Remember the story of Jack and the Beanstalk? Jack’s mother asked him to sell a cow and instead he traded it for beans. His mother was furious and threw them out of the window and a giant beanstalk grew leading to the residence of a wealthy giant which Jack burgled.
Maybe Jack was an entrepreneur…or maybe a thief… I don’t really know. Had he been a real estate investor he would have had many more options than to climb the stalk, take stuff, and run. He would have negotiated a deal with the giant so that they can have a continued relationship and turned this magic beanstalk into condos with a 20% Low Income Housing Tax Credit to fund the rehab. That, my friends, is an investor mindset.
What does this have to do with wholesaling you ask? Wholesaling is the magic beans of real estate investing. With almost nothing you can make fast cash.
We have all heard the saying it takes money to make money. What if I told you that is not true? What if I told you that you can make quick in and out cash in real estate without spending anything more than a small EMD (a small deposit on the home as consideration of the contract)? Interested?
By just throwing the beans out of the window a bean stalk grew from nothing. By putting out a little marketing your business can grow.
Wholesaling is the practice of finding homes to flip or hold and selling them to other investors for a profit.
Here are 5 ways to structure a wholesale deal where everyone is a winner. You should be able to make any situation profitable if you are able to come to an agreement on the numbers.
1. Cash Assignment. Cash Assignment or Assignment of Contract is the ability to sell a contract to another buyer. You do not actually own the property at this point, just the contract. The value of the contract is yours to sell to another for whatever sum agreed upon by both parties. This is used when you have made a cash offer to a private seller.
2. LLC Assignment. An LLC Assignment or Entity Assignment is used when you have made an offer on a bank or corporate owned property. Remember you must plan for this in advance as you will be making offers in the name of an LLC that is not your primary. The purpose for this is that all REO’s (foreclosures) are not assignable. I recommend this for an investor who is planning to write a ton of blinds and take what he wants with the intent to wholesale the rest. You avoid the problem of assignment by selling not the contract but the business.
3. Owner Financing. Assignment of Owner Financing can be done two ways. First and most simply, you will have the option for assignment placed into your agreement with the seller. You will simply notify him of your decision to utilize said option and assign the agreement to the new buyer. The second technically may not fall into the realm of wholesaling as this is an in and out business but I will mention it for the sake of information. You can wrap your owner financed assignment. This means that you will continue to make the payments to your seller while taking a higher payment from your buyer. This is an Owner Financed Wrap Assignment.
4. Sub to. A Sub to Assignment or an Assignment Subject to the Existing Mortgage is when you have a contract to buy a home from a seller for which you will be paying by taking over payments on the financing that is currently in place. When you decide that you are not interested in buying this property and wish to sell it you will first need to be sure that there is an assignment clause in the agreement, there should be automatically. You will simply notify the seller that you have sold the agreement to another buyer.
5. Lease purchase. A Lease Purchase is when you enter into an agreement under a lease with equitable interest (this is the ownership of equity without the ownership of the property) that allows the purchase of the property for a set amount. A Lease Purchase Assignment allows you to convey control of and equitable interest in the property to a third party.
As you can see, no matter the situation, there is a solution. The key when making offers is being mindful of the value of the offer. You want to offer a good solid deal to your end buyer especially if your end buyer is an investor. You can turn 1000 glasses of water to wine but turn one to shit and that’s all anyone remembers. Reputation is key in this business.
Happy Investing My Real Estate Junkies!!
I was born an entrepreneur. I am pretty certain that I was peddling passies in the hospital when the nurses left the room.All of the other kids in the neighborhood were riding bikes and playing with dolls I was selling jewelry out of a catalogue and creating a back yard consignment shop. At 21 I became a real estate investor and fell in love. This was/is/ and always will be my passion. I have been madly in love with flipping, holding, and writing offers on real estate that seem crazy for 18 years. Ladies and gents I am willing to share the love of my life with you. Maybe its polyamory maybe its jut because I can’t shut up about it. Either way I will be sharing every mistake I ever made and the lesson that came from it. I love questions. Please ask away!!!