Wholesaling is a great way to get started in real estate, capitalize on deals that you are not going to be buying yourself, and provide other investors with properties they need while making some decent money. Your typical wholesale deal consists of a vacant property that the seller needs to get rid of due to a distressed situation. As a wholesaler, if you are only working vacant property deals, you are limiting yourself and the deals that you are putting in front of your buyers. Every investor in the country is looking for more deals. By being creative with your solutions for property sellers, you will be able to provide those investors with more properties for their inventory and set yourself apart from other wholesalers in your market.
Wholesaling with Escrow Agreements in Place
Many times, sellers need the money from their property to be able to move onto their next residence before they can actually vacate the property that you need to wholesale. We have found that allowing the seller time to move out, while holding money in escrow after closing will allow you to still wholesale the property. For example, let’s say that your seller needs 30 days to move out of the property after closing. In this scenario, what we do is write up an escrow agreement stating that we will hold 10 percent of the sales price in escrow at the title company after closing until the property is vacant. Then, during the sale of this property, we just pass this escrow agreement along to our buyer. The seller gets the money and time they need, the buyer gets the property they want, along with some compensation if the seller is not out on time and you are still able to collect your assignment fee.
Another option is to do a short-term lease with the seller if they need a few months to move out of the property. In this case, instead of just holding money back at the closing table, the seller would just pay a monthly rent to the new owner until they vacate the property.
By allowing options to sellers to receive the money they need before vacating, you are solving multiple problems for them, which allows you to have more opportunities for deals. It is all about expanding your reach on the types of deals you can do and put as many properties in front of your buyers that you can.
Wholesaling with Cash for Keys Agreements in Place
Issues with tenants is a huge problem right now for many landlords and wholesalers. Landlords are looking to sell their properties but with non-paying tenants still under lease, it makes it a little trickier to wholesale. We recommend that trying to work out a cash for keys agreement with the seller and assigning that agreement along with the contract onto the buyer allows you to still make the deal work. Our cash for keys agreements have ranged anywhere from $500-$5,000 dollars for the tenants. When we send these deals to our buyers, we just market them as “Purchase Price of $100,000 with a $2,000 fee to tenants upon vacancy in 30 days.” Not every buyer is going to jump on a property with a cash for keys agreement, but during a time when inventory is low and everyone needs properties, it allows you to have another option for someone looking to buy.
Another option for you when you are trying to wholesale with non-paying tenants on a lease, is to do a lease negotiation. The tenants may be willing to sign a month-to-month lease in exchange for any back-rent to be erased. A month-to-month lease is more attractive to a buyer when dealing with a tenant because it then becomes an issue of non-renewal instead of non-payment.
Wholesaling Subject To’s
No one is exactly sure of what is going to happen when the foreclosure moratorium ends. But we do know that there are a lot of people with properties that are behind on their mortgage right now. This is a market that wholesalers need to be marketing to, wholesaling properties subject to a seller’s mortgage. Your purchase agreement is probably going to have to include the mortgage, a reinstatement fee, and some money to the seller, but there is going to still be plenty of meat on the bone with most of these deals. And there is plenty of opportunity. Sellers are looking to get out from under their mortgage, and when you can put some cash in their pocket as well, you will be able to make the deal happen.
You can also look at doing deals with various types of owner financing for deals that have no or high equity, as well as wrapping a mortgage. If you are able to put a deal in front of your buyer that the financing is already in place instead of them burning their cash, you can set yourself up with a larger buyer pool.