All Forum Posts by: Michael B.

@Shannon McCasland wholesaling is not as easy as the gurus make it out to be. You can burn A LOT of money in marketing without getting any good deals if you don't know exactly what you are doing. I would buy a rental property first. Buying your first rental is the best learning lesson ever. As you add to your portfolio you can start to market for your own deals. As your marketing machine is gaining momentum you will be able to assign the contracts for deals that you don't intent to close on to other investors -> become a wholesaler. 

Most investors that start with wholesaling spend a lot of money on marketing without making a profit. 

@Todd Powell I buy in Michigan right now. I can't find the cash flow that I'm looking for in CA. That's my most recent deal:

Hays Deal

I personally love investing in MSHDA/Section 8 properties. I decrease the downside by working with a PM that knows how to screen these types of tenants.  On the upside, the government pays all or part of the rent. If the economy worsens and people lose their jobs -> more tenants for me. Also, the middle class has been shrinking by 11% since the 70s and that trend is continuing -> more tenants for me. The state of the economy doesn't really matter in my kind of scenario. 

@Dave Vona I would start with a rental that is managed by a good PM. The PM has access to contractors and can help you with not overpaying. Rehab a few rentals, collect the cash flow and build your team.  It will be less likely for a contractor to rip you off if he fears losing future business with you. 

I pay 8% with no added fees with my PM in Michigan. 

Invest in income producing assets and don't worry about timing the market. Invest for cash flow and you will be fine. You are missing out on profit while you are waiting for an adjustment in the market. NOW is (always) the best time to invest.

@Millie H. I'm not negotiating but my property manager dropped the fee over time due to me having a lot of rentals with them. A good property management company should be able to prioritize you when needed. I also make sure that I tell and show my property manager that I really appreciate his help. I think that's where a lot of landlords mess up. Many investors feel like they are superior to the property management company for some reason and act accordingly. I have seen whole rental operations crash and burn because of that attitude.

I think it's also important to reward the designated property manager that you work with the most every now and then. Gift cards, birthday wishes, Christmas wishes etc. should be a no brainer considering that person is holding the fate of your assets in his hands.

I also make sure I keep my rentals up to a good standard. If an expensive capex repair comes up then I make sure to take care of the issue without trying to patch anything up. This in turn will keep the tenants happy who will praise the management company for the good rental. If the rentals look like sh** and the landlord is constantly broke and can't repair them, then naturally the management company won't be excited about working with the landlord and the vacancy rate will increase. 

@Caleb Heimsoth you only pay $850 for the main LLC and you can connect as many LLC's as you see fit. You only have to pay $850 for each LLC if they are completely separate.

@Karen Margrave Well, it doesn't really matter what the DRE might say about it, since common law favors the freedom to assign contracts. The only time you are not allowed to assign a contract is if it is prohibited in the contract itself. So the only time DRE would even be allowed to interfere would be if you use their contract.

Technically you can "wholesale" anything - cars, houses, goods etc.  For example, I go to my neighbor who owns a beautiful Lamborghini Huracan and negotiate a sale. We go ahead and draft a contract with specific rights and obligations on both sides. Who is going to stop me from selling my contract to an interested buyer at a higher price? Do you think I will get in trouble with the DMV because I don't have a california car dealer license? I won't because it's not up to the DMV what I do with my contract. 

And, It's not up to the DRE to decide what I do with my contract for a purchase of a house. It also has nothing to do with being a loophole, it's the actual wording that makes the difference in law.

Because it was mentioned earlier that we should call the DRE to ask about wholesaling, I challenge you to do the following test:

Call the IRS, tell them that you are a real estate investor. Tell the person that answers the phone that one of your properties appreciated. Tell the person you got a HELOC with PenFed and you are going to draw 100k out of your asset to buy a Ferrari. Use your normal investor lingo. Ask the person on the phone if you need to pay income taxes on your draw. There is a good chance that the person will say yes. You know why? Because this person is being paid to answer phone calls and is not an attorney or CPA. The IRS call center person will hear: $100k - draw - buy a cool car - must be income.

Calling the DRE to answer the wholesaling question is useless. You will get an answer that reflects the gut feeling of a person that is being paid to answer a phone. Like in my IRS example. The DRE call center person will hear: finding deals - selling houses - must be licensed. 

Karen, you are an extremely experienced real estate investor. You know that it's not as easy as saying "bringing buyer and seller together - need license." All experienced real estate investors use the law to their maximum capacity when it comes to taxes, asset protection and other things. It's only a touchy subject when it comes to wholesaling because there are a lot of agents and brokers in this forum that don't like it and voiced their gut feeling about the legality of wholesaling. 

@Karen Margrave @Jay Hinrichs Wholesaling is absolutely NOT illegal in CA. I see you guys are not even in CA so I really question where you get your facts. Newbies in this forum rely on this kind of information and trust people like you... Very poor performance without any factual basis... It's not as easy as saying "You can't bring buyers and sellers together and make a commssion. A wholesaler is not making a commission.

Come on guys. You, as real estate investors, should understand the importance of words in business. Your guys' assumption about the commission is pretty much as far away from the truth as saying - "a cash out refi is taxable income because you have money in your pocket after the refi."

Every person has the right to assign a contract under CA contract law. It's basically like SELLING contractual terms and has NOTHING to do with a commission. There even is a 100 year old supreme court decision about this matter.

 If you guys don't believe me I would highly advise you talk to a good attorney about this subject - Jon Enochs, a ROCKSTAR attorney down in OC will be able to explain everything about wholesaling if you retain him. He is, among other well known investors, Todd Tobacks attorney who is doing quite well wholesaling in CA. Wholesaling and assigning contracts has to be done right of course (like anything in business) but if it is done right, then there is nothing illegal about it. 

Sorry guys not trying to offend anybody but it's bad practice to give advice on something that you guys obviously don't understand because you don't even do business in CA.