How can you fund a wholesale deal?

Question

So I am getting excited about my first wholesale deal and I am working on putting the pieces together. I have 3 or 4 interested buyers in my area and 2 or 3 realtors to work with. I am still working on what options for finding said wholesale deal I want to pursue but so far driving for dollars and keeping an eye on the MLS and having a realtor who works with investors set up a search for me on distressed and foreclosed homes in the Waukesha, Jefferson, and Milwaukee counties. This will help me get my feet wet and I can crunch numbers on as many as I can to get a idea of what is a deal or not. So a realtor I spoke with told me I needed a pre-approval letter or a proof of funds letter to get into a house. How do you do this if you want to wholesale? I just bought our first home and I do not think I will be able to get another FHA loan pre-aproval. Can a hard money lender get a proof of funds letter? what do other wholesalers do about this? Thank you in advance!

Ted

Account Closed · Answer

@Ted Phelps

Proof of funds for a wholesale deal? That's too complicated for me. Im trying to find my own deals without a real estate agent. If I put it under contract by myself, and then assign the contract to another buyer, I shouldn't need proof of funds.

Ken Barnett · Answer

How can you fund a wholesale deal?

Why would you when there is no need to?

Realtors are great for many things but wholesale deals is not one of them.

Go out and find your own deals. Try driving for dollars or craigslist as the poster before me suggested. By finding you own deals that have nothing to do with the MLS you control the situation not your realtor. Plus you don't have to put a large amount down. (I rarely put more that $20 down on a wholesale deal).

FYI: I always take down For Rent sign information and call them soonest. Most will start off with a positive attitude and will want to rent to you. You should be listening for the landlord who is tired of dealing with tenants and has a less that positive attitude. I've gotten some great deals this way.

Hope this helps.

Svetlana Foley · Answer

Ted - I am a realtor and work with investors as well.  There are a couple of ways to buy wholesale - if it is just a conventional sale (that includes REO, foreclosures, etc), you must have a preapproval/proof of funds.  Talk to your lender first, see what you qualify for, and also how much equity you have in your house - you MAY be able to use HELOC with the right lender for the purchase.  Another way would be to immediately resell the property at significantly below market value to another investor/RE portfolio holder and make less money, but in much shorter time - you would in essence be selling a note.  That would not require funds, but it is a more nuanced transaction.  There is a number of hard money lenders in Milwaukee, they all require that you use some of your money as well to have "skin in the game".  They will issue a proof of funds letter if you meet their criteria. You definitely want to join local REIA chapter, all HML as well as a few wholesalers are very very active in the group.

You also want to ask your realtor to expand the search outside of just foreclosures, since there are deals to be found on MLS on conventional listings as well (mostly probate, divorce, preforeclosure, short sale, etc), and many times that would actually save you money since the homes would be in functional condition, as opposed to foreclosures, which in portions of Milwaukee require more money to fix them than the purchase price.

Hope this helps, and best of luck on your first deal!

Ted Phelps · Answer

thanks Ken! And maybe I did not come off correctly. I am using some realtor help to get an idea of what is out there and to start property searching to get a baseline of what is in the area. I will be finding properties off the mls and on my own. I am now understanding that they can be put under contract with very little money down. Which is exciting! Thank you all for the input.

Willny Guifarro · Answer

@Ted Phelps

Ted, I have some Milwaukee deals we can work on. Inbox me for more info

Svetlana Foley · Answer

Check out milwaukeehardmoney dot com Sarah is REIA member comes to meetings I believe Scott as well.  Reliable, do quite a bit of business here in town

Bob E. · Answer

@ ted

@Ted Phelps call some local rental listings on Craigs List and strike up a conversation, see if they would consider selling.  Then work out terms that will work for your buyers.

Ted Phelps · Answer

thank you!

Michael Madden · Answer

I've used Scott for deals.

5 points and 15%. He will also lend the rehab money.

Better have conventional lending setup once rehabbed. The interest adds up fast.

Ted Phelps · Answer

Thank you so much for the info! I am not sure about our house we close in may.  We don't even own it yet! we paid 161K and it came back appraised at 165K so its a start.  I am hoping to try the note selling or send it down the line to another investor for a smaller prophet.  I would like to get a small fund started with a few wholesale quick deals to fund my bigger entry as a part time wholesaler and/or fund my start to become a realtor! I joined the Milwaukee REI at the April meeting! That is how I am meeting all these great people!  I have not met any hardmoney lenders but I am sure there are some at the Milwaukee REI meetings I can find.  I will double check with the realtor I am working with about what the search includes.  We set it very broad to start and I will narrow it down to what I am looking for as I go. Thank you again.

How can you fund a wholesale deal?

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