All Forum Posts by: David Vesta

I have two questions regarding wholesaling:

1) How much information/due diligence should I provide potential investors?

2) How much of a spread are investors looking for when purchasing from a wholesaler?

For the first question, this is what I was planning on providing to investors on my cash buyer's list:

• Recent comps (compiled from House Canary (paid), BOA comp tool, FSBO comp tool, Zillow comp tool)
• Rent Fax Pro Forma Full Report (paid)
• Title Check (paid)
• Renovation Estimate (paid)(Fix-n-Flip estimate & Rental rehab estimate)
• Pictures
• Video Walk thru

I'm wondering if this is too much information, or if this will make it easier for an investor on my list to pull the trigger?

For the second question, here is what I've been using as my wholesale formula:

• Purchase Price + Rehab + Closing costs + my fee = 75% of ARV

Example:

• ARV = $200K (after repair value)
• IV = $150K    (Investor's value)
• --------------------
• C/C = $4,500  (closing costs)
• Rehab = $30K
• My fee = $10K
• --------------------
• MAO = $105,500 (maximum allowable offer)
• S/B = $100,225 (starting bid - 95% of MAO)

So, for this example, the investor would be making $50K on this deal. Would this be considered a "good deal" for a investor/cash buyer? Or is 70% of ARV more in line with what investors are looking for?

Any information or advice would be greatly appreciated - thanks!

@Nick C. Thanks for your input. Yes, I am planning on paying the GCs to do the estimates. The upfront cost to me per deal is approx. $1500, and that's including a small deposit to the seller (legal consideration). 

I'm just starting out in with wholesaling, with the hopes of helping me fund BRRRR. I've purchased a few deals from wholesalers and read a bunch on these forums and elsewhere. My thought is to do this right, providing investors with all the information they'll need to feel comfortable purchasing one of my deals. I want to know from other investors, especially ones that work with wholesalers, if what I am planning on providing investors is overkill.

Once I have a signed PSA, I plan on:

• paying for a title check (to make sure the title doesn't have any unexpected liens)
• scheduling a home inspection
• having a general contractor provide a renovation estimate (labor & materials) for both a fix-n-flip and a rental renovation
• An ARV appraisal

I am planning on compiling all of this information, along with a copy of the PSA, a full RentFax report, pictures of the property, and a video walk-thru into an "investor packet" that will be emailed to my investor list. My goal is to allow investors to feel comfortable purchasing one of my deals sight unseen. 

I just know that not all wholesalers are created equal when it comes to due diligence. I want to exceed expectations. Any suggestions would be greatly appreciated. 

You might consider taking the free course the sheriff's office offers - a lot of great information plus they do a Q&A at the end. Here's a link:

https://www.officeofphiladelphiasheriff.com/en/rea...

As far as insurance, this is what they said at the seminar:

• "YOU CAN GET HOMEOWNER’S INSURANCE AFTER YOU PAY FOR THE PROPERTY (DEPENDS ON THE INSURANCE COMPANY)
• YOU ARE RESPONSIBLE FOR THE PROPERTY FROM THE DATE OF THE SALE. ANYTHING THAT HAPPENS THERE IS YOUR RESPONSIBILITY"

As far as Right of Redemption:

• JUST TAX SALES (MORTGAGE SALES THERE IS NO REDEMPTION
• 9 MONTHS FROM WHEN THE DEED IS ACKNOWLEDGED
• THE FORMER OWNERS HAVE TO PAY WHAT YOU PAID PLUS 10%, PLUS ANY COSTS YOU INCURRED FOR CORRECTING STRUCTURAL ISSUES

Hope this helps.

Hi Melissa,

  Congrats on the triplex. Before I give you my answers, I want to say that I am not a lawyer or tax advisor - I just have some knowledge that may help you. So, here we go:

1) I would not hold the property in your name. It's easy enough to set up an LLC or LP. But when you do, do not incorporate in California. Nevada or Wyoming are the only two States to consider. There is a saying I alway remember when considering California laws: "Go to California on vacation; come back on probation."

Meaning, there are so many laws in your State, it is easy to get caught up without intending on doing anything wrong. Plus, there have been several court cases concerning corporate protections in California where the Court has decided to "pierce the corporate veil" concerning California LLC's - which means that setting up an asset protection structure based in California is almost like not having anything in place at all.

The thing you have to keep in mind is, right now, you are completely exposed. If one of your tenants falls down the stairs, they will go after you and all your assets. If you set this up correctly, your assets will be protected. 

My suggestion - pick up Garret Sutton's book: How to use LLC's and LP's - here's a link: https://www.amazon.com/How-Limited-Liability-Compa... He has a chapter specifically for real estate - this will get you to understand what options you have and why putting something in place is so important.

2) Yes, once you set up an LLC or LP to hold the property, I would set up a business bank account and deposit all rent checks, plus pay out all expenses from that account. It makes it much easier come tax time.

3) If you do the first two things, you will be able to deduct all business expenses. 

4) I'm not familiar with anyone in California with regards to a tax advisor, but for a legal advisor - I would consider Garrett Sutton's company, Corporate Direct. Just let them know your situation and they will be able to advise you as the best structure to set up to meet your investing needs. Here's a link: https://www.corporatedirect.com

Hope this helps....

Hi Kelly,

  I would use the service offered through Corporate Direct, which is Garrett Sutton's company. He is part of Robert Kiyosaki's Rich Dad advisors group. The cost will be about $125/year. They have agents in all 50 States.

However, there are really only two States you should consider incorporating in - Nevada or Wyoming. So unless you live in either of these two States, you will be required to have a registered agent. These States have the best laws and corporate protections for business owners and real estate investors. And it's a simple process to request to do business in your State as an Out-of-State business.

I would also suggest you pick up a copy of Garrett's book: "How to Use LLC's and LP's" - it's awesome and breaks everything down for you. Here is a link: https://www.amazon.com/How-Limited-Liability-Compa...

Asset protection is such an important component of starting and running a business, especially one such as real estate investing. Not only for the liability issues and corporate protections, but for tax reasons as well. Although it may be a dry subject, it's well worth reading up on your options.

Hope this helps....