My First Wholesale...Maybe?

Question

Hi all,

I've recently acquired my real estate license here in Florida so I could have access to the MLS/maybe do a couple of sales, but my main interest is to start wholesaling to gain some capital for rentals. When I was searching through the MLS I found a foreclosure that I am considering for a wholesaling deal. The asking price recently went down after two months to 135k, and the comps in the same golf community have gone for around 155k-160k. I think I can make money for a flipper (once I find one) and myself if I can get my offer accepted for less than 120k (as there's hardly any work that a flipper would have to do to the property). Since this is my first time going through this I would like specific details about how the wholesaling process works. Do I call up the selling agent, make an offer? What kind of documents should I be using to cover my bases? What are the step-by-steps to get this deal done? I would really appreciate some advice in this and maybe some one you know who would be willing to do a deal with me? Thank you in advance for any time you put toward this!

Ryan McIntyre · Answer

@Corby Goade That thought popped into my head but I was so focused on the other side of deal that I disregarded it. Thanks for bringing it back to my attention. It does seem to be one of the better ways of moving forward. Thanks!

Amanda G. · Answer

Hi Ryan,

This isn't always they case, but usually wholesale deals are off-market properties. When something is on the MLS you have to expect to pay the realtor fee for the other side.

You are probably already familiar with the wholesale rule of thumb:
Offer = ARV*.7 - repair costs
Assuming zero repair costs (not likely on a foreclosure) 70% would be 108,500.
This is why people spend so much time on BP talking about finding motivated sellers, because not many people will sell for a price that investors want to buy.

If you haven't gone to your local real estate investment group, I highly recommend finding it. there will be people there doing what you want to do, and they tend to be very generous helping out beginners who show they are open to learning. Good luck!

Ryan McIntyre · Answer

@Wayne Brooks I had a couple in there, but I did forget the buyer concessions and an extra layer of back end costs. Thank you!

Corby Goade · Answer

It seems to be you could make more money and simplify the process by simply representing an investor on the buying side, help them negotiate a great deal and collect a commission.

Wayne Brooks · Answer

Holding and financing costs for the flipper, commissions, buyer concessions and closing costs for the flipper on the back end.

Ryan McIntyre · Answer

@Jason DiClemente Really I just consider finding and dealing with investors who think more like me much easier than regular buyers which is why I wanted to take an investor rather than a regular agency approach to my deals. With this property not having as much meat on it as I thought, I would definitely consider just doing this through finding a normal buyer.

Really, I don't like the agency side of this business and do not want to rely on it in the future. I want to deal mostly with people who recognize the numbers and quality of the deal and put their faith in that rather than my ability to sell myself. I realize that no matter what I'm going to have to prove that I am a trustworthy and reliable partner in any deal, but I'd like decision to be based more on the deal than on me.

Sorry if this is making no sense :)

Ryan McIntyre · Answer

@Ned Carey and @Amanda G. thanks for the advice. I will definitely check more into the legality of assigning contracts as I didn't even consider that (it's been a while since I've had my head in the investing game). Finding a good investment group down here in Naples (which seems to be very difficult thus far) and talking with the investors there will really help me get into a better mindset/help me understand the little nuances of my area.

I will have to do a little more research I suppose in order to get a better understanding of how this deal would go down. I've seen this property and really there is almost nothing to be done on it since it is about the exact same quality as all the other condos in the community. Now that I think about it, I'm not sure exactly what a flipper could do on it.

Really this was something I just happened on and decided to put through the wholesale calculator here on BP so I could test out how this would actually go down for deals in the future. I just figured if I could somehow negotiate with the real estate agent to get to my price below 120k (whether that be now or in a month or two when they're more desperate) I could do it. For the calculator, it did say that my asking price should be 118k even with 5000 put into the rehab, 5000 for me, 25000 for the flipper, 3% for the agent, and 2500 in closing costs. I must be missing something though if I'm having this much push-back. Does anyone see anything that I am missing here?

John Thedford · Answer

@Ned Carey

A licensee can work assigning contracts and market properties they do now own just as they may take listings and market properties they do not own. Non-licensees may not market properties they don't own.

Ned Carey · Answer

@Ryan McIntyre as @Amanda G. said there is not much of a deal here. It is a great deal for a homeowner but not for an investor.

If by wholesaling you mean assigning the contract, most agent contracts say they are not assignable. Since you are in Florida, Wholesaling by assigning contracts is illegal I believe (@John Thedford may want to comment). I don't think there is much meat on the bone to double close. Your best be may be just to find a homeowner buyer that is looking for a fixer upper.

The basic steps are get the property under contract. Yes this means contacting the listing agent. You can then assign your contract. (Like I said that is not likely to work with another agent or in FL) Essentially you are selling a contract.

The other way is to close on the property yourself and resell to a buyer. This can be done literally minutes apart.

My First Wholesale...Maybe?

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