Wholesaling idea. Anyone done this???

[Kim Handelman]

Hi All, I am a fairly newbie. I've got one wholesale deal under my belt. I'm on my 4th DM campaign and I'm beginning to see a pattern. I target absentee owners. As I've crunched the numbers on possible deals I've realized that it makes more sense for a lot of my sellers to rent out their place. I live in an area where the market is still low (CT hasn't recovered as nicely as the rest of the country) but in my specific area rentals are hard to come by. I have on guy with a 3,000 sq ft house. He owns it free and clear but there is so much rehab to bring it up to the standards of others on the market he'd have to sell it at almost half what he bought it for. But in our area he could rent it for $2,300 a month and even though it's outdated, it would rent very easily.

Do any of you wholesalers offer property management to your sellers as second exit strategy?

[Jeff Rappaport]

Kim,

I think you need to look at your leads in a different way.  There is the traditional wholesale deal where you buy it considerably under market value and sell it to a rehabber or a landlord.  That works fine when you can buy the property significantly under value.  

What are you doing with the leads that don't meet that criteria?  My suggestion is to become more of a transactional engineer (Ron Legrand terminology) and work to solve the seller's problem.  In the case you are referring to how about offering the seller a lease purchase.  You can do this in one of two ways:  First, you can negotiate the payment and the price down and do what is called a "sandwich lease option" where you stay in the middle of the deal.  You then find a tenant/buyer and collect a non-refundable option deposit up front, collect a monthly cash flow and possibly another pay day if and when the tenant buyer gets a new loan.  It actually is a very simple transaction.  Second, if the seller wants market rate rent or retail price for the property you enter into a lease purchase agreement with the right to assign your contract to a buyer.  You collect the non-refundable option deposit and you have nothing more to do with the property.  Just like wholesaling a house to a rehabber.  

You can do this on high equity properties or properties that have little to no equity.  You will be dealing with nicer houses in nicer areas as well.  I have not even mentioned structuring some owner financing which you can also stay in the middle of or wholesale depending on what kind of deal you get and what you are trying to accomplish.  

If you are interested in these type of transactions check out Joe McCall or John Jackson.  Both are very skilled at teaching these techniques.  

You are already generating leads.  You might as well make some money from your marketing efforts.  You can make as much if not more than your normal wholesale fee by doing this.  Hope this helps!