How to buy from a wholesaler???

[Sean M.]

What’s up BP? I am a new investor and boy do I receive killer deals from wholesalers. However, I do not know the steps or best practices for buying from wholesalers. What are the due diligence steps your recommend for a successful transaction.

Thanks!

[Heath Ryans]

Hey Sean. If you receive killer deals from wholesalers, you're the only one on planet earth. lol. I can't find one that understands that I have to actually make money to justify buying it.

That aside, buying from a wholesaler can be a good way to get deals but, as you said, always do your own DD. It's pretty similar to any other purchase. 

In no specific order:

1) Check out the area. Is it desirable? What do homes sell for? How long do they sit on the market?

2) Comp the house. What is a conservative ARV?

3) Does that reflect the wholesaler's projections? This doesn't matter but you want to see if they have any concept of reality.

4) What are projected repair costs? Based off pictures, do they seem like they could be in the ball park?

5) If you think it's possible, see if you can do a walk through of the home with a contractor. This is super important for your first deal unless you have a lot of construction experience yourself. Verify the repair costs and add some contingency because it never goes as planned.

6) Run your numbers again. Will you still be able to make money? Remember you have Purchase Price + Closing Costs + Repairs + Holding Costs + Loan Interest + Agent Commissions + Closing Costs again.

7) If your cool with the deal so far, go over the PSA (purchase and sale agreement) and make sure that it's written in a way that protects you as a bad from recourse if the deal goes south.

8) Verify there's enough time left in the contract period to take care of a title search, secure funding, ect.

9) if everything checks out, sign the Assignment of Contract and immediately send it to a title company to start the title search.

10) Hopefully things go as planned without any surprises and you close.

That's a rough overview of the process. It's all pretty similar to anything else. You're just not the one who had to actively find the deal.