What should I do in this situation?? Trying to get my first deal

Question

Hi, my name is Vernon. I'm a newbie in the Atlanta region. Currently, I'm a bird dog for a friend's company in california. He wants mainly wholesale deals and fix and flips. And I find some good deals left and right. Ready to make an offer and sign away. I was told to go through him for contracts, hard money, etc. But, when I call or send a message, I can't get in contact w him at all. And by the time he reviews the deals it's already gone. I'm going to start my own llc in the next week or so. Any advice?

Thanks

Michaela G. · Answer

Bret....the way I understand it...vernon is finding deals in Atlanta for a friend in California

Bret Ehlers · Answer

CONGRATS VERNON!!   Unless you are born into the business everyone begins as a newbie.

What you have shared with us is about contract control.  This gives you the right to market and direct the sale of the property in behalf of the property owner.  As long as you have contact with the seller first as a buyer, you can purchase the property without an agent being in the way.   All you need is a simple 2 page contract, and your Title Company with a real estate attorney on staff to oversee the purchase transaction.  You don't have to have an attorney in California but I recommend it strongly in all 50 states.

If the property is under a listing contract with a licensed real estate agent you can place your offer today with the listing agent who can represent you and the seller in a dual agency contract.  This is perfectly legal in California.  Use your real estate attorney at the title company for your personal protection in closing the transaction.

I am curious, Atlanta is a great place to invest.  Why are you working the west coast?

Now, here are the big questions if you are going to do it on your own.

1. Are you prepared with your exit strategy?  If is not fair to waste the seller or real estate agent's time if you are not prepared to cash out this transaction or follow through with seller finance terms.

a. If you are wholesaling do you have 30 Flippers who can lay down cash at the Title Company to fund and close in a few days?

b. If you are going to Fix and Flip do you have your Hard or Private money and your GAP funding in place to close within 45 days or less?

c. Or do you have your own cash ready to fund and close.

California and Georgia  are great locations to invest and there is a tremendous group of investors and resources in each state.

To your successful investing.

It is a Terrific Day!!

Dominic Bouchard · Answer

@Mike Snyder @Sean Walton One of the main reason why the corporation type matter is because of the different tax treatment between "long-term" investment and "short-term" (wholesale/flip).

When you do "short-term," you're actually considered an "active business" subject to self-employment tax as well as your personal income.

When doing wholesale (for example) through an S-Corp, you may treat part of your net gain as a distribution wich is not subject to self-employment tax. You'll then be able to have tax advantage there.

There could be other advantages regarding your situation and the desired legal structure you want.

Also, you might want to consider other variables such as:

• S-corp tend to necessitate more paper filing and upkeep 
• The way you're going to get funding might be different with S-corp

As always, you'll need the help of professionals to assess your situation.

Feel free to reach out for more question.

Hope that helps!

Sean Walton · Answer

@Vernon L Keene good luck and good for you taking this on.

I'm not a lawyer and this isn't legal advice and should be checked with an attorney in your state but, you mention setting up an LLC which is great for holding properties but you probably want to set up an S-corp for flipping and wholesaling and don't mix them or you will lose the passive tax status of your buy and holds in your LLC.

Aaron Mazzrillo · Answer

Sounds like your friend doesn't have much business sense. I'm in California and always happy to get more business. You can send me your leads and I'll close them, then split the checks with you.

Ralph C. · Answer

Just do it.  Stop being the bird dog and losing money.

However make sure you have an exit strategy in place either assigning the contract, or ultimately close the deal yourself and fix and flip it or wholetail it.

Needless to say that funding for the deal should already be lined up.

Set up the llc. Get a good closing attorney for real estate deals and if you need one I have o e that I've used many times in Atlanta that is investor experienced.

Bret Ehlers · Answer

If you are wholesaling or bird-dogging in Arizona and you have the right numbers on the properties @Shiloh Lundahl is a great, honest source to take your transactions.

Shiloh Lundahl

Sean Walton · Answer

@Mike Snyder that is above my pay grade but I think the advantage of the S-corp is you can create sub s-corps for each flip or deal. Since the wholesaling is treated as dealer status there isn't a reason to do an LLC but I know just enough to be dangerous. Do your own due diligence

Mike Snyder · Answer

Thanks @Shiloh Lundahl! I did on subsequent posts!

@Sean Walton: Why would the corporation type matter whether wholesaling, holding, or flipping? Doesn't the main difference between LLC and S-Corp come down the type of corporation ownership? Are there other tax advantages for wholesaling with an LLC over an S-Corp?

Shiloh Lundahl · Answer

@Mike Snyder a helpful tip for a newbie. When posting on a forum, use the "@" symbol before the person's name such as @Bret Ehlers. This way it will send an email to that person saying they were mentioned in a forum. Otherwise they may never know a question was asked them.

@Vernon L Keene my advice would be to have an open conversation with your friend expressing the need to be able to get a hold of him as soon as you have a deal. Many good deals get taken up within a few hours in Arizona. So we have to act fast to get the deals. It becomes a waste of time to look for deals for your friend in California if he isn't quick to respond.

Another piece of advice would be to start building your own personal team if you want to start investing in real estate.

What should I do in this situation?? Trying to get my first deal

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