All Forum Posts by: James Danchus

in my mind your risk is from your conscience  or your carma or your god.. take your pick.

Or just disclose up front that you are going to try to resell it and make a profit over what you are paying the seller and if your efforts fall short then you do not get compensated and the seller after the period of time you negotiate to sell said property is free to work with anyone else.

were this gets dicey is the subterfuge that goes on in the industry IE you telling someone your the buyer when you know in your heart your not and your trying to make a marketing fee.

In some states this is considered selling real estate without a license and you can get in legal trouble.

but as a whole there are no code of ethics in the wholesaling space.. its a free for all so let your conscience be your guide.  I have seen both sides from the low down lying snake in the grass to the very up front person... just decide what fits you best.

@James Danchus  Its basically people who brings you deals, for a small fee. Just regular people ,ask them to take for sale by owners.

Google it, I'm very new to this (3 weeks) ,can't nearly explain it well enough. 

Sindy Dufrene Whats your strategy for approaching birddogs on Craigslist?

Oh boy.

Property is financed based on equity my friend.  Lenders do not lend on properties with no or negative equity.  Equity provides the potential for the lender (or other lien holders) to recover their dues from the property.   

The function of wholesaling simply buying and selling a contract is just the method of a transaction.  I am guessing, what you might have your eye on is some cash flow potential from the Subject Property, and that is what makes the Buyer of your wholesale deal attractive.  While that can be true, having negative equity or no equity means, someone else has all the equity.  Those parties with all the equity stand to recover or benefit from the equity.  Not having equity would mean that party is in a first loss.  Any money injected into the property can not be recovered from the property.

So for instance, say we take an investment property needing repairs of $24k.  If the property has zero equity, likely due to some senior lien holder like a mortgage, then putting the repairs into the property to only receive say $1,000 in rent each month is a pretty high gamble.  Rent cash flow would need to be collected for over 2 years in order to recoup the cost of the $24k in repairs.  In the event the folks who hold all the equity decide to enforce their ownership interests and use the property to recover their capital, the money put into the property can be lost in full.  

Equity is the value of an asset free of liability.  When the liability is equal to or greater than the asset value - there is no value in the asset.  It is all spoken for, if you will.  Sometimes equity positions can be improved or earned.  Like making repairs to a damaged property or by paying down the senior interests.

A Buyer can not finance a property with no equity.  A lender who provides the financing needs to be secured in most cases by the equity.  Again, where said equity represents all or a portion of the lender's capacity to recover the funds that are loaned out.  

It think the take away that you ended up with after listing to podcast on the matter is both interesting and ironic.  Some wholesale deals are self-serving for the whole-seller.  Others are mutually beneficial to all parties.  Take caution when you are the only winner in a deal.

A very refreshing thread/question that isn't asked nearly enough by those who want to get into wholesaling. Your initial numbers sound reasonable, however you should be prepared to not get a deal and have the flexibility to either lose that $5,500 entirely or spend more money if you feel like you can eventually make the business work. 

Obviously in addition to your $5,500 for the business, you should have AT LEAST six months of living expenses saved up as well, unless you plan on continuing to work a job. 

New wholesalers often don't plan ahead and find themselves in a bad financial situation quickly. That situation turns into desperation and they'll put just about any "deal" under contract in hopes that they find a buyer. Now, they send out a bad deal to their cash buyers list that they've worked so hard to build and instantly lose credibility. 

It sounds like you're properly planning and thinking ahead, good job!

I just started and I'm about 3500 in.  But that's with all the legal stuff I've established first.  

I was under the understanding you don't need to have any substantial capital for this strategy,  though it does make it easier. I will do my own mailings when it comes time or do it through phone calls to save on overhead at least till I've completed a deal or two. 

I would have to agree with your assumption.  Are you also going to do any bandit signs?  For about 100 signs it will cost you around $350-$400.  

Good luck!!!