as part of an Exhibit. I only fill out one PA, then attach the Exhibit for the rest of them. 

Hopefully your title company can/will allow you to do that. 

I am not going to comment on the bill or what the state of Illinois thinks it's going to stop, by writing this into law. Instead I will point out some actual facts that should have been considered, prior to wasting taxpayer resources. 

I won't pretend to know the motivation behind the state's desire to draft this bill, because I was never invited to the discussion. I will simply go on a limb and say that one of those factors, was probably this gross misconception that we steal equity, and I would guess that it's this 50% number that has the "ouch" factor. 

It would be my guess that the wholesaling industry makes up less than half of 1% of the overall market, or worse. That alone should have been enough to make anyone realize that this law is going to have zero effect, overall. However, it's easy to say that the investor industry out numbers wholesalers, by a bunch. Would 100x, 1000x or more, be reasonable? 

Now I would suspect that those agents/brokers and investors themselves, that are quick to put a wholesaler on blast for their thievery, utilize the very popular 70% rule when it comes to evaluating a property. This of course means that according to that rule, you should never offer more than 70% of its value. Now I have no idea who came up with this rule, but I feel comfortable in saying that it was NOT a wholesaler. So let's see what that looks like, in real numbers. 

Little bit of a test here.

Subject Property
3/2 1800 sq ft. ARV 200K
Needs the following:  HVAC system replaced and updating of kitchen/baths, paint and floors. No other mechanicals are needed. 

Let's start:
200K ARV * .70 = 140K purchase price. Right out the door 30% equity, GONE!
For those that have actually renovated/updated a home of this size, what are the odds you get this done for 40K? Because if the 50% equity creates the problem, you only have 40k to spend to renovate and state within that 50% equity grab. Of course, this math only works if you do NOT use HML or private money, only if you use cash.

Let's be real. Doing a professional renovation on a 200K home that needs updating and an HVAC system, for 40K, is going to be very very difficult. With over 100 renovations to my credit, I can tell you the only way this stands a chance, is you have a rock start crew that turns this within 3 weeks, or you are stealing the material. 

To summarize my point in paragraph 3. If theft of equity was a strong motivator and investors grossly out number wholesalers, then by the popularity of the 70% rule, it would actually be the investors causing more of this problem, than us wholesalers. The irony that there are many agent/brokers that are investors themselves, and live by this rule, yet preach fiduciary responsibility, is not lost. 

However, I am not going to be the one that criticizes and then not offer an alternative view, in fact, a solution that apparently would satisfy all. 

If there is so much concern over the theft of equity, the solution is real easy. 

To the fine folks of BP that provide this great community for all of us to speak freely and offer advice. 

Would you please dropkick the 70% rule calculator out of the window, because it is causing a lot of stress for those brokers/agents and investors that have an issue with wholesalers bringing 50% deals, but they can only buy at 50%, themselves. 

Are all of you that are actual investors that fix/flip and buy/hold, willing to backup what you are arguing, by promising to only buy at 80% or higher, before repairs?

In the spirit of showing my flexibility, how about 70% or higher, before repairs?  I would be fine with either personally, as a wholesaler or investor. 

If so, please join me in my effort of asking BP to remove this calculator, or at least modifying it to say, 125%? I am open for negotiations, so whatever the majority thinks is fair, I am good with it.

I mean, it's in the best interest of the seller, right? 

@Bradley Nootbaar

BP has a calculator for that very thing, in the tools section. 

I

@Mehvish Ahmed

That is the challenge, getting working phone numbers. Many of them will have changed their phone number, because the bank has been blowing it up trying to get paid. 

You will need to go further down the blood line and hope to find a relative willing to talk. This is where you will need to empathize with their situation, to get the relative to hopefully give you a new number at best, or pass along your number.

I use fastpeoplesearch.com for my phone numbers, it's been pretty reliable. 

Don't forget social media. 

In my opinion, sending letters/postcards to PF, are largely going to be a waste of time. In my years of calling on these folks, they tend to abandon the house, quickly. They know what's coming and unless they want to risk their personal possessions as well, most will realize it's not going to do them any good to wait. They rarely leave forwarding addresses, so that postcard is sitting very nicely in the mailbox, along with the other 100+ pieces of mail they have gotten over the last "X" days since they moved out. 

IMO, call them, empathize with them and close the deal. 

@Gus Muller
The unfortunate real truth in all of this, is that if a wholesaler has a very successful business already they are not actively looking for buyers, because they have all they need. 

The "wholesalers" that rain down the ads for "sign up here", most likely are doing nothing but passing on a property that has 10 other people in front of them, thus making it not likely that it's a real deal, or stands no reasonable chance of being investable. 

With that being said, you can try some of these:

1. Local FB marketplace groups. Just be very very careful in them. Don't take anything at face value.
2. Check BP marketplace for any active listings.
3. I did see you attended local REI meetings, continue that approach. It will pay off, eventually. You might try talking to investors there and see if they will give up any wholesalers they work with, but that might be tough going.

4. If you have 1 day per week where you can work some leads yourself, do it. There are plenty of hardship situations to choose from, pick one and work it. When you get efficient at it, you will have no need for wholesalers. 

What i see in this, is a seller that is not money motivated. He simply wants his debt cleared. 
It's time to get creative.

Option 1:  Confirm the numbers and wholesale the deal. quick easy cash.

Option 2:  If you have the cash to rehab, offer him an 12 month balloon, at 4-7% interest. This should allow you plenty of time to rehab and get it sold. 

Option 3: If Option 2 fails, offer him a JV position in the deal. I would start at 15-20% equity.

Remember, 80% of a watermelon is much better than 100% of a grape.

Option 4:  If the seller is capable and willing to be your banker, make him a deal. Offer him equity in exchange for the funds to rehab or a simple interest agreement.

Option 5:  Get Hard money involved. If you need the cash to even rehab the project, see if they will fund only the renovation, if your seller will do Option 2. You will need to look at the numbers closely for Option 3. 

Good Luck!