Saturday, 4 May 2019

Easy Step To Start A Real Estate Wholesale Business

Easy Step To Start A Real Estate Wholesale Business

In this article, I want to talk about wholesaling real estate. If you're not familiar with this term i will explain it to you, when wholesaling transaction what you're doing is you're not actually buying the property, you're tying property up, giving you the right to close on it but you're not going to close on it you're going to transfer that contract to another investor who will come in and take your place.

If I spend a lot of time looking for deals that I can tie up in this manner then I want to be compensated I'm just not going to give the right to close to another party I'm going to charge for it

It's Complicated? Let me explain.

In the typical wholesaling transaction what these investors are doing and you may be one of them, you're going to be like this

  • You're going to find a house

  • There's some investor that would like to close on this property because you've tied it up under contract

  • You transfer the contract over to the investor and in exchange, the investor will give you some money.

That is what will call a wholesaler

You are not buying the property, what you're doing is you're tying the property up under contract in order to give someone else the right to close and you hope to get paid on this deal.

Read: Simple Step To Earn Passive Income In Real Estate

The Problem With Wholesaling

  • Are you aware that when you wholesale property you can be held personally liable and someone could sue you? So you have to be careful about how you structure so that you don't bring back any personal liability

  • Are you aware that when you enter into a contract with someone they may prohibit you from assigning it, so then you cannot set up any transaction and the deal falls through and you lose your earnest money because the seller refused the assignment?
These are problems that are rampant when it comes to wholesaling because individuals just don't know about it until they get involved in a transaction that goes south on them when they experience it and then that cost them a lot of money to get that type of education.

What I want to do now is to show you a way where you can put a wholesale deal together, you can protect yourself so the seller can't come back against you and sue you individually and you can transfer the deal to someone else without anyone else standing in the way of that transaction and stopping it

How To Protect Yourself As a Real Estate Wholesaler

1. Never put an agreement together in your own name, you always want to have an entity that stands between you and the seller of the property, so what you should do is create a c-corporation. You enter into an agreement between your C-corporation and the seller, so if it goes bad the only person this seller can sue is your corporation

They can sue the corporation but they can't sue you personally so the first thing you've done now is limited your liability

2. How you do set it up if you're going to wholesale property in order to assign the contract to someone else.

What you'll find in many situations is that when entering into an agreement and you're going to assign the agreement over to someone else and your corporation is going to get paid, you could run into a problem 

Increase In Value

Sellers like this don't want to honor the assignment, maybe they put language in their agreement that states that the contract Is Not Assignable, so if you don't close on it they get to keep your earnest money and they can go out and sell to somebody else may be at a higher price, so they make more profit.

This is the problem you face

One way or another I hope this article shows you more about wholesaling real estate

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