myEmpirePROQuestion: “How Do You STRUCTURE A Wholesale Real Estate?”
You approach a homeowner or better yet…
It’s actually better when they approach you because the conversation is different.
That’s why I only teach attraction marketing in all of these.
Anything that involves you proactively reaching out to homeowners that haven’t said they want to sell,
…or haven’t shown that they want to sell at any point, I shy away from it because it’s just not worth my digital time.
Based on the fact that I know better things to do with my time like attracting them…
…Like setting up Facebook and Instagram ads that actually attract them to me. Now, once you set all that up,
Once you get through the four stages shown in the process below,
…you have a contract in place and you have to dispose the contract in exchange for a fat profit.
You have to sell the right to the contract so you can close the deal.
Once you get through all of that, the question comes up,
How do you structure a wholesale real estate?
How do you get paid?
There’s something called a HUD-1 Statement.
There are other types of closing statements out there but I’m more familiar with the HUD-1.
HUD-1 basically shows where all the money goes… everything down to shipping fees, documents fees, title company fees and origination fees (if there’s a loan involved.)
… and eve more such as…
Earnest money deposits,
Basically the balance sheet of a real estate transaction.
Ideally your money will kind of show on the HUD-1 as well but the thing is that,
…as a wholesaler, you’re not really considered official by a lot of professionals in real estate world.
So some title companies will say.
…“no, what is that? Real estate wholesaling, fee for what? For finding the deal, a finder’s fee?”
There are still many people that are stuck in 1960.
So how you structure that deal becomes a question.
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There are a couple of ways that these deals are structured.
1. Assignment Fee.
If how much you’re making is less than, the last time I checked, if it’s less than $15,000,
…which is a good payday, of course.
Like a hard money lender is okay for you showing the fee on there.
Once you start going past $12,000, they’ll start looking at it like,
“Okay, why are you making $12,000? For doing what? Are you an agent? You’re not an agent, why are you making $12,000. Well, sorry you can’t make more than $10,000”
They can limit your money like that.
But some of them will actually say “no, we’re not paying the wholesaler. This is not a deal, just shut it down.”
That can actually happen.
So that’s one way, assignments by just assigning the deal.
You assign the contract to an end buyer, and that person pays you.
So you can get away with that by showing your money as an assignment fee if it is less than $15,000.
They like it to be below $10,000.
2. Double Escrow/Double Closing
If you’re gonna make an average of $25,000 per deal, like I do,
…then you need what they call a double escrow or double closing.
Basically, what that means is two transactions.
So you buy it first then the second person buys it from you on the same day.
Back in the days, when I say back in the days I’m talking about before the market crashed in 2008,
…you could use the money at the very end to fund the whole deal after everyone is getting paid from the same deal.
But this time in age, a lot of people are frowning at that, you can’t use the same money to fund two deals.
So then you have something called a transaction of funding these days.
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Transactional fundings are everywhere, just Google transactional funding and it comes right up.
If you have a deal and the end buyer is already ready to go, you have a seller who is willing and you have a contract,
…the transactional funding people will bring the money for the first transaction.
They bring cash, they charge anywhere from one point, which means 1% to 3%.
What that means is that for every $100,000 they bring to the table, they expect that they will charge you a fee of $1000 or $3000.
That will come out of your profit basically.
So if you’re making good $25-30,000 it costs you nothing to pay a transactional funding.
I cost you nothing to pay them $1000 to $3000, it cost you nothing.
It’s a good payday, but it keeps everything legal.
So that’s Double Escrow/Double Closing.
3. LLC Transfers
This one is not very popular.
You use LLC to purchase the property.
The LLC purchases the contract, you own the LLC, but you sell the LLC to the end buyer and you charge a fee for selling it.
LLC is a company, it’s a corporate structure for a company.
The company owns a property, you own the property you just sell the LLC and all the property that comes with that LLC will go to the end buyer.
So that’s the third way that I know.
Now there are many other structures out there.
I’m just letting you know that the most basic one is assignment fee, where you can make $15,000 or less.
It’s still a nice payday.
This is something that you don’t ever want to worry about until you actually have a deal on the table.
Lock in the contract.
You may say, “but Ola, I don’t want to write the contract in the wrong way”.
I’ll tell you right now, after all those years, I don’t think there’s a contract that I didn’t have to put an Addendum on.
Meaning I have to actually correct the contract.
“Something is wrong, something is off. We like the name to be this way. We like the address to be a little bit different”.
There’s always something with the contract and it can always be fixed on or before closing.
So don’t get stuck on a contract, “could be written wrong. I used the wrong contract”,
…really the only prerequisite for this is a motivated seller.
If you have a seller who is willing and able to sell your property, that’s the only prerequisite.
Everything can be wrong.
You can do everything else wrong, you can do that part wrong,
…you can spend your time with a non motivated seller because basically, if you spend your time with your non motivated seller,
What’s gonna happen is that if you begged them to do the next step, you have to beg them to do the next step,
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…and then you have to beg them to do the next step.
You’re just gonna frustrate yourself.
You end up frustrating yourself, so don’t put yourself in that position.
Just keep it simple.
You’re looking for motivated sellers, your marketing for motivated sellers and you wanna do that profitably.
You wanna do that cost effectively,
…you wanna do that in the way that you don’t lose your shirt.
That’s something we teach here.
We’ll teach you how to do this more effectively.
A lot of people are losing their shirt trying to market traditionally doing wholesale.
It’s a very expensive thing to do these days because so many people are coming into the game, so you have to hack the game.
You have to learn how to hack the game with attraction marketing, building a brand, list building and list monetization.
You have to learn how to do those things.
If that’s something that you’re interested in, come on inside, myEmpirePRO.com is where you wanna be at.
Make sure you’re a premium member and then you will have access to Facebook marketing.
You’ll have access to flipping houses nationwide, and then you’ll be able to build this business in a more efficient manner without losing your shirt.
That’s actually very important.
A lot of people are wasting money and resources in doing it the wrong way.