myEmpirePROIn a real estate wholesale deal, real estate wholesale assignment contracts are the tools used to ensure that the deal finder gets paid.
What Contracts Do I Need To Wholesale Real Estate?
If you are interested in wholesaling real estate, you will need to sign contracts with sellers and buyers.
Contracts can be in the form of a purchase and sale agreement, a lease agreement, or a deed of trust.
What is the deed of trust?
Wow, that’s an important question!
A deed of trust is a legal document that secures a loan or debt.
It’s also known as a trust deed or a mortgage.
Basically, it’s an agreement between a borrower and a lender that the borrower will transfer the title of a property to a trustee until the loan is paid off.
It’s an important document that can help protect both parties.
A deed of trust can help with wholesaling real estate by providing a secure and legal way for a wholesaler to purchase a property from a seller and then transfer it to a buyer.
The deed of trust allows the wholesaler to act as the middleman between the seller and the buyer, and it also provides the wholesaler with the legal authority to transfer the property from the seller to the buyer.
The deed of trust also provides the wholesaler with the ability to collect a fee from the buyer for their services.
This fee can be negotiated between the wholesaler and the buyer, and it can be a fixed amount or a percentage of the purchase price.
By using a deed of trust, a wholesaler can ensure that the transfer of the property is done legally and securely, and that they are able to receive payment for their services.
Please check with a local attorney in your state for every document referenced on this page.
Assignment Contract
This is another agreement that will allow you to transfer my rights and interests in a real estate property to another party.
The details of the agreement will include the property address, the parties involved, the transfer date, and any other relevant information.
This agreement will also outline the responsibilities of each party, including payment, taxes, and other related costs.
I’m confident that this agreement will be beneficial for all parties involved and I look forward to a successful transaction.
Real Estate Option Contract
This is another contract that is a great way to secure a property without having to make a full commitment.
It allows you to purchase the property at a later date, giving you the flexibility to make sure it’s the right fit for you.
It’s a great way to protect yourself and your investment. I highly recommend exploring this option if you’re considering buying a property.
This is the contract I used for my first deal. I made $10,000.
Can you wholesale without a contract?
Absolutely! You can definitely wholesale without a contract.
It’s a great way to get started and can be a great way to test the waters.
You don’t have to worry about signing any long-term agreements and it’s a great way to start building relationships with other businesses.
It’s a win-win situation!
How do I set up a wholesale contract?
Setting up a wholesale contract sounds like a great idea! It’s a great way to ensure that you get the best deal possible when purchasing items in bulk.
To get started, you’ll need to research what type of contract works best for your business.
Consider the terms of the contract, such as the payment terms, delivery dates, and any other relevant details.
Once you have all the information you need, you can start drafting the contract.
Make sure to include all the details you’ve discussed, and be sure to get it reviewed by a lawyer to ensure everything is in order.
How do you assign a wholesaling contract to real estate?
That’s a great question! Assigning a wholesaling contract to real estate is actually quite simple.
All you need to do is find a buyer who is willing to purchase the contract and then have them sign an assignment of contract form.
This form will transfer the rights of the contract to the buyer, and they will then be responsible for closing the deal.
It’s a great way to make money in real estate, so I definitely recommend giving it a try!
Look around this page for access to a free wholesale real estate contract pdf or template that you can check with your local attorney.
Where To Get Wholesaling Contracts
Wholesaling contracts can be found in a variety of places!
You can find them through real estate agents, online marketplaces, or even through word of mouth.
It’s great to have so many options when it comes to finding wholesaling contracts – it makes it much easier to get started in the world of real estate investing.
Plus, it’s always a good idea to network and build relationships with other investors in your area, as they may be able to provide you with leads and other resources.
What is a wholesale assignment contract?
Finding and creating real estate wholesale deals is an awesome way to make $20,000 – $40,000 every month.
In order to do that, a person who is essentially a marketer would:
- Find motivated sellers from lead sources such as unwanted inheritances, pre-foreclosures, tax defaults, expired mls listings, for sale by owners etc
- Put a house with an accepted offer under an assignable contract with a purchase price = 65% of the after repair value minus repair estimate.
- Then assigns the contract to a end buy who now pays a fee for finding the deal.
This contract and its content varies from state to state. Therefore the best place to find the appropriate one is at your local rein (real estate investing association)
Gurus and coaches may have generic version embedded inside their course.
But it’s better to find the one use consistently by asking active real estate investors and wholesalers in your local market.
That can also mean that you have to offer to work with or for existing investors for free.
The bottom line is that a good relationship can become handy here.
Even as you build relationships by bringing value to them, you can download or send the PDF version of the whole assignment contract to yourself by email from the investors computer.
It’s not stealing? It’s friendship.
In my opinion, finding a wholesale assignment contract is the least of your problems.
Your focus should be in finding deals, finding motivated sellers, finding and building a list of end buyer.
WATCH THE VIDEO FOR MORE.
Without an agreement as evident by an executed real estate wholesale assignment contracts, you can’t collect an average of $25,000 per deal from wholesaling real estate.
This document is what initiates everything and it is the main commodity that you acquire rights to so that you can sell that right to others.
That’s essentially what we call wholesale real estate; a very lucrative business model.
About Real Estate Wholesale & Assignment Contracts
There are 2 types of contract usually involved in any given real estate wholesale deal.
But that’s not it; there are also 2 different types of contracts combinations that you can have with any deal.
Let’s talk about the 2 real estate wholesale assignment contracts first.
At least one simple but assignable real estate purchase contract is always present in any wholesale transaction.
This represents the agreement between you as a buyer and the seller of the subject property.
In addition to that one contract, a 2nd type of contract is needed to secure your finders fee when you do find an end buyer for the deal.
You have 2 choices:
(1) You can either assign the contract between you and the seller to an ended buyer using a real estate assignment contract
- (i) Simple Real Estate Purchase Contract
- (ii) Real Estate Assignment Contract
OR…
(2) Another simple real estate purchase contract may be execute between you as a seller and the end buyer…
- (i) Simple Real Estate Purchase Contract-A
- (ii) Simple Real Estate Purchase Contract-B
In which case, a 2nd transaction and/or closing will be conducted by the closing agent(s).
This is called DOUBLE ESCROW or DOUBLE CLOSING which means 2 sets of closing cost will be incurred to consummate the deal and go home with $5,000 – $82,000 each time you do it successfully.
The 1st choice which is to assign the original contract to an end buyer with an assignment contract will only involve that same ONE transaction.
The disadvantage of it however is that your seller will be exposed to your fees which can trigger unnecessary greed.
They may start asking for more money than they initially agreed to.
In fact, it happened to me on my first deal back in 2005.
When you download my book Smart Real Estate Wholesaling for free, you will also gain a free access to a Simple Real Estate Purchase and Assignment contract PDF.
Also, look out for a contract PDF generator with all information pre-filled for you.
We are working on that at the moment to make your life easier when it comes to cranking them out and locking them under contract with speed.
7 Essential Parts of a Real Estate Wholesale Assignment Contract
(1) Parties
This is the part of the contract that specifies who the seller is and who the buyers is.
In an assignment contract, the parties would be the buyer and the assignor and the end buyers as the assignee.
(2) Property
Your contract have to specify the address and/or legal description of the subject property whose deed is being transfer to another owner.
(3) Price
In legal terminology, some call this the consideration.
Basically, what is being exchanged for the subject property.
(4) Deposit
The earnest money deposit (EMD) is the amount that the buyer is willing to put as downpayment and goodwill at the point contract execution.
For the end side of the transaction, I require the EMD to be non-refundable as my security to protect time and ensure that the end buyer is serious about the deal.
This is possible because we only deal in deals that are actually good deals and steals for an average buyer investor.
(5) Term & Terms of the Real Estate Wholesale Assignment Contracts
When I say ‘term’, I mean a limited time for inspection, funding commitment and closing must be specified.
In addition to that, terms and condition for the transaction must be explicitly specified on the contract.
This may include disclosures and disclaimers with desire clauses to property the parties involved in the sales agreement.
(6) Signature
The contract has to be signed by all parties involved in the transaction.
Spouses of involved parties may also be required to sign the real estate wholesale assignment contracts if involved in qualifying for funding the deal.
(7) Date
Last but not least, the contract must be dated while signing it so that accountability and requirements from each parties between execution and closing can be properly controlled and monitored.
In addition to these essential 7 parts, a real estate assignment contract need to reference the original sales contract between you (as the original buyer) and the seller.
Double Close Contract PDF: Double Closing vs Assignment Contracts
In the world of real estate wholesaling, the methods of double closing and assignment contracts play a significant role in facilitating profitable transactions.
Wholesalers use these techniques to exit deals with profits as title transfers from a seller to a buyer.
While both methods have their advantages, this video will focus on using a simple double close contract PDF document and explore its benefits over the assignment method.
1. What is a Double Close Contract?
A double close contract, also known as a simultaneous closing or “double escrow,” involves two separate transactions.
In this process, the wholesaler acts as the intermediary between the original seller and the end buyer, facilitating the sale of the property without using their own funds.
The wholesaler will be the buyer of the SIDE A transaction and the seller of the SIDE B transaction.
2. Understanding Assignment Contracts:
An assignment transaction, on the other hand, involves using an assignment contract to transfer the equitable rights of the original sales contract to the end buyer.
In this scenario, the wholesaler does not acquire the property but instead sells the contract to the buyer for an assignment fee.
3. The Question: Double Close vs. Assignment
One common question that arises is whether to choose double closing or assignment.
While assignment contracts may seem simpler and require less capital, there are limitations.
Hard money lenders, for instance, might impose restrictions on the amount of assignment fees, potentially limiting the wholesaler’s profits.
4. Benefits of Double Closing:
A) Avoiding Assignment Fee Restrictions:
Double closing allows wholesalers to bypass assignment fee limitations set by some hard money lenders.
As a result, they can handle deals with larger spreads and generate higher profits without facing unnecessary hurdles.
This is precisely how I did my $82,000 deal and how I lost $10,000 out of the $20,000 I was supposed to make on my first deal.
B) Reduced Scrutiny:
Assignments can sometimes raise red flags for lenders, who may view them as unconventional fees for unlicensed realtors.
Double closing eliminates this concern as the wholesaler actually takes ownership of the property briefly before selling it to the end buyer.
C) Increased Profit Potential:
With double closing, wholesalers can explore deals with more significant equity spreads.
This opens up opportunities to find properties with higher potential profits for both the end buyer and the seller.
5. How to Execute a Double Close:
A) Step 1: Finding the Right Deal: The process starts by identifying a property with substantial equity spread and potential for profitable reselling.
B) Step 2: Securing Financing: For the first transaction (SIDE A), the wholesaler arranges for transactional funding or uses their own cash to purchase the property from the original seller.
Transactional funding will cost less than 3%.
C) Step 3: Second Transaction (SIDE B): With ownership of the property now in the wholesaler’s name, they proceed to sell it to the end buyer in a separate transaction.
This transaction is funded by the end buyer’s financing, which might be provided by a hard money lender.
D) Step 4: Documentation: Proper documentation is essential for a smooth double closing process.
This includes drafting and signing the double close contract, purchase and sale agreements, and other legal paperwork.
6. Downloading a Double Close Contract PDF:
To assist wholesalers in conducting double closings effectively, we offer a free downloadable Double Close Contract PDF in our programs that can be tweaked by your lawyer to fit the property’s local jurisdiction.
This document is designed to streamline the process and ensure compliance with legal requirements.
Conclusion:
In conclusion, while both double closing and assignment contracts serve their purposes in real estate wholesaling, the double close contract PDF offers several benefits that make it a preferred choice for deals with substantial equity spreads.
By using this method, wholesalers can increase their profit potential, avoid unnecessary scrutiny, and optimize their real estate ventures for success.
Remember to exercise due diligence, consult legal professionals when needed, and utilize the free downloadable Double Close Contract PDF for seamless transactions. Happy wholesaling!
By following the tips in this blog post, you can increase your chances of successfully double closing real estate deals.
Are you ready to take your real estate wholesaling to the next level? Join our masterclass and access comprehensive step-by-step guidance and valuable resources on double closings. In fact, you get 3 free books as soon as you register for the class. Click here to learn more.
Frequently Asked Questions
A double closing contract is a legal agreement used in real estate wholesaling that facilitates two separate transactions: buying the property from the seller and immediately selling it to the end buyer.
To do a double closing, purchase the property from the seller in the first transaction and then sell it to the end buyer in a separate transaction, ensuring proper documentation and financing.
Yes, you can double close with no money by using transactional funding for the initial purchase and relying on the end buyer’s financing for the resale.
The difference between a double closing and an assignment contract is that a double closing involves two separate transactions where the wholesaler briefly owns the property, while an assignment contract transfers the contract rights to the end buyer without taking ownership of the property…
Micro Flipping in Real Estate: A Comprehensive Guide
In the ever-evolving world of real estate investing, new strategies and trends often emerge.
One such trend that has gained traction in recent years is micro flipping.
This innovative approach to real estate investment has captured the attention of investors looking for a quicker and potentially more profitable way to turn properties.
In the next segment of this blog post, we’ll delve into the concept of micro flipping, explore its differences from wholesaling, discuss the 70% rule, delve into the pros and cons, and provide guidance on how to get started with micro flipping.
What is Micro Flipping in Real Estate?
Micro flipping is a real estate investment strategy where investors buy properties, often distressed or undervalued, at a discount and quickly resell them for a profit.
Unlike traditional house flipping, which involves significant renovations and holding periods, micro flipping focuses on rapid transactions with minimal renovations.
The goal is to identify and capitalize on quick profit opportunities by purchasing properties below market value, and then immediately selling them to another buyer, usually an end-user or another investor.
Micro Flipping Vs. Wholesaling
While both micro flipping and wholesaling involve the quick turnover of properties, they differ in certain aspects:
1. Strategy: Micro flipping involves a faster process and usually minimal or no renovations before selling the property.
In contrast, wholesaling focuses on finding deeply discounted properties and assigning the contracts to other investors without taking ownership.
2. Ownership: In micro flipping, the investor takes temporary ownership of the property before selling it.
Wholesaling, on the other hand, does not involve actual ownership transfer; instead, it revolves around assigning the contract rights.
However, wholesale real estate sometimes uses double closing which involves title passing through a wholesaler’s name for a brief moment.
3. Profit: Micro flipping aims for relatively smaller profits on each deal but completes transactions at a higher volume.
Wholesaling typically targets higher profits per deal, but the volume of deals may be lower due to the longer acquisition process. Time is worth more than money.
How much profit is the 70% rule?
The 70% rule is a widely-used guideline in real estate investing, including micro flipping and traditional house flipping.
It states that an investor should not pay more than 70% of the after-repair value (ARV) of a property, minus the repair costs.
The formula for the 70% rule is:
Maximum Purchase Price = (ARV x 0.70) – Repair Costs
In other contexts, it may go down to 65% and others, as high as 85% in very busy cities with high demand.
This rule helps investors ensure they acquire properties with enough built-in profit potential or equity to cover expenses and still generate a satisfactory return on investment (ROI).
How do I avoid capital gains tax on a flip?
Capital gains tax can significantly impact the profits made from flipping properties.
However, there are several strategies to minimize or avoid capital gains tax:
1. 1031 Exchange: Under Section 1031 of the Internal Revenue Code, investors can defer capital gains tax by reinvesting the proceeds from the sale of one property into a like-kind property of equal or higher value.
2. Primary Residence Exemption: If the property being flipped was your primary residence for at least two of the past five years, you may qualify for the primary residence exemption, which allows you to exclude up to $250,000 (or $500,000 for married couples filing jointly) of capital gains from taxation.
3. Real Estate Professional Status: If you are considered a real estate professional by the IRS, you may be able to offset your real estate gains with real estate losses, reducing your overall tax liability.
Please check with your local tax professional.
What is a good profit on a house flip?
The profit margin on a house flip can vary depending on factors like location, property type, market conditions, and renovation costs.
However, a good rule of thumb for a successful flip is to aim for a net profit of 10% to 20% of the after-repair value (ARV).
For example, if the ARV of a property is $300,000, a satisfactory profit would be between $30,000 and $60,000.
What is the Rule of 70 (Doubling Time)?
While it may be confused with the 70% rule used to secure a healthy ROi as discussed earlier, it’s different in the broader world of real estate.
The Rule of 70 is a mathematical formula used to estimate the time it takes for an investment or economy to double in size.
It is calculated by dividing 70 by the annual growth rate.
For example, if an investment is growing at a rate of 7% per year, it would take approximately 10 years for it to double (70 ÷ 7 = 10).
To Recap, what is a Microflip?
A microflip refers to the act of conducting a micro flipping transaction.
It involves identifying and acquiring a property at a discounted price, and then rapidly reselling it to another buyer for a profit, often without significant renovations or improvements.
What is a Micro Real Estate Portfolio?
A micro real estate portfolio is a collection of properties acquired through the micro flipping strategy.
Investors who specialize in micro flipping may accumulate several properties in a relatively short period, leveraging the faster turnover to build a diverse portfolio.
Pros and Cons of Micro Flipping
Like any investment strategy, micro flipping has its advantages and drawbacks:
Pros:
Quick Turnaround: Micro flipping allows for faster transactions, enabling investors to generate profits more rapidly.
Lower Risk: With minimal renovations, there is less exposure to renovation costs, construction delays, and market fluctuations.
Less Capital Intensive: Compared to traditional house flipping, micro flipping requires less upfront capital, making it accessible to a broader range of investors.
Market Agility: The ability to adapt quickly to changing market conditions can be advantageous in dynamic real estate markets.
Cons:
Lower Profit Margin: Each microflip may yield smaller profits compared to traditional house flipping, necessitating higher transaction volumes to achieve the same earnings.
Market Dependency: Success in micro flipping heavily relies on finding an active market with enough demand for quick property turnovers.
Limited Upside: Since micro flipping involves selling properties as-is, there may be missed opportunities for higher profits with significant renovations.
Transaction Costs: Rapidly buying and selling properties can incur higher transaction costs and fees.
Best Micro Flipping Software
Several software tools can assist investors in streamlining their micro flipping endeavors.
These tools typically offer features such as property analysis, deal tracking, lead generation, and marketing automation.
While the best software will depend on an investor’s specific needs, some popular options include PropStream, DealMachine, Realeflow, and Zoho CRM.
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How to Start Micro Flipping
Getting started with micro flipping requires a well-thought-out approach:
1. Education and Research: Familiarize yourself with the micro flipping strategy, study local real estate markets, and analyze successful micro flips.
2. Build a Network: Connect with local real estate agents, wholesalers, and other investors to find potential deals and buyers.
3. Financing: Secure adequate funding or partner with investors to have the necessary capital for acquisitions.
4. Marketing: Develop a marketing strategy to reach potential sellers and buyers, using online platforms, direct mail, and other targeted methods.
5. Property Analysis: Conduct thorough property analysis to ensure potential flips meet the 70% rule and offer a favorable profit margin.
6. Negotiation: Hone your negotiation skills to secure properties at the best possible prices.
7. Legal and Tax Advice: Seek guidance from real estate attorneys and tax professionals to ensure compliance with regulations and optimize tax strategies; especially after you start closing more than a few deals.
Micro Real Estate Investing and PIN Micro Flipping
Micro real estate investing is essentially the same as micro flipping, focusing on quick transactions and fast profits.
The term “PIN micro flipping” may refer to utilizing Property Identification Numbers (PINs) to identify and track properties for potential micro flips.
Why Flipping Houses Is a Bad Idea
While flipping houses can be lucrative, it is not without risks and challenges:
1. Market Fluctuations: Flipping relies on a stable and active real estate market.
Economic downturns or local market shifts can negatively impact profitability.
2. High Competition: The popularity of house flipping can lead to increased competition, making it harder to find profitable deals.
3. Renovation Risks: Renovation costs and unforeseen issues can eat into profits, especially if not accounted for in the initial budget.
4. Holding Costs: If a property takes longer to sell, holding costs like mortgage payments, property taxes, and maintenance expenses can accumulate.
Flipping Houses TV Shows Lie
Flipping houses has become a popular subject for television shows, with programs showcasing the challenges and successes of real estate investors as they flip properties for profit.
These shows have contributed to the increased popularity of real estate investing and have given rise to new investment strategies like micro flipping.
In conclusion, micro flipping in real estate is a strategy that offers a faster and potentially more accessible way to generate profits by identifying undervalued properties and quickly reselling them.
It differs from wholesaling and traditional house flipping in terms of strategy, ownership, and profit expectations.
While micro flipping has its pros and cons, investors can leverage software tools, networking, and proper education to embark on a successful micro flipping journey.
As with any investment endeavor, it’s crucial to thoroughly research the local market and have a clear plan in place before diving into micro flipping.
If you like this blog post, you will the one we wrote on “Do I need an llc to wholesale real estate?“:
If a state requires a state issued contract, what parts of a contracts for wholesaling real estate should include from your contract?
When it comes to wholesaling real estate contracts, there might be instances where a state mandates the use of a state-issued real estate contract.
In such cases, it’s important to understand which elements from your wholesaling contract should be incorporated into the required contract.
While it’s somewhat doubtful whether such a requirement truly exists, typically real estate agents are bound by regulations imposed by the realtor board if there is any such obligation.
However, to be fully prepared, seeking advice from a title agency or attorney experienced in real estate investment matters can provide accurate guidance on this matter.
It’s advisable not to overly concern yourself with this aspect until you’re in the process of finalizing the deal with a title agency or attorney who understands the real estate investor landscape.
It’s worth emphasizing that rectifying any contractual issues is possible even at the eleventh hour before the closing.
This can be achieved through the addition of an addendum to the contract, particularly if the seller is genuinely motivated to swiftly dispose of a property that has been causing significant challenges.
In an extreme situation, if complications persist, a combination of approaches like double closing, transactional funding, and building a network within the local real estate investing community can effectively address the issue.
This solution is especially viable when dealing with a motivated seller who is eager to proceed with the transaction despite any procedural hurdles.
As a wholesaler, your primary focus should remain on streamlining your processes, becoming proficient in marketing and identifying potential sellers.
Frequently Asked Questions
Micro flipping in real estate is a strategy where investors buy undervalued properties and quickly resell them for a profit without significant renovations.
The 70% rule in real estate suggests that an investor should aim for a net profit of 30% after subtracting the purchase price and repair costs from the property’s after-repair value (ARV).
Capital gains tax on a flip can be avoided through strategies like a 1031 exchange, primary residence exemption, or qualifying for real estate professional status.
A good profit on a house flip is typically between 10% to 20% of the property’s after-repair value (ARV).
The rule of 70 (doubling time) is a mathematical formula used to estimate the time it takes for an investment or economy to double in size by dividing 70 by the annual growth rate.
Micro flipping in real estate refers to a strategy of quickly buying and reselling properties without significant renovations for rapid profits.
A Microflip is a real estate transaction where an investor rapidly buys and sells a property to generate quick profits.
The 70% rule in flipping homes advises investors not to pay more than 70% of the after-repair value (ARV) of a property, minus repair costs, to ensure a satisfactory profit margin.
A micro real estate portfolio is a collection of properties acquired through the micro flipping strategy, often consisting of multiple quick turnover deals.