All Forum Posts by: Max Gradowitz

Not to discourage you, but 95% of people that consult me about wholesaling in SoCal end up never completing a single wholesale transaction. I've had so many people have me form an LLC for them, provide them with purchase and assignment agreements for their deals, refer them to wholesale-friendly escrow companies, etc only to never find a wholesale lead in the first place. Just giving you the reality of what I see.

It's not that it's an expensive market, it's not the supply of homes, it's simply that SoCal is an over-saturated market for investors.  You can't really compete with the people that have been mass mailing using thousands of dollars and many years of followup going towards snatching all the off-market deals in the SoCal markets.  Many of them can perform themselves and don't even need to wholesale to an end-buyer, so people in distress prefer that anyway.

Central Valley in California.  Specifically Kern, Tulare, and Fresno Counties. 

I've had plenty of clients make good cash flow money on purchasing condos in middle-class medium-sized cities in California, even as their first real estate purchase. I would stay away from the big cities as the rent doesn't justify the overly high purchase prices and HOA fees. But in central California, I've seen good profits on buying and renting sub-$200k condos.

Just keep in mind that some HOAs do not allow for anything but owner occupants. So finding an investor-friendly HOA is crucial if you go with condo rentals. Ask before you make a serious offer.

Walk away.  The bank will not take less than the mortgage balance.  The only exception is a short sale, but the seller and their agent will have to apply for a short sale, which is a lot of work for the agent and no guarantee.  The seller will have a short sale on their record which is negative to their credit.  If the seller has any indication that they can get enough to cover the mortgage balance and commission, they will not short sell.  That is what their agent will/should advise them.

Is there a creative way to do this otherwise?  Sure, ask the seller to come out of pocket for the $130k difference so that the rest of the mortgage balance and agent commission is paid.  Does that sound like something that they will do?  My guess is no.  Just walk away.

Yes.  There are lots of downsides to seller financing.  The terms will be worse than a bank loan: shorter terms (higher payments = less cash flow), higher interest, usually higher down payment, etc.  Most sellers do not want to do seller financing because they take the risk of non-payment and having to foreclose, which is a lot of work most sellers don't want to deal with, so there are considerably less of them.

And most seller financing deals in my market are usually just plain bad deals, because 99% of buyers have conventional financing or cash, which is WAY more desirable to a seller.  So, at least in my market, sellers that offer seller financing only do so because the property has major issues keeping it from being financed in the first place, or they are can't get any other offers for whatever reason (undesirable area, etc).

There's a lot of talk on BP claiming seller financing is a great way to get into investing.  I disagree.  It might be your only option if you don't have the income, credit, etc to qualify for a conventional loan, but that doesn't mean its a good option.  In my opinion, it RARELY is a good option. 

Should you wait?  It's up to you.  If you assign the contract to a new buyer, that new buyer will have to take the property with all the obligations of those tenants, which will yield either a smaller overall purchase price or simply make it more difficult to assign.  The assignee may request the tenants be evicted prior to close of escrow, which in California might take a couple months or more if the tenants are still paying on time.  You can also just wait for the seller to evict before you get it into contract, but you might lose the contract by then (the seller can change their mind by then, for example).

Regarding notice of entry to show the property, that MUST be signed and posted by the CURRENT OWNER.  They can probably have their property manager do it on their behalf, but it must be THEM, NOT YOU.  Being "in contract" to buy a property does NOT give you ANY rights over the tenants.

Finally, welcome to the wholesale world.  If it was easy everyone would do it.  Uncooperative tenants are part of the game.  Good luck!

 Not very expensive.  Contact an attorney directly for pricing, it varies obviously.

Given that you want a 60/40 division of anything, there tons of issues you should address in the partnership agreement beyond just the profit split.  You should have an attorney draft a partnership agreement based on a decently-lengthy discussion with them about the goals of the partnership, rights and responsibilities of the members, etc.  How are losses split, the same as the profit ratio or different?  Who makes the decisions?  Is there a vote for major decisions?  What happens if they make an expensive business decision you disagree with?

If you don't address all these and other rights/responsibility issues very specifically in the agreement, you can risk spending thousands in litigation costs.  It's best to have an attorney draft this type of agreement.

Definitely consider central California.  Reasonably priced, good cap rates in the middle/large cities, steady appreciation, etc.  Especially for multi-family here I've noticed. 

If you are bored and want some good reading, read some of the recent desist and refrain orders and bar orders published on the CBRE website.  Good gossipy reading (hopefully you don't recognize some of those names!) and you can learn a lot about the process and penalties involved in complaints like these.