All Forum Posts by: Account Closed

Home prices are beginning to either level off or come down depending on your area. Here in FL I'm seeing appraisals come in lower than expected.... There's volatility in the stock market which generally is the first indicator of a recession on the horizon.

I am hoping for a mild one, but preparing for a tough one.

That said, unlike the early 2000's, many folks gobbling up single family residences have been investors this past decade. As people lose jobs they will inevitably be unable to afford to pay the rent. This increases turnover and the pool of qualified renters shrinks.  

If you're holding a bunch of single family rentals how do you game plan for this? Is the response to simply ride the wave and minimize the effects on your cashflow to the extent possible? Basically hodl your way through the storm? Is it to reduce rents and potentially operate at a loss? 

I don't think we have seen a real estate market quite like the one we are seeing now where so many investors own so many single family residences that may have otherwise been under mortgage by the occupant, but are not due to credit or cash issues, or both.  

Sorry to be a debbie downer but would really like to hear your perspectives. 

@Caleb Heimsoth - I understand that it does vary state to state.  I have also seen the double close being referred to as the ideal method when you are NOT licensed. Now, regarding having money there are companies that will fund wholesalers who are doing double closes. I think that solves the legal issue... I also think I over thought here, lol. 

I got wrapped up in the whole "middleman" portion of things.  If you are acting as a middle man between buyer and seller then you're acting as an agent and should be licensed. But, if you have buyers and you're double closing, you're not the middle man legally speaking.  So, I got myself all confused thinking "if you're double closing with their cash you're still breaking the law because you're a middle man."  But again, once you close with the seller, you're the owner ( for a few moments) and I would imagine you're allowed to sell to whomever you want.

***Not legal advice, just my interpretation. 

That said, if anyone can shed led on the whole acting as an RE agent and wholesaler / lowballing vs. listing the property dynamic, I'd be very curious to know how that all works.

Hey all! 

After months of following the subject, my entire wholesale world turned upside down today when I discovered most wholesalers are breaking the law, operating unethically, or both.  Anyway, I was hoping you guys could help me understand how to approach wholesaling in a way that's legal and ethical.

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I learned that you can't market to a seller, put a property under contract, market to a buyer, then assign the buyer that contract without having an RE license (in many states).  That's essentially what most wholesalers do.

From what I understand if you actually BUY the property with your own or borrowed money, close on the property, take title to the property, and THEN market and sell it, you're good to go.  Makes sense.

So, I started researching options for wholesalers who need funding to execute that workflow after reading a BP post that mentioned "transactional lenders."   

I called up a few and it turns out that they fund double close transactions.  One site expressly stated the key benefit to using their service was that they'd help the wholesaler hide how much money they were making from the buyer. I was expecting more of "we help you wholesale legally... the right way."

Nonetheless, their service seemed worthless to anyone looking to wholesale without an RE license since they require a double close, as in order to arrange a double close, you must act as an agent... In order to act as an agent, you must have a license...

Now... here's the thing.  In order to set up a double close, or a assign a contract to a buyer - LEGALLY, you must have license.  Isn't there a conflict of interest issue here though?  

Do I call up Joe Seller and say "hey Joe, I am a licensed real estate agent and I'm calling to lowball you."?  Isn't your responsibility to get the best possible price for your client? 

How does one navigate these issues successfully?  More specifically,

1. How do you successfully and LEGALLY operate as a wholesaler WITHOUT an RE license?
2. How do you legally and ethically lowball people if you are licensed?  

What if Joe Seller says "No I will not take a lowball offer, I want max dollar." What are you supposed to do, list the house and say "Ok, I understand you've declined my lowball offer, I will list and work hard to get you max dollar."?

Thanks for your time!  

So much creativity and risk mitigation in this.  Thank you very very much!

I'm slowly wrapping my head around this but the upshot is that if he pays his mortgage and gets his credit back on point, I'd be selling him back the OPTION at a certain price?

He'll be using future more traditional financing to purchase back that option and that's where I make my spread (when things go well)?  If that's the case, should I set the price for him to purchase back the option up front?

The contracts are structured as "Future Receivables Purchase Agreements." The company is buying a portion of future sales and these are not structured as loans. However, I will look into Oregon as I don't think I've ever seen a deal come out of Oregon since I've been connected to the industry (10 years). Mostly FL, CA, NY, NJ, TX, and OH. 

I think I may be on to something. I need you guys to do everything in your power to convince me that I am not and that this is all crazy... I say that tongue in cheek.  A lot to share and I'll be as concise as possible. 

My background is in short term working capital. I would routinely encounter business owners who put themselves in a bind because they would irresponsibly go out and take MULTIPLE concurrent short term working capital loans at one time. 

Short term working capital loans work something like this; a business owner receives a sum of cash. He's / she is responsible for paying back that cash + a fee in fixed DAILY payments. 

In the case of daily payments, the payments are spread out over 4-12 months depending on credit and other factors.  Generally speaking, the owner will pay back 1.24x - 1.48x what he / she borrowed. So, if you got $10k, you can pay back up to $14,800.

In speaking with an old client, I found the guy to have taken 3 concurrent loans / advances at one time.  First of all, lenders put language in their contracts that prohibit this.  But they do it anyway. 

Anyway, guy calls me for help and there's nothing I can do for him. More short term capital is not going to help - at all. Just makes matters worse.  That's IF I can get him approved. He's in danger of losing his business and I pondered the following...

Overview of the Problem:

• Business owner is debited around $500 per day in service of short term working capital loans.
• Business owner owes roughly $40,000 total and is scheduled to pay the money back over the next 100 days. The problem is, he may not make it the full 100 days. If he closes shop, he'll be facing judgements in court from these providers, etc.
• Business owner owns roughly 50% of his home valued at $300k
• Business owner's FICO score disqualifies him for more traditional / sensible financing which is why he opted for short term working capital in the first place.

Proposed Solution:

• Come in and pay off the existing $40,000 owed to short term working capital providers on behalf of the business owners.
• Take deed to the property under a sub to arrangement.
• Lease option the property back to the business owner allowing him to stay in his home.
• Charge a reasonable fee for the $40,000 and lump that in with the monthly mortgage payment and spread the payments over 24 months.

Expected Result ROSY Scenario:

• Business owner will free up cash flow. Will go from seeing $10,000 / mo + mortgage going out the door to roughly 1/3 of that going out the door on a monthly basis. He will no longer have his daily cashflow decimated due to daily debits, which can sometimes lead to overdrafts.
• Business owner will be able to get his credit back in shape.
• Business owner will exercise his right to re-purchase his home as he'll be qualified for a HELOC / 2nd mortgage.
• He will have learned his lesson, I will have made a nice return on my capital while holding the deed to the property where he owns 50% equity as my security. 

No So Rosy... But, Unfortunately Likely Scenario:

• Business owner will not take the steps to be responsible and repair his credit. 
• Business owner will go back to the same working capital providers and take more money again.
• Business owner will be unable to exercise his option. (I believe the data says 4/5 of DO NOT exercise their option).
• Business owner will place himself in a position where he's given up $150,000 in equity and received $40,000 in cash for it. 

Finding these business owners who have put themselves in distress requires pulling UCC data from the states and collating it using software. Not a quick and simple process.  I'm inclined to do more digging pull records, append contact data, do outreach, and have convo's to see if there's any merit to my approach but would appreciate you guys' thoughts and questions. The tougher the question - the better.

Thank you!

A friend of mine does co-op mailers on these giant postcards using every door direct mail from the United States Postal Service. It’s spray and pray marketing but I can get into 10, 000 mailboxes for 7 cents each. Do you guys have any experience in this area? Buying ads in co-op mailers - UNTARGETED (except zip code and postal route). Interested to hear your thoughts. 

So I am a newbie to REI and and have been digging through the Bigger Pockets Podcast archives and found a gem:

From Tragedy to Broke to $400,000 a Month...

As a newbie things got more crystal clear for me on that podcast. I realize that I'm almost completely "paralyzed" because there are so many ways to do deals, subject to, wraps, flips, wholesale, wholetail, etc.  

Prior to listening to that podcast I had a certain level of frustration because I don't find any of this to be rocket science but it's not like anything I've done in the past where I can just "go" ASAP.  

Did door to door sales out of HS, two hours of training, GO. Wanted to build a software company, formed a team, GO. Wanted to start an internet business and become the "Tai Lopez" of my niche, GO. Now... want to do REI...errr... ummm.... "maybe I should do more reading." "Maybe I should get a real estate license first." "Maybe I should just start by buying and holding a rental property with my wife..." I've been telling myself everything except GO.

This podcast was a game changer for me because now I know that I'm one step closer to GOING! 

All I have to do is pick a lane. Commit to it. Stick to it. Master it.  Am I doing flips? Am I doing wholesales? Am I doing sub to?

I feel so much more empowered because all I have to do now is some qualitative analysis and pick a lane based on my own personal goals. This guy had people flipping all around him, he said; "no." People were doing multi family / unit apt deals, he said "NO."  He's crushing it. 

FOCUS IS SAYING "NO" - Steve Jobs...

This Bigger Pockets thing from podcast to forum is simply amazing.

Building a list of owners to contact and I have come across a multi unit rental property for sale that confuses me because the owner is offering owner financing. The owner has completed some upgrades and there doesn't appear to be too much work ($5k or less) to get this thing 100% rentable. 

So I guess I am trying to figure out the sellers' motivation for marketing / highlighting the fact that he will do owner financing?  

Please keep in mind that I am a complete NOOB (only been studying this stuff 8 hours a day for the last few weeks). But, the reason I suspect he may be offering owner financing is because the property is classified as commercial property, thus making the downpayment requirements higher (20-25%) for commercial lenders, if I understand correctly? 

Just hoping to get an idea of situations where a deal "looks good" on paper where the owner is offering owner financing but turns out to be a disaster.  Thanks!