All Forum Posts by: Mark Sewell

Yeah.  And here we are.  This is positive, no question.

Will, did this do anything to backup my earlier comment?  

Will, the more I read, the more I think we are sharing the same sentiments.

But let's rephrase this:

Creating Wholesale Deals = Lead Origination Methods

There are a lot of ways to do this. And REI is a team sport.

Somewhere along the way I have gotten the impression that wholesaling was born out of the practice of assigning contracts.  Real investors - flippers/rehabbers and buy/hold buyers - in a given market generally run in herds, and I suspect that even established investors don't see deals come across their desks in regular intervals.  So when an investor come across deals that they cannot do right at that point in time (might already have a couple flips going), he/she hands it off to another buyer that is looking for that kind of property, in that area, with that price point and whatever parameters... for a fee.  Win-win-win solution.  

This is LEGAL in Texas - assignment fees are listed right in the state promulgated HUD form - but again, we're assuming that the buyer is really a buyer, with the ability to close the deals they enter into.

But this is really a rather advanced strategy.  There are so many moving parts.  If the stars and planets don't line up, then these investors have resources to close anyway.  It is just crazy to think that new investors should be starting with this.  

But spend ten minutes on FB or YT and you'll see them out all out there extolling the virtues of wholesaling as this life-changing new religion that will save our financial souls. 

@Will Barnard I think you know what I am mean.  This forum is known to be tolerant at best with respect to wholesaling, and I would even call it borderline hostile.

It's illegal.  Its fraud.  You know the litany.  It's not a knock on BP, but this place is broker-realtor land.  It just is, and if you are going to hang out here, you need to realize that this pretty much their living room.  I just ignore it - but then I'm not a huge proponent of wholesaling either, at least not for newer investors.

Are there real professional wholesalers that hang around here on BP?  Sure, there are some, I suppose.  Heck, there are lot of realtors that assign deals from time to time. But see, they are realtors, with a license, so... you know, they wouldn't lack integrity.

I will say this - you CAN come here and talk freely about lead generation, and marketing and systems and automation and outsourcing and negotiating and all the relevant aspects of wholesaling.  There is a LOT of knowledge helpful folks here that can talk and add value on all those topics.  But if I were an aspiring wholesaler, I would not feel all that welcome here.

This is interesting, in fact, because I sometimes get leads for 4 and 5 bedroom houses that need a bit of work, but they are livable (they just need some updating).  Sellers don't want to sell it low enough for a flipper to make money, but they are generally willing to allow some room for repairs.  Leads like this can sometimes still work for smaller 3/2 houses that will cash flow, but these bigger houses don't quite cash flow - the rents are just high enough.  Never occurred to me that these leads could be still viable for potential house-hackers, because you can get more by charging by the room.

I had one lead recently that I shared with some other BP buddies -- it is a place in Copperfield, 77095, with a pool.  Seller lives out of state and is renting it, but wants to sell it.  The seller had been told by other investors that the place needs about $60k of work - again everything is OK, just old and needs updating.  Has a pool, I've been by the place, good neighborhood.  Figure it would sell for $230K or more with the right renovation.

I couldn't get this guy to take an offer low enough to make this interesting for me.  I mean, even if I offer that guy $150 I'm not really making any money, probably losing some.  But somebody that moves in and house hacks the place could probably pay that or even a bit more and do just fine. 

In fact I have another one a bit like this in Kingwood - needs carpet, that's it.  Maybe I just need to make friends with more potential house hackers, and hand off these leads for beer money.  That's better than I'm getting now.

@Ian Middleton we should kick this around a bit.  

@McCall Russell I think you will find that this is not the place to come to learn about or even discuss wholesaling. 

But I think you can see the concern. Some bright RE investor guy named Mark goes out and puts a house under contract. He 'thinks' he's got a buyer or two that will be interested, and he truly believes that he has a good estimate on the ARV of the house and the cost of the renovation to get that house to that number. He even tells the seller what he is doing. Hell, he even gets the seller to sign a disclosure that they are aware of what is going on -- I mean, he does everything in earnest.

Except Mark doesn't have the ability to close.  And so what then?  What happens when he cannot assign that paper to a buyer?  The seller still gets hurt even with all the best of intentions.  And Mark finds himself in the unenviable position of having to back out of a contract that he was never really able to perform anyway.  Mark then realizes that he has opened himself up in terms of legal liability, and worse, he just feels like heck about putting this seller in a bad spot.  Don't be Mark.

The simple answer here is just go buy houses.  Figure out the funding aspect of it.  Network.  Partner up, use hard money, get a loan from your $401K at work, do whatever it takes.  Just don't depend on cash buyers to close.  This is like getting the stars and the planets to line up.  Sure, they will present themselves and you might be to assign a deal or two here and there, but just make sure you are buying that house, full-stop.  As far as regular contingencies, those should be rare - like something totally unforeseen came up during an inspection -- then yeah, that is what those clauses are for.

Wholesaling is really, really, really hard.  It takes a lot of skill, at marketing, at negotiation, at everything.  And you have to have a good handle on renovation costs and valuations -- its rare that anybody ever really gets good at all this, and even more rare that people get really good at this having never renovated a house before themselves.

Purely my opinion, and sure, there is probably some limiting beliefs here -- but I honestly feel this way.  I think it is actually easier to work in teams to simply go buy these houses (master the financing and the renovation end of this) than it is try to hustle contracts as a wholesaler.  No doubt I'll get some argument on that, but that I can live with.

Hey Stanley, if you are house hacking then that is a pretty forgiving strategy.  I think you can do that just about anywhere - I mean, if it is an area where you want to live, then no doubt it is an area that others will also want to live as well. 

Yeah I am aware of that. I've talked to my VA loan originator guy in fact about re-using it. What I don't have a grasp on is using a VA loan to build new. Interesting to consider. Just seems like it would be a challenge to get the financing lined up.

Probably would try to just sell this place, capture as much of the equity as I can, and plow that into some little SFR that would make a good rental candidate (using conventional and not VA). Make it a live-in remodel (so my wife won't bail on me) with the goal of renting it out later. I guess we'd need to live there for 2 years or so in order to not pay capital gains (somebody correct me on that if I'm confused). Then we can start working on getting reapproved for the VA loan to do the tri/quad flex.

Of course, you still have to figure out the debt/income ratios and qualify for all that... that's the part I'm fuzzy on.  I mean, it's basically project finance - you haven't built anything yet, how do you demonstrate that you'll have rental income.

I keep thinking about selling this house I live in now, which has some equity, and doing a new loan to build a triplex or quadplex. No idea where to even begin with this. It is a bit too big to rent, so not sure it makes sense to hang onto it - but I do have a VA loan so that might be useful, if I can reuse that for the 4-plex.

Wife-unit will not be wild about this plan either - although, she does get the whole tax aspect of it. I might could approach it from that angle... We'd be living for free, or close to it, and we could refi out of it and get another SFR in a couple years.