Wholesaling/ Flipping Using Hardmoney
I was wondering.... If you are pre-approved with a hard money lender that does not charge penalties for paying off the loan early, and assuming you find a property that you can purchase for 50% to 60% of the ARV, could you pay cash for the property and then flip it and pay the hard money lender back? You could then keep the difference from the purchase price and what you sold it for. Has anyone ever done this?
when do you get the loan? At closing, would require the loan to be shown on the HUD. After the fact would require the loan to still be recorded against the property.
[addsig]
Yes, why not put a hard-money loan on the property and have the
person you wholesale it to assume the loan! Makes it look a lot more appealing
with financing already in place!
What I do is have my wholesale clients
get pre-approved with my hard-money lender if they dont have financing and then after I purchase something I can just collect my fee, grant deed them the property and have them assume the loan.
Best Riches
Jeffrey Adam
_________________
"The only place success comes before work
is in the dictionary."
[ Edited by JeffreyAdam on Date 01/20/2004 ]
[ Edited by JeffreyAdam on Date 01/20/2004 ][ Edited by JeffreyAdam on Date 01/20/2004 ]
I have to agree with tinman on this one. Don't get hardmoney involved in wholesaleing unless you have too. In my opinion, if you get the deal financed, why not retail it yourself and make the big profits.
Thanks for the feedback! I guess I was just thinking you could command a greater price offering all cash.
Over the last 3 years I have just been buying properties and renting them out. I am now beginning to pursue wholesaling to meet my immediate cash needs. Thanks again!
-David
Hello Dlukes
Is there a website that I can research hard money lenders (particularlly) the one who you are dealing with now.
Thanks
Elizabeth,
I currently do not have a Hard Money Lender. I was speaking hypothetically. I beleive they have a good resource for Hardmoney Lenders on this website.
In terms of not wholesaling a property
if you have financing on it? Every situation is different. If you are doing only a couple deals a year, then yes I
agree. If you are doing multiple deals
a month, then that is a different story.
I personally offer financing on all of my
properties that I wholesale. It is not a
big deal especially if you are going hard-
money. Just one phone call. Your buyers are also happy.
I think that a bird in the hand is better than two in the bush! Especially if the
property is in a warzone! But like I said
earlier, each situation is different. If it is
a nice house in a nice neighborhood, I
will put a sign on it and retail it myself.
If in not so desirable neighborhood, then
you need to evaluate what you have going on at that present time.
Jeffrey Adam
DLukus:
Hook up with a hard-money lender and
start wholesaling properties immediately. "Take care of today's cash
flow needs today." Besides,
the properties will look even more appealing to your wholesale clients with
financing on them.
If you want to get even more savvy, see if
the hard money lender will let you broker
a point or two to a broker friend of yours
or give you kick you back some $$$$ for
the referral.
Best Riches
Jeffrey Adam
_________________
"The only place success comes before work
is in the dictionary."[ Edited by JeffreyAdam on Date 01/20/2004 ]
JeffreyAdam,
Let me make sure I understand you. You build your list of buyers for the ones who do not have a source of financing. You then pre-approve them with your Hard Money lender. You proceed to find a property, get it under contract, purchase and close on the property. Then you contact your buyer and let them assume the loan. Is this what you are saying you have done?
You are defiantly right about taking care of today’s $cash$ needs. I started out 3 years ago at age 25 with little money. I did purchase a total of 3 duplexes and 2 houses. What they don't tell you is that it takes money to hold onto properties! I had to learn this the hard way. (Unforeseen vacancies, repairs etc.) This is why I am now preparing to wholesale properties. To meet my immediate $cash$ needs.
YOU WROTE: "If you want to get even more savvy, see if the hard money lender will let you broker a point or two to a broker friend of yours"
Could you clarify on this?
Thanks for all your help!!
David Lukas
Little Rock, AR
[ Edited by dlukas on Date 01/21/2004 ]
How I handle wholesales is to give the homeowner a $10.00 option fee for 30 days while,I find a buyer to wholesale to. We sign an option contract and I sign my name followed by as assigns to.
Hi David:
This is how it works. Once I have an offer
accepted on a property that I am going to
wholesale, I contact my wholesale buyers and give them the address to see if they want to buy it or not. They all know they have to act quickly as my properties are normally sold within a day
or two. Once I know who wants to buy it,
I either let them arrange their own financing. This is simple. I collect my fee from them and simply assign them my escrow and let them close it. You have to open escrow as an "assignment"
to do this. The other thing I do is if they
do not have their own financing in place,
I will simply purchase it with a hard-money loan, close the deal, collect my
fee from them, grant deed them the
property and have them assume the
loan. I have several repeat wholesale
buyers who love properties in warzones,
so I have them pre-approved with my
hardmoney lender. So the process is
very simple. Another thing I often do is
have my private lender put a loan on it, collect my fee, grant deed them the property and simply have them make payments to him directly.
When you have financing lined up like this, you will have buyers lined up at your doorstep. <IMG SRC="images/forum/smilies/icon_smile.gif">
Once you get good at it, you can collect money on the front end when you wholesale it, and money on the back end
when you line up the financing. For example, my private guy charges me 3pts, no appraisal or junk fees. If I use his financing and wholesale a property,
I in turn charge my wholesale client 4 pts and my private guy kicks me back 1pt.
In terms of brokering a point. This is a
little confusing. Lets say the hardmoney lender is going to charge me 4pts. If I am going to wholesale the property, I have them charge me 5 pts and send a
pt to my broker friend who in turns gives
it to me. A pt is not much, but on a $90k
purchase, that is $900.00. A trip to Hawaii the way I look at it!
My advice to you is to put an ad in the newspaper " 3 bedroom, 2 bath, needs
work." Your phone will blow up. Write
down the names of all the investors who
call and find out what they are looking for.
Go out and find some deals and you have your wholesale list in place. You are now set! Once you build up your
capital, you can start retailing some your
self.
The main thing though is to:
"Take care of today's cash flow needs
today."
Best Riches
Jeffrey Adam
_________________
"The only place success comes before work
is in the dictionary."
[ Edited by JeffreyAdam on Date 01/20/2004 ][ Edited by JeffreyAdam on Date 01/20/2004 ]
The problem with your post is that if you are paying cash for the property, why do you need to pay the hard money lender back.
But I think you meant, if you borrow the money and pay cash when you sell the property do you keep the difference. Yes. It's done all the time. I have done it more times then I can count any more. Itis being done every day by my students and others throughout the country.
Blessings,
Steve
Quote:
On 2004-01-20 15:23, dlukas wrote:
I was wondering.... If you are pre-approved with a hard money lender that does not charge penalties for paying off the loan early, and assuming you find a property that you can purchase for 50% to 60% of the ARV, could you pay cash for the property and then flip it and pay the hard money lender back? You could then keep the difference from the purchase price and what you sold it for. Has anyone ever done this?
Thanks for all the great information. I really appreciate it!
steve
that's what I couldn't fiqure out
thanks lori