Large Multi-units Wholesale: Using Buyer's Funds to Close?

Question

I have buyer for a multi-unit who will pay cash for properties with a limit of $3MM. Other than double closing, is there any way, I can close using his funds. For larger amounts, even double closing itself can cost a lot.

I have heard about opening an escrow with one company (company-A) and closing with another title company (company-B). During closing with company – B, we request funds from our escrow at company-A. Has anyone done this before? Are there any articles anywhere regarding this?

Any suggestions are greatly appreciated.

Will Barnard · Answer

Not sure why you care if your buyer knows how much money you will make. If the deal makes sense at purchase price "X", then it should matter not how much your fee is.

The best strategy for such a large deal is to: Form a new entity naming your buyer as X% holder and you as y% holder. Upon closing, you sell your shares of the entity to yoru buyer for your fee.

Bill Gulley · Answer

Why not form an LLC or other entity with you and your buyer and just be up front with your fee, then you simply resign after being bought out at closing. He can bring the money to closing and you don't have to fool with the dollar shuffel.

Going to more trouble, buy with 100% seller financing and then sell paying off the note immediately after your purchase, you can also trim some of the closing costs....just so long as the closing agent can show that the A transaction can stand on its own merit.

Lokesh W. · Answer

Yes, I know some good apartment deals here. I use a spreadsheet to calculate all the expenses. Based on that some deals seem pretty good. My buyer agent is experienced in multi-units. It is good to have potential buyers for apartments. I have a few buyers with budget ranging from 400K to 3 MM. Any suggestions?

Johnny P. · Answer

Lokesh, you're trying to do what we call "working the buy side".  You have a "buyer" who may or may not be interested in a property you don't have.  I would spend more time looking for the actual deals... do you know what apartments are on the market in your area?

do you know how to correctly underwrite an apt?  How do you know what a "good deal" is in your area? etc etc etc.

Basically i'm telling you to stop chasing around this "buyer" and start looking for a good apartment deal.  Let me give you a hint (its not easy)

Lokesh W. · Answer

Originally posted by Johnny P.

Yes, Johnny.

Originally posted by Will Barnard

I agree. I could even ask for acquisition fee. THanks!

Johnny P. · Answer

Are you talking about wholesaling apartments?

Lokesh W. · Answer

Thanks. I was just wondering if there was a way the buyer wouldn't know how much I make. I understand that after a few months after closing, he can find out by looking at the deed registrations.

Lokesh W. · Answer

Thanks Bill!

Regarding the first one, I'm not sure if I want my buyer to know upfront how much money I am making since I have not done a deal with him yet. Once I am comfortable doing business with him, I may use this technique.

I do like your second option with 100% seller financing. I could convince the realtor about this. This probably will not work with REO multi-units because the bank will have its loan qualification criteria.

Large Multi-units Wholesale: Using Buyer's Funds to Close?

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