All Forum Posts by: Randy Thomason

Hey @Kasan Kelley,

Be careful what you do and say.  It sounds like what you are talking about is what some people call reverse wholesaling.  It can be a grey area and some states consider it flat out illegal.  Without a license if you are hunting for buyers and getting them to give you a price they would pay for a house before you put it under contract, it walks and quacks like a duck and appears you are acting like a realtor. 

Every state is different so just be careful and know your states laws.

Good luck and keep the deals flowing!

First you need to learn the laws in your state.  I'm not an attorney but I know in most states, if not all, If you don't have the CAPABILITY (money or a way to get it like a private lender), and you don't have the INTENT( as in you have no intention of closing) then you don't have a legally binding contract. I know more and more RE Commissions are starting to use these two "test" as to whether you are wholesaling legally or illegally.  See @

That being said, the majority of wholesalers don't worry about either of those things.  They just sign and go.  Some will get caught, most will not.  

See @John Thedford comments above, as he has it right smack in the middle of the Bullseye. But why let the danger of prison and fines get in the way of making money?

Guess it is time to get of my horse now!  

P.S. for those who think I am anti wholesaling you would be wrong, and I actually teach it here, but the correct way. I do it ( legally) and double close the majority of my deals but do assign some too. 

@Kyle J. and @Jay Hinrichs both have it right.  Never pay a seller or a wholesaler directly.  Send it to escrow.  

Also, you should be looking at the underlying contract to know what you are supposedly buying.  As I stated before, the actual contract may have something screwy in it like mowing the sellers yard for then next 12 months.  If you are buying a contract, read the contract you are buying before signing.  

***Words of wisdom for newer investors.***  IMO you should be paying most of your attention to seasoned investor here. We have seen the ups and down of markets and have lots of good and bad experiences you can learn from.  Newer investors may have some great ideas to ponder, but experience is PRICELESS, as the commercial says on TV. And I am not saying newer investors are not right oftentimes and some of us that are longer in the tooth might sometimes be wrong too.  At the end of the day we are all offering opinions, remember that too.

Let me see how things turn out. Experience has taught me that government (or quasi gov) officials dont like to get pinned down to specific answers  if i get some good info i wil put something together and get it out there for everyone

@Josue Vargas Yes, I understand the lease contract enforcement was the main issue and I fully agree.  Run it like a business.  

This forum is an education product to a degree, and some people have the mindset that to be nice they don't enforce the last payment or let people cancel early without penalties.  

I was trying to help newer people understand that in essence they are paying the renter money by not enforcing the lease.  I use that expression to my new renters when I sign a lease with them.  Upfront, I tell them that rent will be drafted out of their accounts on the first business day each month.  If the ACH bounces they have to find me. I don't hunt them down.  they have until the 3rd business day to get me the money and late fee.  If not, an automatic eviction notice goes out and at that point they are gone.  I don't pay people to live in the houses. I tell them it is just business.  There is a mortgage to pay whether or not they pay the rent.  If they are tight on money they should choose to pay the rent before cars or credit cards because they will be living in the car if they don't pay the rent first.   They understand fully what is expected and they don't test the boundaries like a teen does since they know the boundary will definitely be enforced and no excuses accepted.

If that is not understood or acceptable I tell them this property is probably not their best choice because this is what happens.  

Because I am up front and matter of fact, I rarely have to do an eviction of a tenant I put in my properties. I do have to evict a large majority of the tenants I inherit from others when I buy a property with an existing tenant. Luckily it is cheap and fast here in my state. 

And for those who think I have a hard time renting my properties with this attitude, you would be wrong.  In most cases they are rented within 10 days from the time I have them ready to go. I get top dollar for my area too and my tenants stay for years so I have low turnover.  The reason?  My properties are in good shape and when something does go wrong I respond immediately.  Critical items are fixed same day.  Non critical items (ceiling fan, light, one stove burner, etc) is fixed within 3 days max but usually within 24 to 48 hours.  My response time to them is the same as I want them to respond to me.  

Hope I settle any confusion from my above response.

I assume you have a mortgage on your rental.  If you don't charge them the rent and you don't get a new renter in the property, you are in essence paying them to move move out early.  

Just a thought.  

You are running a business to make a profit.  If you aren't trying to make a profit then close down your rentals and start up a non profit company.

Arkreia main monthly meeting.  Randy Thomason will be discussing the information received from his meeting with the full Real Estate Commission regarding what is legal and what is not legal in the eyes of the Commission.  What things are the specifically targeting when looking for illegal activity.  What you should be doing to make sure you are in compliance with the law.  

We will also be updating everybody on the market trends nationally and more specifically in the Central Arkansas.

You go girl! @Lydia T.

The biggest point (besides legality) you should be looking at is this, 

If they couldn't make their mortgage payment before to a bank who can destroy their credit, why do you think they would make a payment to you? 

And I assume you are going to rent at market or close to market rate, which should be higher than the mortgage payment they were supposed to be making (in most areas anyway).  

wow!  So much you are missing on a sub 2 transaction. Here is a list of things to do but maybe not everything.

First I would have a trust set up to have the seller sell the property in to. 
Cashless transaction so no deed stamps due in most states that way.  

Have the seller send a letter to the insurance company to change the named insured to the trustee's name for the trust on the effective day of closing, and to change the policy as required such as a rental property policy if you are going to use it as a rental. If you don't do this then the house is not insured if you have a claim because the policy covers the named insured and the seller does not own it so they can't be insured and then you are screwed.

You need to get a limited power of attorney from the seller giving you authority to do anything to or for the property.

You need or should get a seller disclosure acknowledging that understand the due on sale clause and are accepting the risk.

There are a few other doc's I do to cover my butt but won't go into those here.

I always get an email from the seller with some language that says- here is my login and password to xxx bank. You have my permission to sign in and make the mortgage payments every month and manage the accounts and property.

This way you are not seen as hacking into a federal bank across state lines and possibly committing a felony.  Make the payments online every month.  if made on time the bank has no reason to ever look at the loan to see who owns it. No red flags.

Just a few things to be aware of. If you don't know Sub2 THOROUGHLY then don't do them.