All Forum Posts by: Gilbert Dominguez

I do not think you can just assume the listing broker will charge an additional percentage to list the property. Most brokers have a commission split arrangement with their agents already based on the 3%. That is the 3% will not be paid to the agent but rather to their listing broker and the broker will then pay the agent based on their agreed upon commission split. It can also be the case that the broker offers very little to the agent other than a place to hang their hat and license and there it no commission split or charge other than some standard charge from the broker to the agent. However you will want to be aware of what arrangement you agent/partner has with their broker. You would not want any surprises at the sale point. 

I would say your money man gets a first on the property, then up on sale they get their 15% first and then you split the remainder 50/50. I think this can be good for convenience but you as a builder can do better. There are lending outfits out there that will offer you the very same thing but at 9%, and 12% max.  15% is rather stiff but if they are your friend maybe you would rather offer this to a friend and work with them. If they are willing to put you on the deed so much the better. I would not offer to put you on the deed but that is just me based on my experience with partnering with builders. 

I do not think the question was directed to a building you would buy as a value add where appreciation might be up to 50% within the first 2 years and so would cap rate and cash on cash evolve greatly but to buildings that are being sold with no more then a 20% growth potential and appreciation is not expected to be much more than 4% per year or so. We are talking about two very distinct scenarios but it was good you gave the example of how you would consider cap rate and interest expense toward deeply discounted buildings. 

First understand the reasoning behind why Wholesalers are needed, in what way are they useful, what is the demand for wholesaler, and what are the benefits of using a wholesaler?

The word, "Wholesale" implies quantity and discount. Well, there are some wholesales that in effect do deal with large quantities of properties but on the whole they do not really provide such a large quantity of properties and most people interested in buying from wholesalers are not going to or interested in buying large quantities of properties. 

Next and this is very important to realize and that is that most so called wholesalers do not own the propertied they offer for sale. What they own or have for sale is simply their contract and right to purchase a property at a discounted price. We say discounted because a property is valued according to the current market value of the property. However you may not be buying a property that has any true market value other than what is called, " turn key " properties. This means the properties exist in livable condition and have renters in them so that you have the rents as a source of income derived from the buildings. 

There are turn key properties and properties that only have a potential such as distressed properties or properties that need repairs and are not in livable condition. 

You have to distinguish between properties a wholesale owns and has the right to sell and properties a wholesaler does not own and only has a contract to purchase therefore only the right to assign their contract or in essence transfer the contract rights to you. 

Let us define, "Wholesaler" again: A person or entity(company) that buys houses or buildings in quantity and offers them for sale at discounted prices.

If you are a person while enough or allot of money and can buy allot of houses and sell those houses at discounted prices then you are a true Wholesaler. However you can be a person without much money and cannot buy allot of houses or even one house. What do you do if you have no money to buy a house?

You can get a seller to sign a contract with you for you to buy their house. You will need to know how and why a seller would sell a house to you at a discounted price. You will need to evaluate the house's true value but at least know what your maximum offer for that house would be. This would be based on what a buyer would offer for that house. So then you have to know what a buyer's , your buyer's criteria would be to want to buy that house by buying your contract to buy that house at the price you have negotiated. Know that you will not be the one to buy the house so you should be honest with the seller and let them know that you have a list of buyers you will be taking the contract to and be assigning the contract to the buyer. In this manner the seller will know that at least you are in contact with and know people that would be interested in buying their house. In many cases you would want to have a list of buyers who have the cash to buy the house immediately. However you may know of a buyer who does not have the cash but does have the wherewithall to arrange to buy the house through other than full cash means. For example:

part cash and part financing or full financing. There do exist loans for people to do both purchase and repairs and can get the finance to do both. 

If you choose to work in this field your job or service will be to obtain the house at a substantial discount so that you can offer a buyer what will be regarded as a good deal.If you do not have the money to buy the house then the most you can do is contract to purchase the house for a given amount of money then work to sell your contract , called contract assignment to an end buyer. 

The better the deal you can offer the more likely you are to find a buyer willing to commit to pay you for your work and contract assignment. 

How do you determine what should be your offer price or purchase contract price?

You need to determine what the market price would be for the house you are dealing with meaning what is the current price for that particular house in good living condition.

You will need to know how to determine as exact as you can be about the repair cost if their are repairs to be made or updates etc. 

You will need to determine how much work, how many hours, you will be working to put a deal together and come up with a charge to add or place on your contract should that be all you have to offer. Of course if you outright buy the house at a substantial discount you will need to be able to determine what you should add to your cost of buying the house in order to make it worth your while to sell it. 

These are some of the basics and the rest you will need to learn as you involve yourself in the business. You can work to educate yourself on the subject. You can reach out to those already in the business, you can attend real estate investment association meetings in your local area, ask questions , listen and work to gain what you need to know about the business and of course you will learn more as  you start to put deals together which you will want to sell. 

Dealing in real estate is a regulated business so you should familiarize yourself with the laws, rules and regulations. It might help to consult with a real estate attorney in setting up and operating your business. 

You asked why someone hates wholesalers. I am not sure I qualify because I do not hate them. However I can tell you  at least 3 things they do that I find bothersome .

#1) They do not perform reliable due diligence on the properties

# 2) They quote unsubstantiated ARV and repair figures

#3) They do not adjust their fees according to the price the sellers will receive

Example: They charge $6,000.00 on a house a seller will receive only $24K that is the same as charging a 20% commission on $30K when that should not be more then 3% at most

#4) They claim to have the right to sell the house when in fact they do not have the right to sell the house but only have the right to assign their contract which equates to selling their contract

#5) They convince the seller they have a buyer when in fact many do not even know what to do after they get the house under contract. A wholesaler should make sure they have a buyer in line before they get the house under contract. This requirement would limit wholesalers to those that actually have relationships with buyers and can deliver on their promise to a seller. So before a wholesaler could and would be out at large contacting sellers their first contacts should be buyers and create agreements with buyers to search deals for them and then be honest with sellers telling them that their services are or would only be to make an effort to get their house sold and not include or suggest any promise to buy their property. 

#6) Every wholesaler does not but should include in their contract that the seller retains the right to hire a real estate agent and that the contract they wish to sign with an agent would supersede the contract with the wholesaler making it void and canceled. 

#7) They advertise, " they buy houses cash" when in fact they do not ever buy houses at all what they do is help sellers find a cash buyer and that is exactly what they should advertise. 

#8) They never pay the seller a high enough earnest money deposit. I would like to see they pay at least from $1,500.00 to $2,000.00 that way if they have no contacts with buyers they will lose money for leading the sellers on that they would get their house sold. One thing I might suggest is for wholesalers to work with buyers and have the buyers put up the earnest money. How they would work that out I do not know but definitely no wholesaler should be allowed free and at large that cannot substantiate their existence and service

Anyway that's my .02C. 

Suggestion: Buyers could sponsor a wholesaler school for entry level wholesalers and provide earnest money which could be qualified for same as one qualifies for loan. Then if the deals make sense the wholesaler gets paid for their contact assignment and it be left up to the buyers to bid on the contract. This way buyers could assure themselves of the service. wholesalers would be paid and trained and seller would get the properties sold. Just more thoughts. Something along these lines..........................................................

If you are that concerned about it then contact a few asbestos remediation companies. Be prepared to pay a pretty penny though. Asbestos has to be loose and airborne and even then you have to be exposed to it over a long term. However its your personal call.

I have both viewed and listened to the tapes posted on here referencing the state of Ohio. 

It is important to know, and this is according to my understanding of what I saw and heard, It is not, I repeat not illegal to wholesale in Ohio. What the authorities are pointing out and discouraging is that you cannot represent to be selling a piece of real estate that you do not own. You can however get a house under contract and advertise your contract for sale. Your interest is in your contract and your right to purchase the property but not the property itself. I can list the address so that people will know what your contract is for but you cannot post pictures of the house or in any significant way imply you have the right to sell the house. The question of pictures was left as a grew area because again you have to be able to show what your contract to purchase if for. 

I would caution that the authorities will most likely not allow a whole lot of time for you to close on the purchase of the house. If you however can line up a cash buyer in a reasonable amount of time then you should still be good. You may need to get creative to let others know about the house and its location. The whole point is to avoid you preventing the seller from getting what they expect and that is that their house will be sold. 

Contract law in Ohio says you have the right to sell your contract because you do have a vested interest in the contract just be careful not to say or imply you have the right to sell the house because you cannot sell a house you do not own and you do not have the right to represent the owner, that is a licensed activity. 

For example: You cannot advertise a 1500 sq. ft home at 123 Main St. for sale. You can however state, Contract for sale for $2,500.00 to purchase  123 Main St. at the price of $X

You can include ARV, costs of repairs and purchase price according to your contract.

This is my understanding. You cannot advertise, market, or sell real estate that you do not in fact own, but you can your own contract and it rights. 

Now one thing I see is the possibility of obtaining transaction funds and doing a double closing or arranging for the closing on the same time in tandem. 

Who knows this may open the door to transaction lenders to provide funds at a lower rate than they are doing now. After all if I had 2 million dollars in cash and  someone closed with my funds every other day I might earn 100% on my money in one year. I would certainly be looking into this if I was a lender. Every wholesale in town or in the state might want my funds at .5% per day or 1% for smaller funds. This way a wholesaler could actually buy the properties and advertise something that they owned. 

Looks like you painted yourself into a corner, hehehe :) no pun intended. 

You can try what are called bridge loans. See if you can  find someone to lend you just enough money to finish out your project as intended or as you can plan for now. If your credit is good and you have not created any dings in it lately and you have some income you can show you just might be able to work a bridge loan to tie you over until you can refinance the house. 

@Tom V.,

I think you are missing the value of the post. It is about someone feeling positive about something they did. Obviously Jamal is a newer participant in the real estate business and is presenting to the community something he did that worked out well for him. We should join him in his celebration and encourage him. No doubt in the course of time people like Jamal learn how to do their job and business on a more professional level. 

Do you see the positive energy the community has responded with? I have been in the business for over 30 years and I because of the position I am in might have done the deal totally free for the seller because I understand more the needs of an elderly couple. 

I once bought a piece of land because of a private investor that put up the money. I only had construction experience and architectural design knowledge. After about a year the property had gone up in value. The private investor needed to get out of the deal. At that time my credit and financial situation had improved to where I could qualify for a loan on my own. I took out a loan and paid back the investor. I proceeded to keep up the payments on the property for about another 2 years and one day the broker called me up and told me the mortgage holder's financial situation had taken a turn for the work. They were a private party. They asked if I was willing to sell the property so I could pay off the loan. I not only agree to sell the property but signed it over to the private mortgage holder so they would get their loan money back as well as benefit from the further appreciation the property had gained. It was my way of showing my appreciation for those that supported me and I again did not need the money at that time. I was fortunate. 

You can quote laws if you want to and point out people can always do things better, You can criticize whenever you care to knock people down or you can choose to do something to help. This whole forum is about people helping each other and sharing the ups, downs, and consequences of negative experiences. It is a place to ask questions and opinions. The very fact of people participation on this forum is and effort to do things more professionally, gain knowledge, and contribute. 

I am sure you have allot to contribute to this community. However you being more professional by self proclaiming yourself as an authority and a judge I see little value by kicking someone that is new in the business. Your actions are not in keeping in the spirit of this forum and you fail to see the fact that others are rallying behind Jamal for his effort, accomplishment, and good spirit. No one is judging, we all have much to learn, and there is always something we could have done better. 

Tom V. I am so glad you are perfect and that so many people including myself aspire to be just like you. 

The only thing that comes immediately to mine is to try some of your neighbors or on Craig's list to see if you can find some bars that will fit your windows on the cheap then if you are handy install them yourself. I can't think of anything else that would do an adequate job of providing the protection you need and still save you the money you want to save. 

@Jeff Norton,

Actually be thankful. Your general life experience will contribute to you taking a wiser approach to real estate investing and gain you a little more trust with lenders or investors that might become a part of your team or deal making. You should be able to make quick progress depending on your financial situation.