How Do You WHOLESALE a BUILDING?

[Charles Kagahastian]

Hello all,

So here's the situation. My partners and I have come across a number of 40+ unit buildings at a discount and I have buyers willing to move at prices that make all parties happy. The only obstacle now is what strategy does one use when wholesaling buildings?

Can you assign?
Can you double close?
Can you do a Land Trust?
Division of Proceeds?
etc.

Keep in mind however that one particular building we have that we can move the quickest is a HUD building. This requires HUD eligibility requirements. We're working on finding HUD buyers now and we have someone working on finding out how to qualify some of our current buyers.

The main question is what should our wholesaling exit strategy be for a 40+ unit building?

[Steve Babiak]

One strategy mentioned by an attorney in PA at a seminar I attended: Get it under contract, and then do a "conditional release of contract", where the conditions require original seller to execute contract with your buyer at the price you agreed on with your buyer, plus you are to be paid as a line item in the seller's HUD as a "release from contract" fee. Entice the seller to do this by explaining that they will receive added net proceeds at the new price, and make sure that they do (you have to cover any extra seller-side transfer taxes, for example).

Note that this accomplishes several things: no assignment of contract (in PA there is an extra set of transfer taxes due when that heppens); it gets the wholesaler paid on the HUD; since wholesaler is paid on the seller's side of HUD, the lender isn't going to worry too much about that release fee.