All Forum Posts by: Jeff G.

I have my first deal under contract and need some advice. I was going to market it as a wholesale deal to buy and hold investors. But, the rehab looks to be much more than I anticipated. (Sorry, I don't have the figures in front of me at the moment.) I'm entertaining the idea of countering the seller's cash price with a seller financing offer at terms that work for the end-buyer.

I've never done a seller financing deal before. I realize we'd write up an assignable contract with escrow instructions and I'd get my assignment fee as per a normal wholesale deal. But, then what? Who maintains the debt service between the end buyer and the seller? What steps do I have to take to set that up besides escrow instructions? The property is free and clear--so there is no due on sale clause to worry about. Is there anything else I should know? I just don't want to miss a step. Thanks!

Hey @John C S. just remember that not all section 8 Vouchers are equal. Housing vouchers are good up to a specific number of bedrooms. You can check out the Section 8 rates here: http://www.huduser.org/portal/datasets/fmr.html to find out what they are in your area. Be sure to match the prospective tenant with the unit according to the number of bedrooms their voucher permits. For example, it would be a bad idea to rent a three bedroom unit to someone with a two bedroom voucher. You'll get a lot smaller check every month from the state if you do.

@Sarah Jones

You've inflamed some passions on this thread. I'd like to lend my perspective here in what I hope comes out as a constructive manner. 

I'm genuinely curious as to what drives your fear in specific terms. Are you afraid of being sued because of use, misuse, or theft of the firearm? I'm not trying to be patronizing, I just don't understand.

Note to the Second Amendment crowd: the Bill of Rights protects the abridgment of your rights by the State--generally both the several states and at the Federal level. It's rarely of use when private entities are involved. Why? Because historically private entities could contract for just about anything including mutually agreed upon limitations of the free exercise of rights. (I'm not a lawyer, but I have a good grasp of history.)

As someone else pointed out you can put just about anything in a contract but its enforceability is another matter entirely.

If you're just trying to reduce the business risk arising from a lawsuit, just be sure to be properly ensured. There are two major things you can do here:

• Have a solid umbrella policy to on top of whatever other insurance you already have in place.
• Require your tenants to have renters insurance. Certain renters insurance policies will cover the landlord's money damages upwards of a certain dollar amount (e.g., $10,000) arising from some misconduct of the tenant. 

Personally, I don't see a real increase in risk here. If you own several units someone else almost certainly has a firearm that you don't know about. There are a LOT of gun owners in this country. Before you go throwing a "no guns" clause in your lease (assuming it's both legal and somehow enforceable in your state) consider the opportunity cost of doing so. You're disqualifying about 37% of the population from renting from you and this could be reflected in your bottom line by increasing the turn-around time of empty units.

It would be presumptuous of me to tell you what to do, that's not my purpose. I'd just like you to see that this subject has multiple angles. In addition to a good lawyer, you may wish to have a conversation with an insurance agent as well.

Good article. 

I should note that as a non-yet millionaire I don't consider millionaires to be "rich" though they are certainly wealthy. I don't think you're really "rich" in monetary terms until you hit 25 million. Why 25 million? Because that's roughly 1 million dollars at the dawn of the 20th century adjusted to today's far weaker dollars--if my quick math is correct. They just don't make them dollars like they used to.

I agree with @Michael Noto but I'm not sure that would help as much as we might all like. Lots of people have no idea what an accredited investor is and I'm not sure the media would do the best job of explaining it correctly.

Ouch @Brie Schmidt! He's probably just jealous. :)

@Debbie Lee

Wow, I don't know where to start. There is almost always some discrepancy (however unintentional) between what the sales guy says you'll get and what actually happens. But, wow if I understand you correctly they really dropped the ball.

If I understand the essence of what you're saying correctly they pressured you (arguable duress) into maxing out your cards and then when you signed up quickly vanished on you and didn't provide the support they claimed (possible fraud.)

Well, it will cost you, but yes, get a lawyer to write demand letters. This isn't legal advice, nonetheless there are some other steps you might consider:

@Dave Fontana is correct the FBI may well get involved. Do yourself a favor and obtain council before contacting the police, FBI or any other enforcement agency. You might also consider sending complaints to the attorneys general of the relevant states (yours and the state they're incorporated in, etc.) and the federal trade commission. Your lawyer can help you with that part too. If they're really up to no good they're not going to want to be put under a microscope by various enforcement agencies.

Please update this thread with your progress and let us know how things go! We all hope you get your money back. Money isn't something that grows on trees!

I use rent-o-meter all the time. The other thing I do is cross-check the rental figures that rent-o-meter gives me with Section 8's Fair Market Rent figures. This is especially useful in states were it's forbidden to turn away renters solely on the basis of their section 8 status. It's probably less useful in states that don't compel landlords in this regard.

Depending upon the area this might be higher, lower, or about the same as the rent-o-meter figures. In any event it's useful knowledge.

This question may seem to come out of left field for some of you, to others this may make more sense. Wholesalers deal with large checks $5,000 - $20,000 (or more) per check. Sometimes wholesalers even get a rash of small checks for little deals with not a lot of meat. The point is it's not hard, once you've built up enough momentum, to start getting large sums hitting your account in under 30 days.

Have any of you ever had your account frozen because of the size of your wholesaling checks caused suspicion? Or, worse, have you  as a wholesaler ever been accused of the non-crime of "structuring" payments only to have your assets (bank account) drained under the presumption that the large checks must be the fruits of criminal enterprise--simply for cashing wholesaling checks from a cluster of small deals?

I'm not trying to spread FUD. I'm genuinely interested in people's experience on this front. Further, if I know to expect "bumps in the road" I can at least plan for them and have a checklist in place to mitigate them should they arrive. I don't like FUD.

Obstacles exist to be overcome.

So, I'm considering mailing some probate leads. I'm trying to understand a few things about the notices that get posted in the paper along with a few other things.

Do yellow letters still convert well when mailed to the property/decedent's fiduciary? 

Do the different notice types "Notice to the creditors of..." and "Insolvent estate...." notices inform as to the usefulness of the lead?

Because these properties are tied up in probate is there a long delay between presentation of offer and getting the contract signed?

What happens if the deal falls through, by which I mean you can't find an end-buyer for some reason?

Is there anything else I should know before adding this lead type to my pipeline?

Thanks!

I'm probably going to get yelled at by others for saying this but here goes.... 

There is a lot of speculation on this thread an a good chunk of it is FUD. Kudos to the people who posted their local RE codes in relevant part to try to clear things up. The only thing I have to say about that is it's still worthwhile to seek competent counsel (which isn't a random guy posting on this thread) because other statutes might interact with those laws in ways you do not expect.

Take a Deep Breath

We would all have to know much more about the specific civil claims against the individuals who were busted for operating without a license to draw reasoned conclusions instead of emotional reactions. This includes the presence or absence of a real estate contract (or contracts,) the presence or absence of an earnest money deposits, the manner in which the contract / assets of the contract were marketed, and how quickly the individual who was prosecuted lawyered-up.

I suspect (but absent more facts) can't prove that these individuals who were busted (1) didn't get the properties properly under contract themselves, (2) advertised the property in a way that suggested they didn't have an interest in of the property. Those of you who have had your own deal marketed back to you in an email by some random guy know exactly what I'm driving at.

Get Actual Facts for Your Situation

Whoever said to call the RE board and describe your activities (I don't recall, this is getting to be a longer thread) I must respectfully suggest your advice is unwise. That is, in effect, like calling the police non-emergency line and asking if, hypothetically, the small amount of ahem... "herb yielding seed" you carry on your person is considered medicinal / non-criminal in your state. You'd better have glaucoma. 

Rather, I respectfully suggest meeting with a competent RE attorney for an hour or two and describing your operation to him in detail. Ask around at your local REIA, someone will know a good RE attorney who works with investors and is competent to address your concerns. For heaven's sake keep his card in case something comes up. He may or may not advise you to get licensed, change your contracts, increase your EM deposit, modify your marketing approach, etc.

What to Do If the Local Law Is Unfriendly to Wholesaling

Your state laws are written by men, they're not carved into granite by the finger of God. They're not immutable--they can be changed.

Your easiest option MAY IN FACT be to get licensed at least in the short term. Even if you do, you may still want to see the law changed. How do you do that? Well queue flashback to High School civics class... contact your state rep and politely ask for it.

First things first, you need to be able to articulate your exact concern with the relevant statute and contact your state representative about it. For example, you might think that there needs to be a explicit exemption in the state RE code for persons with equitable interest (probably defined as some minimum dollar amount) which would clarify the status of your operation in a manner favorable to yourself and your fellow wholesalers. Or, you might ask for something else like the ability to do lease options in TX.

You need to be able to express why the current law is a problem, articulate a tailored solution that isn't likely to have unintended consequences, and explain the benefits of the proposed change to the legislator's constituency to your representative (more likely his intern.) Once you have a bill number and a draft, go back to your RE attorney and get his two cents, then get your buddies at the local REIA (and social media) to call and express support. Keep doing that until the law changes.

If MY MOM can successfully lobby to get a state law changed regarding adoption (yes, really) you can call your representative and personally lobby to have your state law changed in some small way that is more to your liking as well; if that is your wish. 

What If That Fails?

Try again at a different time in the election cycle. You're unlikely to succeed on your first attempt. It helps a lot if you've done volunteer work for your representative in the past or have the same political affiliation. If neither is the case you'll probably have a more difficult time.

If you really can't get anywhere after considerable effort: there are 50 states and there is this thing called the 10th Amendment. The several states have a lot of leeway on internal matters like RE law. If you must, find state that has greater respect for personal property rights and the the right of individuals to freely contract with one other without undue state interference than the state you presently occupy. Once you've done that vote with your feet: pack your bags and move.

Obstacles exist to be overcome.