The real estate market is roaring back! And today’s market can be good news forwholesalerswho learn to capitalize on these opportunities.
The real estate market is
One of the primary reasons prices are escalating fast is because of the reduced bottom-feeder inventory of cheap houses, as a result of the drastically declining inventory of foreclosures. The very best foreclosure deals are routinely receiving a bidding war and only the highest bidder gets to buy the house.
A myth about wholesaling real estate is that it only works on single-family “junker” houses. Wholesaling works with all asset classes of real estate including single family, duplex, multi-family, mobile homes, commercial, land, etc.
Here’s a case study of an actual wholesale real estate deal I completed on an apartment complex.
Step 1: Find a Motivated Seller
I like to use a team of bird dogs to help me find deals. The up-front marketing expense with bird dogs does not cost a penny. One of my bird dogs, named Tameka, contacted me with information on a motivated seller. She told me the seller has two duplexes, a multi-family property, and a single family home to sell.
I spoke to the seller over the phone,screened his desire to sell, and knew he had non-performing assets (property sitting vacant with deferred maintenance). I met the seller, Wayne, at his towing business. We discussed his situation and why he was selling.
The multi-family property was his biggest point of pain as it was 32 units and had just 6 tenants occupying units. It also had plenty of deferred maintenance, which is why he could not rent all the units.
Step 2: Control Without Ownership
We began negotiating on his 32-unit apartment complex. Wayne wanted no less then $545,000. After a lot of back and forth discussions, we settled at a price of $500,000. We then signed an option contract that would allow me to control the real estate, gain equitable interest, and allow me to wholesale the apartment complex. The consideration deposit to ratify the contract was $50, and we arranged to gain access to the vacant apartments using my lock box.
Step 3: Find a Buyer
I packaged the property with photos and relevant information on comps, repairs, etc. and began to market the opportunity tomy buyers listcommunity. I decided to sell the apartment complex for $575,000, which would allow me to enjoya $75,000 gross profit.
Within a few days, I had two buyers who wanted to see the apartment complex. I met them both, but my buyer John was absolutely ready to buy his second apartment complex, and this one was the perfect opportunity for John. So I signed a contract with him to sell him the apartment complex for full price of $575,000, “as is” and without contingencies.
Step 4: Collect your cash
I took my option contract with my motivated seller (Wayne) and my sales contract with my buyer (John) and opened escrow at my local title company. The transaction:
Buying the apartment complex from Wayne for: $500,000
Selling the apartment complex to John for : $575,000
I instructed my title company to do this transaction as a “simultaneous closing.” As a simultaneous closing, I would not be required to bring any of my own funds to closing. The funds from my buyer John would be used for the entire transaction, and I walk away from closing with the difference between my buy contract and my sell contract which totaled approximately $72,000.
I paid my bird dog, Tameka, $500 for finding this deal, and she made an additional $1,500 when I wholesaled the other three properties from the same motivated seller.
This is a wholesale deal case study with a lot of teaching points, including finding motivated sellers, controlling real estate, building your buyers list, and structuring simultaneous closings that allow you to profitwithout cash or creditto invest.
This is a great market to build a real estate wholesaling business. The days of lazy investors buying directly off the MLS are coming to a close. It’s becoming hard to find great deals again, andthat is great news for wholesalerswho can structure deals directly withmotivated sellers.