Can I make a deal out of this? If so--HOW?

Question

Hi there!

I have a wholesaling question. One lead that has come to me is a gent who bought a condo specifically to sell it. I get the sense that I could get it at a discount, but it is not a property in need of work. Certainly not a fix-and-flip scenario. It is a nice property in a good area--a solid turn-key rental. Hypothetically, let's say it's worth $335k (an identical unit sold next door last month, so I do know right about what it's worth at retail) and I think I can make a cash offer at $275 and he'd take it. As a wholesaler--I can't afford that property even if it's a pretty good rental and a below market price--can I turn this into a deal? If so, how? I suppose I could always put a contract on it and try to turn a retail sale, right? Although I haven't been working on any retail-type marketing, I've been working on a buyers list populated with investors, not people seeking retail property. So, can I make this a deal?

If the answer is no, that's okay. So far, as I delve into this particular niche, the biggest learning curve for me is the art of recognizing potential deals. I know that as I get calls coming in, my mind is scrambling to try and recognize if I'm barking up the wrong tree, or worse, if I may be passing on what could be a good deal! I just don't know yet!

Thanks for your input BP community!

Brian Bandas · Answer

Thanks guys.

Shaun, I think you've got it right--he's hoping for an offer from me that's closer to retail. I also don't think that it's a great rental investment either, mediocre at best. I think my best bet here is to try and pass him to an agent friend for a referral fee.

Ian, that's exactly why I think this isn't the right opportunity--70% is 100k below retail and he's not motivated enough to go that low.

I just know that I'm having a bit of a block on getting my first property under contract--fear is always a factor on the first--and I'm trying to make sure said fear does not keep me from doing business when I should be. It's a strange balance between "don't be too afraid to make a move," and "don't make a move just to make a move." It's a balance I'm still learning.

Troy Fisher · Answer

The question that needs to be asked in every wholesale deal is, why do you need to sell?  Without asking that question everything else is useless.

Did you ask him if he'd take 230k for it?  He could laugh at you, or say no, but you need to know what his answer is.  It could be a deal.  But if you just assume it would be no, you could be walking away from it.

Also, don't forget that the 70% is mostly for a rehab.  A buy and hold investor may be interested in getting into something closer to retail.  A lease-optioner might be more interested in the deal at 80-85%, because they make up the money on other sides of the equation.

Not every lead is a deal.

-- True.  But you don't know if it's not a deal until you've worked various angles.

I just want to continue to learn the various ways to structure or create a deal, and I want to learn to recognize them.

-- Which ways have you tried to structure the deal?  Telling us you don't think he'd take less than a 50k reductions doesn't mean you've tried to do the deal.

Ian Kuchman · Answer

Great discussion guys. I love the idea of an abundance mentality. What goes around comes around.

Remember, this agent can repay you in the future by buy throwing a sweet investment deal your way when the time is right.

Good things.

Shaun Reilly · Answer

Taking it back to the helping the seller point.  If you have a good relationship with this agent and think they are good you want to refer the seller to them since that would really help them out too.

It is never bad to help some one else out and we are lucky that we can do that in real estate while making a fabulous living for ourselves as well.

Brian Bandas · Answer

@Shaun Reilly really really appreciate your input and advice! i do have a pretty solid relationship with this agent, but nothing solidifies a relationship like that more so than increasing someone's bottom line! furthermore, i think the mindset of being others-oriented--helping out the seller or this agent or any one else, even if it doesn't directly make me money--is a mindset that will result in far greater success in the long run.

again, thanks a ton for offering up your thoughts!

Shaun Reilly · Answer

You can still refer the guy, you just can't really get paid for it.

The agent can give you a token gift, say a $25 gift card that could just be considered a deductible business gift for them as well.

Bigger thing is a) good karma from helping out the seller and b) building a relationship with the agent.

Having an agent that will help you with stuff is a good thing to have.  They will be more likely to help you when you contribute to their income.  Ultimately you both hope that would be by buying and selling deals where they can get a commission, but if you give them other prospects they get fed until you bring them your own business.

Brian Bandas · Answer

Gotcha. Well, one goal among those I have set as I move into real estate investment is to alway operate in an upright way. So perhaps I just let this one go, which is okay. Not every lead is a deal. I just want to continue to learn the various ways to structure or create a deal, and I want to learn to recognize them. At this point, I don't always trust that there isn't one there just because I can't see it.

Shaun Reilly · Answer

Be aware that unless you are licensed yourself an agent won't be able to legally pay you a referral fee.

They can do something to work around the law but cash will be blatant disregard of it.

Ian Kuchman · Answer

I wouldn't offer anything more than 70% of $335k minus a potential assignment fee (say $2k) if your looking to flip it to investors.  If you want to flip this at retail price then your best bet would be to do a rent-to-own deal.

I also would agree with Shaun Reilly - figure out what the numbers would look like from an investors stand point. They are going to want to know NOI, ROI, etc. So, having good estimates of your rent and expenses would be useful to know.

If the numbers look good, get it under contract and hustle. Start by going to your local REIA. Next see if anybody on BP Marketplace is interested based on your numbers.

Shaun Reilly · Answer

What are the rents?

$300K+ condos aren't usually great cash flow generators.

If they place is worth around $335K and doesn't need work why on earth is the guy not trying to a retail sale?  Especially if his original goal was to buy it to resell it?

Can I make a deal out of this? If so--HOW?

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