All Forum Posts by: Joshua A Kloos

@James Wise

Not true - you absolutely do not need a license to sell real estate. That's just false information. 

In MN for example, in order to "advertise" the property on MLS and other affiliated sites, you do need to have a license. However, if you are doing under ten deals per year and are not pretending to be an agent - wholesaling is perfectly legal.

As long as you do not mis-represent your role and go around openly advertising the property as an agent, you are fine. The whole sale deals I have been involved with have all been done by word of mouth and have been geared at helping out a distressed seller. 

In fact, my real estate agent brought me a deal the other week and specifically asked me if I could go find a cash buyer for it. The property was distressed and he was afraid to tarnish his reputation by listing such an ugly property. Yet, he still wanted to help the sellers out by attempting to help them get rid of the property. 

As a real estate agent, if you participate in wholesaling you may run into fiduciary responsibility issues, but you do not absolutely need a real estate license to sell real estate. 

This sounds to me like you are a broker who is simply being overly negative on whole sellers. Honestly, I dislike using brokers because of the inspection laws, waiting periods, losing almost 10% of my sale to your fees, and dealing with the hassle of not being able to communicate with the buyer/seller directly. Selling to someone for cash is SO MUCH better than dealing with the hassle of involving real estate agents/brokers in ever deal. Sometimes agents are an asset and sometimes its a liability. It depends on the circumstance and the parties involved. 

@Nicole Dechow

So with seller financing, not all banks are okay with it. I have met some sketchy people in the past who will try to get you to seller finance, take your money for a year and then sell the property out from under you.

If you don’t get his mortgage company to allow it as an enforceable contract, it may not even legally hold up.

It sounds like a deal you may want to pass on.

Hope this helps!

@Vicky Kalashian

Hi Vicky, usually you can use 75% of the estimated rental income and factor that into your debt to income ratio. So, this should help. Also, because you have a history of success holding onto real estate, you should be able to find a bank who will work with you. 

On another note, you could look into a hard money option or a non-recourse loan. If you have the income/collateral to put up for the loan, these can become reasonable options. 

Hope this helps! 

@Casey S.

If it makes you feel any better I’ve dealt with nightmare parents before. Have cost my partners and I thousands of dollars.

At the end of the day, this one is on you.

A.) have then sign a lease for a date you are positive renovations will be done

B.) add a clause to the lease and have then initial that they understand they do not have ownership of the property until x date after renovations are done

C.) always under promise expectations to parents.

According to your verbiage, it seems to me like you violated the lease and they paid for two months and were unable to stay there because of renovations.

Keep in mind, man, people don’t care what’s “best” for you and mostly don’t listen to what you say. They probably heard “remodel bathroom” and “before you move in” and tuned everything else out.

Maybe offer them a free month and offer to buy them a dishwasher or something - thats what id do! (No security deposit and you probably planned for a dishwasher anyway). Out zero dollars! Everyone wins!

@Ian Michael Thompson

I am a fan of a strategy that involves buy and hold as well as fix and flip. Essentially, find a property that can cashflow with a renter as well as have the opportunity for some value adding. This way you can go into the property with the idea of fixing it up and selling it, but if that doesn't work out as planned, you still have the option to hold and cashflow off of the rental income!

@Amy Kendall

It sounds like Amy is familiar with the area - sounds like it may be a deal to pass on.

Nothing wrong with passing up a scary deal - not every opportunity is a good one!

@Trevor Emmett

@Anthony Hollis

And the sellers are being cheating. Whole selling works well for distressed properties that are out of options or, for whatever reason, need to be unloaded quickly.

Why on earth would a normal seller with a single family home take a 30%-40% cut in their sale price? How did you even get them to sign the agreement in the first place??

@Anthony Hollis

I’m curious as to why you want to whole sale it. Why not just list it as an agent?

If you’re trying to get a bigger spread, I would imagine that opens you up to some legal issues. Isn’t that a violation if your broker agreement and fiduciary law?

Why even pay to become a real estate agent if you are trying to whole sale?

This doesn’t make sense to me.

Good luck though, I’m curious to see how this turns out.

@Garth Mackendel

Here are two models I’ve used in the past:

1% rent method. Basically evaluate the average rental cost in the area (apartments.com is what I use). Check for similar square footage, bedrooms, amenities, etc.

Is average rent cost for similar units is $3000/month, then 300k is a good price for the home.

If you can’t find a similar one in the area, hope on some public record sites and check the average income for the average family in the area. I shoot for around 33% rental cost of gross income (that’s what I’ve seen management companies use). So for example, if the average income is 72k/year that means a safe rent price would be $2000/month. This gives you the likelihood the average applicant could afford it.

Knowing $2000/month is a baseline, a good home value would be 200k.

monthly rent income = 1% home value

Method two is use a website like Zillow.com to check out the “sold” prices in the last year for the area. Remember to look at comps - similar square footage, yard, garage, bedrooms, etc.

These methods are a bit quick and dirty but can be effective to see if you should even consider a deal.

If you want to entertain it, decide if you want to whole sale it or buy and hold. A good risk mitigation technique is to find a price point that would cash flow if rented out. Then, using my income % method, if it rents for 2k/month, I would offer 150k-170k cash. This way, if I can’t sell it for profit, then I’m comfortable knowing I can profitably hold it.

Make sense? And keep in mind, without an agent, they are saving around 10%-13% in broker commissions, inspections, and possible alterations.

Hope this helps!

@Garth Mackendel

Well you could wholesale the thing.

Have you ever estimated the value of a property like that before?