Not Assignment Wholesaling...BUT, Close and Resell..Who Does it?

Question

Hello All!

We are in 3 Different Markets.

Expanding into different markets and growing, though we have a problem.

Reputation and Buyer Dependancy.

There is a DEEP Love/Hate Relationship we have with Wholesaling (Assignments).

The Love: No Risk. High Profits. Leave Contract, No Problems.

The Hate: Dependance on other buyers word..(One of the worst). Reputation with Sellers, Not Actually purchasing the home. Having to play in the "Grey" Zone and not in the Black and White.

To grow a Serious company with a Strong Reputation we need to be moving toward CLOSING then RESELLING on the Open market (As some call it, REAL Wholesaling).

Anybody Actually doing this on a High Level in multiple markets?

If so, would love to discuss.

Joe Villeneuve · Answer

What I find, I'm going to use the word "unfortunate" here (I have a few better that can't be mentioned), is how many newbies are told that they can start out wholesaling as a way to get into REI with no money, no knowledge, no time, no...  This is so far from the truth it's not even a suburb of the truth.

What results is this.  Deals (OK, I can't print what I actually call them) that have wrong comps, wrong data, wrong interpretation, bad pricing locked up, and a big wholesaling fee added on.  What way too many wholesalers don't realize is this.  A wholesaler, a good one, does EVERYTHING an actual REI (their end buyer) does...except close.  They tie up properties with contracts, then try to sell their deals to REI's based on that deal being great.  When they can't find a REI that will agree (at that time), they drop the deal, and go on to the next.  (I'm hearing the theme song from Kelly's Heroes" going through my head now...for some reason).  What they should be doing is finding the buyers first.  The value of a good wholesaler can't be measured.  The damage done from the "not so good ones", can be.

Wholesaling isn't a shortcut, or a "light" version of REI.  It can be a very valuable part of the REI's team though.  "Unfortunately", the "not so good" ones, give the "good" ones, a bad name.

Jay Hinrichs · Answer

I think as you are finding out... the lack of control over your transaction is an issue.. also its not a grey zone.. its selling real estate without a license in most jurisdictions.. ( that is if your attracting your clients with a website and describing the homes etc etc.. Not to mention just walking from deals when you can't assign and really hurting a sellers feelings or financial situation.. I like to think about it ... like would you want your mother treated that way.. think she sold her house only for wholesaler not to disclose they have no intention of buying it if they cant assign it.   These are moral and ethical issue of course and we all run on a different compass.

the wholesalers in our market here in PDX the bigger ones anyway they close.

and of course they are all licensed brokers.. ( again the bigger ones.) the wholesale companies I have dealt with in FLA are licensed.. but many are moving from that model as inventory dry's up.

I personally like to shoot and hit what I aim at... IE close things.. then do value add and resell. but that's me.

too many moving parts trying to wholesale in the assignment game.. if I was going to try that I would just be a RE broker and build a team and make a million a year selling real estate the right way and build a career..  Heck my wife who is a solo broker no team.. sold 14 million last year.. and with her years in the industry .. She spent zero on marketing its all referrals. if I see a disconnect with wholesaling Is it a constant over head issue to create the deals.. cost money to make money. were a long term run in the brokerage gets easier and easier..  I spent zero on marketing as well.. just set up teams and deals come to me..

Raphael Vargas · Answer

As you know running a Company, Incurs many expenses.

I wish I can say we have made NET Millions in a year, as we have only been in serious Revenue business for 2 years. The first 2yrs were my mistake/learning years :)

And, As you know...Putting all your Cash into Every Asset, (10+ homes/month), isn't the Healthies/Safest Investment.

We have a LOC, although it takes time to grow a relationship with that bank and increasing the amount.

Also, the Restriction with that is just in one market. (Hence Local Bank)

They do not lend outside of our market.

Because we are in Baltimore/DC/Tampa this again brings up restrictions.

Any other Helpful Suggestions?

David Faulkner · Answer

Once he finishes his rant about the wholesaler clown train, perhaps @Bill Gulley could enlighten us on the use of TICs to get on title prior to reselling the property to an investor ...

Raphael Vargas · Answer

@David Faulkner I'm Confused. Can you Elaborate?

Account Closed  Yes, I actually spoke to both of them via phone the same day. Great Advice from both. PM'ing you Direct Brad.

Thanks to All who gave valuable Feedback

Raphael Vargas · Answer

Account Closed Great Info Shared my friend.

So you purchase with Hard $$ and Immidiately put back on the MLS?

If you dont mind me asking, what market are you in?

Also, The way we determine our Price is typically looking at what investors are buying similar properties for at their investment price. (ex. Analysing Renovated properties and checking the Acquisitions price of that investor or Seeing Cash transactions for AS IS properties).

How do you determine your offer range to homeowners?

Are you doing a potential scope of work with contractors and analyzing based on reno/costs etc then profitability?

Thank you sir

Account Closed · Answer

We use transactional funds provided by our hard money lenders or private lenders.

We base the entire conversation with sellers off of as is value, we back out what we want to make   fees from that (example: as is value = $100,000 we back out $35,000, 15K goes to closing and realtor fees the rest is profit). ​

We're using an appraiser or BPO agent to determine as is value and we're in the Wisconsin Market.

When you get the seller to think in current as is values instead of a more speculative "ARV" I've found it's a lot easier to talk the price down and get them to see it your way. Of course, there are more 'intricate' details pertaining to this but this is the jist of it.

Account Closed · Answer

We use a hard money lender for transactional funds and list on the open market. Dealing with licensing issues and a limited pool of cash buyers can be tough. Why not go to where 75% of the buyers are (MLS)? You can reduce recurring costs and grow your business nationally and not have to learn every single new market by leveraging inspectors, appraisers and Realtors, they'd only be paid on a transactional basis so capital expenditures would be directly tied to how much revenue you generate.

Brent Hill · Answer

@Raphael Vargas  I, and I know of others, who are wholetailing just like @Michael Quarles teaches here in Florida.  Using transactional funding if needed but can do simultaneous close if needed.  I am prepared to buy any of my properties to flip with hard money and is one of my exit strategies.  Buy at least at 70% of as-is value and you will have no problem selling.

Not Assignment Wholesaling...BUT, Close and Resell..Who Does it?

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