All Forum Posts by: Michael Lauther

I use Equity Trust and the service has been outstanding. Good luck in your investing.

Lenders who specialize in lending to self directed IRA's offer non recourse loans routinely for between 6 & 7 % up to 70% of value based on rental income and sufficient reserve even with poor to no personal credit. While your strategy is not within an IRA 12% seems excessive.

Congratulations Nathan, you have taken action and that is the hardest step in becoming successful.

Will, I agree with Nathans analysis of your deals but recommend a more conservative approach. Leverage is a two edge sword, rental income can disappear quickly and you have limited resources. I would put solid rental agreements in place on these properties and then market them to other investors who are looking for long term rental income. If you continue to find more deals like #1 you could build your cash to a point where you are able to retain some of your properties. The 2% / 50% guidline used by many investors would make this property worth up to $33,000 2% is $660 the 50% rule which may be conservative indicates your cash flow after maintenance taxes and insurance would be $330 xc 12 or $3960 which translates to a 12% cash on cash return. considering your low taxes and insurance on this property a buy and hold type like myself would consider this property. You could generate an additional $10,000 in profit. If you repeat this several times a year it will build your net worth without the risk of leverage you may not be able to afford. Not get rich quick but a plan nonetheless.

Aaron: I understand your criticism however there are many would be wholesalers who are marketing properties they have no legal agreement to market. In this case there was a "daisy chain" leading to the owner of record. a wholesaler needs to be a valuable resource not just someone with a nice looking web page and a list of cash buyers. I know what I need to make putting my hard earned cash on the line. In the past I have found my own deals but I will welcome reputable knowledgeable wholesalers who earn their fee. Are you suggesting that I dispense with due diligence before I commit funds?

Shane: my experience with realtors is that they have helped me negotiate a realistic price, honestly presented the property, have cut through red tape and completed most of the paperwork, taken current pictures of the property and neigborhood (i invest outside of my state) and have led me to other properties that have proven good investments.

the right realtor is worth many times his commision.
Good luck with your offer.

I am learning a great deal about wholesaling from this thread. the following is what My title company leads me to understand.

Many title companies do not like double closings. My attorney agrees that they are perfectly legal and that most "flips" are within the law. Title companies are only concerned with the appearance of fraud which is illegal whereby investers get together to artificially increase the perceived value of a property by rapidly reselling property in order to mortgage it to the hilt and then walk away. This has been a fraudulent strategy that took advantage of the recent real estate bubble.

The double close also poses additional cost because of the need for redundant filing fees and closing costs.

There is also a concern that the wholesaler may have Federal tax liens against him or his company and this would cloud his ability to transfer clear title.

Many title companies will not take part in a double close unless they are given the opportunity to review the details of the original contract to purchase. Conservative companies are concerned with the potential for fraud.

A preferred alternative to a double close would be to purchase the contract from the wholesaler with money being held by an attorney for disbursement at closing. This would add a few hundred dollars for the attorney to review the contract and hold the funds but it would most likely save money over a double close.

In this way the sale is made from the owner of record and only one title search and one title policy is necessary.

This is only my understanding of the issues surrounding the wholesaling process. Clarification is always welcome and of course I am no attorney so my understanding is bound to be somewhat flawed.

Apparently I need to know more about wholesaling before I can successfully use this potentially valuable resource.

Terry, I had direct phone communication with the owner of record of the property and with the wholesaler in an attempt to understand the nature of the proposed transaction. They were both aware of my communications.

Ibrahim, this wholesaler was not as far as I can tell offering an assignment of contract but was instead asking for EM to be held by the title company. I did not understand the details and when I suggested we deal directly with the owner of record having his fee paid at closing by this owner, he accused me of not dealing in good faith, and threatened legal action . There was never any indication that he would be cut out of the deal but rather than try to fix all these misunderstandings it would be prudent for me to find another deal.

I am a bit disturbed about his accusations as my reputation is important to me and I have written to him to that effect.

Thank you all for your input, and I willnow go back to the drawing board to find out how to deal with wholesalers. They can be a great resource and I need to know what to expect.

So this is how it turned out.

I'm afraid I have alienated the wholesaler, this is his partial response

"However, the biggest issue you have in all of this, Mr. Lauther, is that despite my repeated requests of you to deal directly with me, you have continued to contact (the property owner) to induce him to breach his contract with me and deal directly with you. Your conduct has given me a cause of action against you known as a tortuous interference with contractual relationships.

I am not stating this because I want to get involved in some action against to you but to stress upon you the importance of complying with my request to deal with me and only with me directly. I must insist that you cease and desist from any further contact with (the property owner) his agents, associates, contractors and assigns immediately."

I replied by wishing him well.

I have several questions regarding this failed attempt to use a wholesaler.

Is there any restriction regarding contacting the owner of record, property manager, or any other party.

I was perfectly willing to deal
through the wholesaler and never tried to circumvent his contract, but I was not able to determine his legal equitable interest.

Is there some document that I should have been given to determine this?

I am only inquiring so that if I should ever entertain another property I could avoid a repeat of this unpleasant situation.

The threatening tactics of this wholesaler precludes me from considering any property he is associated with but I am sure my inexperience added to this deal falling through.

Thanks for the idea Steve: I will let you know how it turns out.
The wholesaler is working out an arrangement with the owner of record and I will be sending the owner an offer directly and he will arrange to pay the wholesaler from proceeds.