Real Estate

Wholesaling 101 Class

Mike Jacka

2017-09-06


Wholesaling is a tool in the real estate investors arsenal

A good tool for quick cash

The Three Steps of Wholesale Real Estate

  1. Find a good deal
    • Rehabs
    • Rental
    • Creative Seller Financing
  2. Get property under contract correctly
    • Purchase agreement
      • Bilateral agreement
      • Both parties are obligated
    • Option to Buy agreement
      • Unilateral agreement (may buy, may close)
      • Only the seller is obligated
  1. Sell to end-buyer
    1. Assign contract
    2. Simultaneous closing
      • Ideal closing
      • Becoming obsolete and unpopular with Title companies
    3. Double closing

“Cancellation of contracts is most important”

Why would a seller sign an option agreement?

  • Desperate
  • Sell offer (i.e. retail store buy block)

Transactional Closing

  • Use IRA

Ideal Numbers:

  • 250K      ARV_After Reaired Value
  • 50K         Rehab budget
  • 125K      MAO_Maximum Allowable Offer

Formula:  ARV x 70% – repairs

Pay 70%-72% maximum based on comparables

Marketing

To find properties:

  1. Bandit / Street signs
  • Qty 100 = $250-300
  • Place at busy intersections where the 2nd car will see the sign, not the 1st car waiting for the light to change and busy observing traffic
  • People don’t see signs in their neighborhood
  • Visible, but out of the way
  • Always place on public property
  • Place in areas where it cannot be mowed (closer to street sign areas)
  • Use anchor roofing nails with large, plastic roofing washers
  • Spread out signs – not too many
  • Phone number more important than the website
    • Must get someone live on the phone
    • Use an answering service_PatLive Answering service
      • Leaving a message is a loss
  1. Direct mailing
    • Qty 1000 = $450
    • Can be used for cleaning up lists
    • Non-deliverables are important and the real information showing vacant houses
      • No one living there, for sale?
      • People moved with a new address received
    • Postcards
      • No one living there, for sale?
      • People moved with a new address received
    • Use invitation envelopes
      • Use personalized handwritten fonts using Yourfonts.com
      • Put a slight slant on envelope addresses
        1. Better simulates actual handwriting
        2. Increases response rate up to 15%

Marketing takes 2-3 months for top efficiency

Expect 05-15% return results

Wholesalers are marketing tools for rehab buyers

As a wholesaler, build a buyers list of rehabbers

Rehabbers, once they have a rehab job, forget about marketing and after project, income dries up.

Purchase Agreements and Contracts

(See picture)

Always check ‘private financing’

Stay away from realtor contracts, advantage is to the broker and attorneys

‘Earnest money’ legally binds the seller to the contract

Bank REO’s

Ideal but there is a low inventory now (2017-09)

Assignments may not work with Bank REO’s

  1. Contractually not assignable
  2. Deed Restrictions_Contractually unable to resell within 90 days
    • Create an LLC ($150) as the buyer, then sell the LLC shares to the buyer
      • Buyer buys the LLC as a full share holder
      • LLC owns only one assest, the rights to the contract to buy the property

BofA is checking for LLC ‘seasoning’

They are checking for the date the LLC has started

Keep a rotation of LLC’s going to avoid this problem

Business idea – Sell seasoned LLC’s to RE investors

Assignment of Contract

Wholesaler to buyer

A wholesaler is only selling the rights to a contract, not selling a property.

Be sure to always say this to avoid legal trouble

All contracts are assignable unless they say they are not assignable

Trusts

Create a land trust as the buyer (this is how Mike does it)

Become the trustee

Similar to LLC but I am the trustee

Trusts are not recorded with anyone

Trustee responsibility – Find and acquire assets for the trust

Beneficiary is not the trustee

Only do this with other investors who understand trusts

Buyer becomes the beneficiary

You tell the seller you are not the buyer, beneficiary is.

Trusts are of the highest legal standards because used by politicians

Investigate trusts as these seem to be the most interesting

 

Title Companies

Request a buyer/seller HUD (separate rooms)

Wholesaler needs to control the closing from the title company

Request the O&E report (Owners & Recumbence) from the title company immediately once purchase agreement is signed

West Title Co. – $25 to MnREIA members

Miscellaneous

Rehab costs and landlord cost (up to code) are very different (i.e.: rehab =60K, landlord=10K)

Court system purpose is only for contract disputes

Notary is only for public records

Public records do not make something legal or valid, only public

County determines whether a title is Torrance or Abstract

*Research what this means!

“More money in cleaning up title issues than in real estate deals”

Legal Shield

Mike Baccon

$29.90 per month

Month-to-month agreement, no contracts

“Don’t ask what a lawyers opinion is, ask what a section of a contract means.”

For one’s business, we need a CPA and an attorney

In Minneapolis, law firm used in Wagner, Faulkner, and Judd

Can even use for speeding ticket

Be sure to explore ‘Member Perks’ for deep discounts.

Resources

PatLive.com

  • Use Robyn Thompson scripts

ListSource.com

YourFonts.com

DirtCheapSigns.com

SuperCheapSigns.com

PatLive Answering Service

West Title Co.

  • $25 to MnREIA members