All Forum Posts by: Eric F.

Can we stop with 50 threads "generalizing" wholesalers and creating strawmen to attack? There are lawyers who rip people off too. If you go to a lawyer internet discussion board do you think 75% of the discussions are about the small percent who rip people off? That is what this place is becoming. This thread is another 20 post thread ripping on wholesalers based on a made up example. IT isn't even real, just made up. How does it help anyone?

Also, in your made up example that hardly ever happens, how is the seller going to sell their house otherwise? It can't go on the MLS, no one can get a loan for it in the condition it is in, they have no idea how to do the paperwork, they would not even know where to start. I pay my lawyer $250 an hour. All he does is put words on a piece of paper. But I pay him because I don't know what words to use. Real estate investors make a lot of money. But they know how to get the deal from start to finish.

And now I just replied to a made up example like it actually happened. Ugh

You did a lot wrong. 

1) You can't keep going to the house with a bunch of people if it in any way bothers or inconveniences the seller. If it is vacant get a key, or else do it all in one shot. 

2) You have no right to tell them to keep utilities on. If you want them on so you can sneak buyers in disguised as contractors then pay for it yourself.

3) Your trust should be on thin ice. You were dishonest and got caught. You did not tell them you might flip it before the close until you got caught. Your contract can say whatever it wants, but put yourself in the seller's shoes. You have given all indication you are going to fix it up yourself, even making them drive there THREE TIMES to let contractors in, then they see it on craigslist listed as is. You lied and wasted their time.

4) You tell the wife "you're good to go, and ready to buy it" then have multiple contractors come out, sellers come out, and put it on craigslist. You don't sound good to go to me.

It is all small stuff but it adds up. The main problem is inconveniencing the seller so much and telling a bunch of little lies. 

In the future:

If it is vacant see if you can get a key or put a lockbox on it. Note: Until you own it do not give the code out to anyone unless you have done a lot of business with them and would trust them in your own house.

If the seller is involved in any way when you need to get in the house (they have to let you in, they live there, whatever) go there as few times as possible and certainly do not parade people in and out.

Stop wasting GC's time. You have had 3 contractors drive to this house and you do not even intend on buying it yourself. That is disrespectful to them.

Be prepared to pay for utilities before you close. Should you have to? No. Should you? If they are off when you sign the deal, yes.

Be more honest in general. I have a feeling you told a lot of "little lies." There are quit a few in your summary.

You say your contract says "seller can show to buyers" but "she doesn't get it." I will tell you what she gets. She gets that you said you were good to go yet you have had 3 GCs out there (causing her to drive there each time), are posting it on craigslist clearly trying to sell it before buying it, are waiting 60 days to close after you are "good to go." And now you are giving her a hard time because she is not giving you a 2 month freeroll on utilities in a vacant house! What do you expect the seller to think at this point? And on top of all of that, you even say "god forbid I don't buy it!" You said you were good to go! 

Get a few serious buyers and advertise to them directly. Forget craigslist unless you own it.

The bottom line is who cares what your contract says, who still owns the house, etc. When you build trust with the seller, tell them you are going to buy the house, etc. in their minds it is already sold. If that means you pay for the utilities then so be it. 

I, along with several people I know, use MileIQ and love it. Basically it can automatically tell each time you drive and you can swipe one way for business and another for personal. You can have sub reasons to classify each drive for example meeting/temporary site/whatever. You can put your rehab site as a saved address to allocate miles to it. Under business -> purpose you can add each project and allocate miles to it. So if you drove from your office to Lowes you could still select "123 main street" to assign the miles to your rehab. You can also make notes about the drive but I never do this.

You can get weekly reports, monthly reports, reports for a specific date range, etc. 

It has a few things I do not like which are probably easy to fix:

• If you stop to get gas sometimes it will break up your drive into 2 drives. I just found out you can merge these on their website but I do not think you can in the app.
• I think to delete a drive (example, riding in someone else's car) you have to go online. Usually I just mark these personal even if it was a business drive because if it isn't my car it isn't my miles.
• The app was crashing a decent amount over the last month but I think the most recent update fixed it for me. 

It is $60 for a year but I would pay double that easily. Before I had MileIQ I would track my bigger drives but drives like "2 miles to Lowes and back to the rehab" would get ignored. Those add up to way more than $60 a year.

I have also used the logs to go back and see when I met with someone or did something. I can just open the spreadsheet, search for the address, and then see "I met the plumber there last Tuesday at 3pm."

Note: I don't work for MileIQ I just love it.

Honestly for most wholesalers take their comps, rehab estimates, and ARV estimates and throw it all in the trash. Heck, throw them in the trash even if I am the wholesaler! Do your own comps and rehab estimates every single time. I would never buy a house without doing this. You want to be a real estate investor and get discounted properties, well, this is part of your job now. If you want accurate information you can rely on, go pay full price on the MLS and pay 6% to brokers, pay $400 for an inspection, $400 for an appraisal, etc. If you want deals doing work and research is part of the territory. Nothing in life is free. There is risk here. A lot of risk. Part of the reason you get a property at 70-80% of full value is because you assume risk. You bought it cash, you bought it quick, and you bought it AS IS. If you are not comfortable with this use a broker and pay full price. I bought a house recently that needed 8k of electrical work I missed when I looked at it. Stuff happens. When I bought the house for 75% of the as is value it was because there is a risk I might take an 8k hit on something like that. If everything was easy and risk free the business would not exist. 

All that stuff @John Thedford says is great advice for buying a house. However, you're not getting all of that from a wholesaler (usually). They are selling you a property AS IS. Their comps might be high (80% of the time) their rehab estimates might be low (99% of the time) but it says "do your own due diligence" somewhere in their correspondence. You don't get a 30% discount on a property for nothing. In this business the 30% discount is for risk. They call it investing, not "guaranteed returns." If you want all that stuff John said signed, sealed, and delivered go pay 100% on the MLS. If you are in Florida I'd use him as a broker (or agent in Florida.) He obviously dots all his i's and crosses his t's. I would imagine with him everything would be triple checked and verified before you put a nickel towards a deal.

There is something wrong with backing out of the deal if the real reason you want to back out is you cannot find a buyer. If you sign the deal knowing you have no intention of closing, even if you do have the means, that is still dishonest. Gurus preach having all these contingencies with a wink and a nod like "subject to partner approval." This is in almost every contract anyone uses even if you are a single member LLC and there is no partner. I heard some guru says something like "put a termite inspection clause in there, then if you can't find a buyer you can get a clean termite inspection and say you only wanted a house with termites." 1) Good luck in court and 2) good luck looking yourself in the mirror if you try that garbage.

You are correct about being up front if you assign it. A lot of people who are not wholesalers but post on this subforum all the time can't grasp that the seller flat out does not care if you assign it or sell it to someone else. As long as you tell them something like "hey, I work with this guy Johnny Investor sometimes, I think he might buy the house, I'll bring him over to see it and you can meet him" (note: don't let the seller meet Johnny Homebuyer if he is not someone you know is a professional and you are already 100% sure he will close) . The seller will not care if you assign it. Or if it seems like you have the rare seller who will care, just double close and call it a day.

At the end of the day, the seller cares about 2 things.

1) The deal closes

2) Whatever check they are handed at closing is for the amount you told them it would be when you signed the contract.

They don't care if you sell it the next day, rent it, spend 200k rehabbing it, burn it down, drop a bomb on it, paint it purple, or let it sit empty for 9 years. They care about 2 things. It closes and they get paid what they expected to get paid.

Honestly, I would probably pay the 3k (actually I for sure would). 1) You did not notify them in the 30 days, which is a requirement, so you are already in the wrong. 2) You probably don't have before pictures. 3) Did you have the deposit in a separate account only for security deposits? Did you notify the tenant as to where the deposit was being held? 

4) You said you are using the funds towards a renovation of the unit in a text. Not repairs. Renovation. The tenant doesn't pay for renovations out of their deposit, only damage and repairs. Did you send an itemized list of repairs via text? I doubt it.

Basically, there is a much larger chance you lose than win.  And if you lose, 3k is probably the floor of what you will have to pay. This $3,000 is your fee for learning the legal requirements of being a landlord. If you want to be positive about it then realize you could have lost a lot more before being motivated to read the statutes around your chosen profession.

PS it blows my mind how many people here conduct these conversations by text message as @Mindy Jensen said. I know it is 2017, but a text message is not formal communication. If you are keeping over a thousand dollars of someone's money, you need to use more than 250 characters to let them know. 

Like @Curtis Mears finding any type of "deal" in this market is really tough right now, especially on the MLS. I doubt you will find anything that meets the criteria Biggerpockets preaches (70% ARV-repairs, 2% rule, etc.) Every now and then I'll look at a house on the MLS that needs 30k of work, see what they are asking, think "haha no way" then 6 hours later it says "contingent" and sold for full asking price. That is just how it is here right now.

I have been poking around the wholesaling industry for a few months. Everyone I meet seems like they are either too busy to guide me through this or they don't really know what they are talking about. I have a few questions that remain unanswered. I know there is no one "right" answer to any of these questions but I would love everyone's opinions.

The reason this happens is 95% of people who are "poking around" or "interested in" becoming a wholesaler never do anything so no one wants to waste time. If you want some guidance, find a deal and I guarantee someone will walk you through what to do to get it closed. 

1. Should you tell the home owner you are a wholesaler? Why or why not?

Yes, well in my opinion sort of yes. I would not say "I am a wholesaler" because the seller won't know what that means. Say you are an investor. Don't hide your actual intentions. You can say "I plan on reselling this to make money" or whatever, but the term wholesaler by itself won't mean anything to the seller. It would be like meeting some computer guy and he says "I am linux implementation strategic engineer." That means nothing to me. "I install software on computers" at least lets me understand at a high level what they do.

2. How can you find out if the person who says they are a cash buyer actually has cash or if they are another wholesaler? This one is important in the rapidly growing Philadelphia wholesaling industry. Everyone says they are a cash buyer.

Like Nick said, make sure they have done a few deals.

3. How can you protect yourself from home owners changing their minds and going with different buyers who pop out of the woodwork with higher prices when you begin to market the property? 

Sign the contract, stay in touch until closing, give them actual earnest money (not 10 dollars). My contract has an initial space next to the part about if the seller backs out they are liable for attorney fees. I always explain this. Also, this is rare, don't waste time worrying about a seller or buyer going around you. 

4. How do you gain access to a home before closing in order to show potential buyers? How do you do this if you are trying to keep secret that you are a wholesaler? 

Well, first you are not "keeping a secret." They know you are an investor and in this business to make money (because you told them so, see #1). If the home is vacant I usually get a key. If it is occupied, well first of all you can't be bringing a stream of investors in to show it. If you go in there 20 times you are disrespecting the seller's time, privacy, and comfort. I try to go in an occupied house 2 times max. Unoccupied, I just get a key. 

5. I have been told by my mentor to use a standard PA Agreement of Sale with a few modifications as a contract. This is not binding for the person I assign the contract to. I was told I have to trust my buyer and if I don't I shouldn't be working with them. What are everyone's thoughts on that? Are there other contracts you would recommend that could make a more legally binding situation for my cash buyer? 

Find a real buyer and you don't have to worry about this. Find a real deal and you don't have to worry about this. If you have a professional real estate investor as a buyer and a good deal why would they back out? They will be rushing to close.

6. What are your favorite market segments to target when finding motivated sellers? What are your favorite marketing channels to use? Letters are getting very overdone in my market. 

Letters are overdone because they work. First, the majority of the time you are one of 3 or 4 people meeting the seller. Your presentation, trust worthiness, etc. matters more than what your letter looks like. This is why I said earlier be honest. Most people the seller meets with lie. I don't get it why they lie to the sellers. They are clearly investors in business to make money, yet they pretend they do not want to make money to the seller. I could write 100 pages about this.

7. After you get the property under contract, do you list it on the MLS? What are your thoughts and experiences with that?

In North Carolina, you can list a house you have under contract but do not own it yet. I am not comfortable with this so I close then list if I want to flip it that way. I will show it to professional investors I know before closing if I am thinking about assigning/wholesaling it, but I don't even put things on craigslist or anywhere a random person can see it unless I own it.

Two pieces of advice.

1) Get a PO Box. I had someone threaten to come to my house and attack me one time. It was the first mailer I ever sent. I got a PO Box the next day. 3 years later and I never got a threat again but better safe than sorry!

2) If sending direct mail to consumers was illegal the CEO of Dominos would be doing 25 to life. Just make sure you do not claim anything you cannot do in your letter.

If your letter says "I want to buy your house cash" and you do want to buy it cash then you are OK. If you have no intention  of actually buying it you are probably doing something illegal. I'm not a lawyer but other people who are also not lawyers in this thread agree. 

I can't get the @ to work but Ed said "I wouldn't worry about the attorney general's office. They have better things to do."  

Attorney Generals love news coverage. When someone gets  defrauded out of their house it hits the news, every time. The AG will be there the next day. This is a dangerous assumption.

Adam is right, join the club when it comes to small mulltifamilies in Raleigh. Right now I would be shocked if you manage to find one on the MLS in the next year that is a good deal.