What is a good estimate of start up costs for a wholesale...

Question

business? I am not talking about getting incorporated. But in terms of going from a newbie investor learning the ropes to a person executing their first deal.

I am learning more about setting up systems to get things rolling more efficiently, so I can reach the point of me not having to do everything, but what I am unfamiliar with is the cost. I feel lost in the sauce.

Jason Cummins · Answer

You do not need even $100 to submit to a title company.  At least where I work.  I submit just signed contracts with no earnest money, and ask them to open title.  Obviously there are times where I have had to submit some earnest money, butyou can put different clauses in your contract that will help minimize the risk.  Some call them weasel clauses, some call them out clauses, and the two main ones are.

"Subject to partners approval"  & "Subject to inspection"

If you cannot sell the house you may be able to "weasel" your way out of the contract and not lose the earnest money.

WITH THAT SAID.  It is obviouse that you are in business to make money, so do not enter into a contract unless you are sure that you can do what you say you are going to do.  It is not our business to tell sellers we will buy their house only to lead them on for a month and not be able to sell the property, then turn around and tell them sorry.  But there are times when you just cannot flip the property to an end investor, and you will need some sort of protection and risk minimizer to get your earnest money back.

REMEMBER ALWAYS send any earnest money you do put down, to the title company, NEVER give it straight to the seller, you will NEVER see it again, even if the seller defaults.

Jason F · Answer

Oh, okay.

Well, I know that reason for the deposit is to make sure the buyer intends on buying the property. If the buyer doesn not buy the property, than the seller keeps the deposit.

That being said, it would be kind of unethical to agree to buy a property, make promises to the sellers and then back out of the deal when you realize you don't have an end buyer. That happening is something you have to consider.

I would think to mitigate the risk of having to back out of a contract I would:

make sure your buyer list is strong
maybe line up a HML, just in case
let the sellers know as early in advance as possible that you can't close

Hope this helps. There are a lot more people on here that know more about it than I do, so you might want to wait for their answers.

Jason F · Answer

Well to fill out a contract you only really need $100 to submit to the title company. I would seriously consider waiting to get this started if you can't round up the $100 to put down.

You might get to a very good price with a seller and then when you ask THEM to submit the earnest money, they might ask you to leave.

Terry Royce · Answer

The 100 is not the hard part, just if I can't find an end buyer I want to have less of my money on the line if I unfortunately have to back out.

Terry Royce · Answer

How do you guys structure your deals so that you do not have to put money down/or an earnest deposit. And when you do how do you get your buyers to put it down?  You can't market a property properly until you control it or if you already have an interested buyer. But many times you won't have the buyer until after your market your property??? At least I would think.

Jason F · Answer

Great Reference! "Coffee is for closers"

Kevin Oliver · Answer

I have always been lucky finding good investors at your local trustee sales (at your court house).  They are looking for good deals cheap, sounds like a wholesale buyer to me.  And they have CASH!  Beside there you may also want to start chatting with your local rehabers and such.

Jason Cummins · Answer

In order to start wholesaling you really do not need to form any specific type of corporation or LLC.  Since there is little risk you can really just do this under your name.  Once you start going and doing it full time and making money you may want to consider for tax reasons only.  But to start out, you really do not need that expense.

Lease T · Answer

What entity do you guys suggest for wholesaling under..LLC , S corp , C corp??

Robin Vidovich · Answer

Wheatie,
Although many try to wholesale, it is not as easy as it appears. I work very hard to get good fair deals to my buyer's list. On the flip side I am offered to be on other's list all of the time and rarly hear from them again. It truly is a business of networking and deal finding as you mentioned.