Traditional real estate investors find a property and after lengthy analysis buy the property or pass on it altogether. This decision process can be harrowing with so many variables that figure into the pricing or value of the property. Added to the usual issues of neighbourhood, neighbours, proximity to schools and basic services, market condition, price and condition play a huge role in the final decision. But what if these parameters didn’t matter at all?
EZ House Buyers-Don McClain talks specifically about wholesaling because this is where most investors start. If they master wholesaling, they have a better chance of getting great buys for rehabbing properties or buying rentals at super prices. Both rehabbing and land lording require a property be purchased and most investors are cash starved to start. Sure they can find other people’s money and borrow some themselves, but to be truly successful they will eventually have to have access to large amounts of money. Wholesalers only need transactional funding and aren’t as dependent on other people’s money (OPM).
What if there was a way to make essentially riskless transactions in wholesaling. Well there isn’t anything that doesn’t have some degree of risk, but let’s say minimal risk. There is and it is contrary to all the usual beliefs that investors and realtors hold sacred.
The process is simple, so simple that most people hearing it the first time believe it is impossible or illegal. It is not either one.
According to EZ House Buyers-Don McClain process starts by finding a property that is either an REO (bank-owned) property or a non-REO which would be for sale by a homeowner or another investor. For REO properties, the investor makes offers until he is able to get a property under contract with an inspection period of from 5 to 10 days or more. Once he has assigned contract, he markets it until he sells it or his inspection period is about to lapse. If he doesn’t sell it, he cancels during the inspection period and gets his deposit back.
The process of putting a property under contract and selling it immediately is normal for wholesalers but foreign to most new investors and realtors. What happens is the investor has sold the property to an end-buyer before he actually purchases it – making the risk in the transaction greatly reduced. The closing comes first with the original seller and then with the end-buyer, but the transactional aspects are sell the property first and buy it later as it is already under contract.
If the seller is a non-REO, the process is greatly simplified because of getting a longer inspection period (more time to sell the property) and a smaller deposit from the investor to the seller. Homeowners are much easier to work with and they are truly motivated, they will not worry about price but rather the investor’s solving their immediate problem – such as foreclosure, divorce, unemployment, bankruptcy, job transfer, two mortgages and the list goes on and on.
In summary, sell the property “first” and then and only then consider closing on the buy side of the transaction. If the transactions are done with cash buyers; the investor may be able to use the buyer’s funds to close the original seller’s side – as long as the end-buyer has given his approval. If no closing takes place because the end-buyer defaulted, the investor can still make money on the deposit differential between what he gave the seller and what he got from the end-buyer.
For more details about EZ House Buyers-Don McClain visit at: https://vimeo.com/donmcclainezhousebuyers/likes
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