All Forum Posts by: Eric F.

I am a bit confused by your numbers. Did you buy it for 315k? Or is that what is was worth and you bought it for 250k? 

If you sold it to this other investor how much money would you walk away with? If he is offering 40k over appraised value cash and you can walk with a bunch of cash, I'd do it all day. If you refi how much would you leave in?  I just sold a house I intended to rent in the same situation except the dollars were much less (west coast numbers make me want to vomit). I only would have cash flowed maybe $100-150 since rents were lower than I thought they were in that area, I would have had maybe 15k still in it after my refi, some dude knocked on the door before I was even done rehabbing it, offered me 92% of full market value cash (pending the rehab being completed of course), and I said we have a deal sir and moved on down the line. Basically instead of leaving 15k in it (@ 80% refi), I got maybe 2k out of it*, so an 17k swing in my cash account, which I have been able to use to buy 2 much better rentals (did cash out refi on one and have about 2k left in it, the other I'll probably have to leave 6k in or so when I refi), with money left over if a third potential deal comes up. Instead of cash flowing $150 if I am lucky, I can now cashflow probably $300 each on these new deals, so 6 times as much if I find one more, just by cutting my losses and moving on when I had the chance.

*I got destroyed on this rehab. It cost so much more than I thought it would to rehab, probably 40% more. I was praying daily to break even if I sold it. If that guy did not knock on my door I probably would have either taken a 10k hit to dump it on the MLS or left 15k in it as a rental, barely cashflowing, and hope to recover my investment in 10 years.

I think bandit sign effectiveness depends greatly on the type of market you are in. I have put out over 1,000 in my city and never done a deal off of them. I used a local number and vanity number. Neither worked worth a crap. I honestly do not think I got 10 quality leads over 2 years and all those signs.  TEN!! If I would have taken the hundreds of hours (and thousands of dollars) I spent on signs and instead driven to any random neighborhood and walked door to door I would have had better results.  However, I know people in another city who kill it with bandit signs. It is by far their best form of marketing. The market I am in is much more expensive than their's and our signs get ripped down quicker, but the difference is just insane. I quit signs but there were days I would go put up 30, drive the route the next day and only have like 4 still up. In more rural areas signs can stay up for months. The guys I know cannot believe bandit signs don't work here and I can't believe they do multiple deals off signs where they are.

@Ryan Dossey how would his competitors know it was a code violation if he sends the letter to the violator? Also, it isn't like the code violation is a big secret. 

I mailed it a few times here with a standard mailer. They know they have a code violation already, you don't need to tell them. Like @Nick C. said, either they want to sell or they do not want to sell.

@Roy N. in this case (as is the case quite often in America) it is actually "the land of the industry which provides the most lobbying dollars to Congress."

I just rehabbed a house and refi'd into a rental. We removed 3 old dishes from the roof. The day after my tenant moved in DirecTV was out there installing a new dish. I just laughed (since I can't do anything else!)

Some of these depend on your relationship with the wholesaler.

First, almost always it is a cash only deal. Part of the reason investors can buy properties directly from sellers for below market value is they close with cash. First, this eliminates inspections to get a loan. If a deal requires a new roof, HVAC, etc then you might not get a loan anyway. Second, speed. I can close the day I get clean title if I use cash. Closing costs are much cheaper. When you buy an off market property at a discount these things are factored in. You should be able to pay cash.

If you have not worked with the wholesaler before, he probably contacted you and 100 other people at the same time. Whoever writes the check and signs the deal first gets it. It might be 20 minutes and it might be 20 days (though like @nick said this means the deal probably sucks) . Again, the primary reason sellers work with investors is SPEED! They sacrifice some equity to sell their house fast. If they were willing to wait 6 months they would fix it and list it. 

Yes you put down a deposit, especially if it is your first time dealing with the wholesaler. You put this down WITH A CONTRACT so he is now obligated to hold it for you due to the contract. Do not give anyone money without a contract (unless you know them and have worked with them before, it is still not the best idea but I have done it and I am sure others have too). If you have a good relationship it probably would work the opposite way, they will hold the deal for you without a contract or money.

-Is the contract under your name? There are 2 ways to handle this. Some of it depends on what state you are in. One option is an assignment. Say the wholesaler has the deal under contract for 60k. You are willing to pay 70k. You can do an "assignment of contract" for 10k which basically means you agree to close on his contract and he gets 10k when it closes. The contract for the property will be the original contract the wholesaler and seller signed. Your name and the wholesaler's name will be on the assignment contract. The advantage of this is there is only 1 closing cost and the wholesaler does not have to provide funds to close. You wire in 70k and that is all that has to happen. I guess a disadvantage is the seller can technically see what the wholesaler made, but honestly they don't care (a lot of people fail to understand the seller a) understands you are in this to make money and b) does not give a darn what you make) 

The other option is a double close. In this instance you sign a separate purchase and sale contract with the wholesaler. When it is time to close, the wholesaler buys the property first from the seller, then immediately (or a day later or whatever) sells it to you in a separate transaction.  

Advantage: 

1. No one knows what the wholesaler makes right away (you can figure it out later on the county tax site). Of course no professional cares what the wholesaler makes.

2. In some states I think this is on stronger legal ground, but I do not know how every state works.

3. It generally is an easier transaction. It removes concerns the buyer (you) won't perform. If the wholesaler has to close then you disappear he still has the property, which if it is a true deal is a good thing.

Disadvantage. There are now 2 closing costs. Wholesaler has to find and provide funding to close if he does not have the cash. It takes longer, sometimes you have to wait a day to do the 2nd part (not significant of course).

An aside, you should never care what the wholesaler makes. If it is a deal for you then that is all that matters. I don't know anyone who is successful in this business who cares what a wholesaler makes. I know I do not give a crap. 

Also @Jay Hinrichs is 100% right. I wish I became a broker the second I turned 18, worked while going to school, learned everything I could about real estate while getting paid, and applied all the knowledge I gained to get to a great place by 30. I went to business school and learned technical stuff (accounting) but I feel like if I was a broker while going to school I would have learned all the soft skills I never learned as an accountant such as negotiation, networking, etc. I had to learn these at 30 when I got into real estate. It took years.

@William Walker I almost did not respond to your post because I value my time, but since you are attacking me I will make it brief. 1) What I meant was the entire concept of wholesaling is too difficult to explain to the average person using REI terms. The sentence you told Arin to try is almost word for word what I actually told @Arin Whedbee to use. How is what you said materially different from ""I plan on purchasing the house, however someone I deal with might end up being the actual purchaser, either way you will get the same amount of money at closing, is that OK with you?" It is not any different. If you think not using the term "buyers list" make it different I don't know what to tell you (I don't even have a traditional buyer's list). I feel like you are disagreeing and attacking me by agreeing with me. 2) RE: Your PS. Again, if you would read my post, you would see 75% of my post is telling Arin to not do what unethical "wholesalers" do.

I come in here from time to time to try to provide people trying to learn with actionable information how to do this business the correct way. I do not come in to attack people, bring in complaints about wholesalers not in context of the thread, etc. I admired Arin's willingness to learn. He was asking an innocent question. He did not understand a concept. When you are starting out in this business, everything is difficult. Things that are obvious to a seasoned investor are not to a beginner. A question like "what are you going to do with the house?" can be tough. It seems easy but sometimes it is not. First of all, as I stated earlier, you might not know. All you know is it is a good deal. You might assign it, you might repair and hold it, you might rehab it. Sometimes I stumble at this question still if I truly do not know what I am going to do with it.  All I know is I am going to make sure the deal closes. I just kept a house as a rental I bought 100% intending to flip it. Of course, the seller never actually asked what I was going to do with the house because he did not care.

@John Thedford Thanks once again for attacking me for saying the exact opposite of what I actually advise Arin to do. I had a seller call me today who dealt with the type of wholesaler you describe (in every single thread on this entire message board), the type I am not, and the type I encouraged Arin not to be. He called me after getting burned by a bad wholesaler. I might buy his properties (it is a big package and about half are further than I like to buy), I might not, but what I will not do is what you accuse every poster in this forum of doing without ever providing helpful information. I will not tie them up and waste his time. I told him that because it is true. I will not sign the contract unless I plan to close. I also immediately told him on the phone, as I always do, I am not a broker, I buy the houses myself, because I do, or someone I know buys it, which also happens sometimes, but it closes. I do not hide anything.  Your fake conversation in your post has never and probably will never happen, it only exists in your imagination, because you are not actually in this business, so you do not understand what a true motivated seller is concerned with. The conversation does not fail to occur because the buyer wants to hide anything, but because the seller is not so stupid to think an investor does not plan on making money. In your imagination I walk into a house, introduce myself as a real estate investor, and then convince the seller I am not going to make a profit? Come on, you're smarter than that I hope. I tell the seller I don't have a license within the first 2 minutes on the phone by the way, before they ask, just to clear that up, not at whatever point in your imagination I lie to them about it. Actually most of my mailers state I am not a broker now that I think about it.

Just curious, why do you think the sellers are so dumb? Do you think they think we buy their houses to not make money? I can tell you have never dealt with a motivated seller by your posts. Most sellers say they know I am going to make money (again, if you were doing this you would know it is true. They do say it..ask anyone who deals with motivated sellers). I never pretend I will not make a profit. Why do you think they are marks? They sell their house because they can't stand to deal with it. I'm buying a house (note: I am BUYING IT, not assigning it, I am closing) from a lady who opened the door, saw what her tenant did, cried, and called me and said she never wanted to see it again and would I buy it? She knows I am getting a discount (although honestly I am paying too much for it, but I signed the deal so I will honor it). She even said she knows I am going to make money. She.does.not.care. Again, she does not care. Most of the objections you have on behalf of the seller are not based in reality. Do you get mad at the auto mechanic because he is making a profit when he fixes your brakes? Do you get angry that the guy who cut your grass charged you more than it cost him to put gas into his lawnmower? Of course not. Do you tell a seller he is an idiot for paying you a commission? After all, if I apply your logic, you take some pictures, put a sign in the yard, and post it on the MLS then "steal" 3% of the sales price from the owner. I am sure you believe your services entitle you to get paid (as do I when dealing with a broker, of course they deserve to get paid for their time) but that is effectively what you say. By the way, don't bother listing the value a broker provides, I know they provide value and am not suggesting otherwise.

What I think many people fail to realize is to a significant amount of Americans their house is an anchor on their lives. This is what people who attack investors just cannot understand. The sellers have no idea what to do with their house. All they know is they don't want it, they cannot sell it how it is, they cannot fix it up to list it with a broker (either due to time or money), they cannot afford to wait 6 months to sell it, etc. A broker cannot fix these problems. Find me a broker who guarantees to buy the house if it does not sell in 30 days. Just one*. Until then, investors have their place in this country. 

*I thought about doing this if I became a broker by the way. Something along the lines of "I can buy your house for 70k directly, to make more than selling me directly you would have to list it for say 82k because of closing costs, realtor fees, etc (note: don't check my math, but let us pretend this is accurate for now)....I will list it at 85k (or whatever) and after 30 days you have a 1 time option to sell it to me for 70k straight up like I originally offered."

PS I apologize that this post will come off as aggressive, but I am tired of trying to provide helpful and ethical advice to people and basically getting slandered by the same few posters. I am tired of having what I said taken out of context and getting attacked for things I never actually say. I am tried of a new investor asking a simple question about getting attacked instead of educated. I am tired of reading attacks on this business that are not based in any reality of how the business actually works. If this forum is to help new wholesalers learn the correct way then they should be able to ask a question without 1) getting attacked and 2) every single thread turning into strawman attacks on "what every wholesaler does" that no successful one actually does. 

@Andre Vitalis I'm in Raleigh and can help you out. What do you plan on doing? Do you want to flip it? Rehab it? Does it need work? Are you going to close on it? 

Don't worry about the business cards or website. I don't think those matter too much. If you can get in the door and talk to them then you won't need a website or business cards. Most of the time they won't want to talk, much less sell. Sure it is empty, but it has been empty for a while and they seem fine with it. If you are worried about signing the deal if you get close to an agreement, speak with the owners, see what they would hope to get for the house, and say "I'll get back to you" and call that other investor to run it by them and see if they think it is good. You can call me on Monday (I'm heading out of town tonight) if you want as well. Remember, you don't have to sign the contract the first time you speak with them. So if you are worried you might mess something up, aren't comfortable with the contract, aren't 100% confident you know the right price to buy, then just get as close as you can to the parameters of the agreement and say you'll call them tomorrow. Then go seek advice from someone who knows what they are doing. That way when you sign the deal you can do it with confidence it will close. As a beginner, please do not sign a deal without knowing how you are going to close on it yourself or make sure it closes. I know gurus preach ways to back out of contracts, but stay away from that stuff.

@John Thedford what do you want from this forum? @Arin Whedbee is a new investor asking a question. There is a lot of bad information out there and he is trying to learn what he should do. Instead of answering his question you insult him and link to a thread that has nothing to do with his question to brag you got someone in trouble. You didn't answer his question. You did not provide him advice. If you want to complain about people who do the wrong thing in this business (and your 4,600 posts show you often do) then don't insult someone who is trying to learn the right way. It is not productive. Your posts do not answer his question. They do not contribute anything. It is not Arin's fault if you google wholesaling you get pages of bad and unethical advice. The first thing Biggerpockets says is go to your local REIA. I went to mine last week and a "guru" was presenting for his bootcamp and he said at least 5 illegal things (5 for sure, a few more probables). This was at the REIA I am advised to go to if I read the newbie guide here. Now, I know the "advice" this guru gave was illegal, but most of the people in the crowd did not. Why would they? This person is a position of authority and presented by a (questionably in my opinion) organization. So if they come here asking about what they heard, you don't need to insult them. Educate them.

@John Thedford He is trying to learn and do the right thing or else he would not ask the question here. We don't need posters insulting new investors who are trying to learn the right way to do things. He did not ask how to lie to the seller (although I am sure you will interpret it this way), he is asking how much information he should give to answer a question. When a seller asks "what do you plan to do with the property" the answer is very open ended and can be confusing. I have signed deals where I have no idea what I actually am going to do with it. I just knew it is a deal that I am going to close. The 100% honest answer is "well, first I'm going to see if some of the guys I regularly deal with want to buy it off me as is, but if not I might fix it up and sell it on the MLS, or maybe I will cash out refi and rent, but I could do a lease option or perhaps seller financed...." the seller is lost, which means he/she is done for which means I am done for. They have no clue what I am talking about even though that is the real 100% honest answer. It is much better to just reassure them the deal will close and they will get their money, which is also honest and true.