The #1 Way to Make Money In Today's Market (that nobody teaches)
| | Monday, February 16, 2009 @ 06:07 AM EST
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Contributed by: Jason Hanson
Jason Hanson Properties
Read more archived articles about Buying
Here are the nitty gritty details of pretty house wholesaling. Regular wholesaling is when you wholesale a junker property to a rehabber. You use the wholesale formula ARV x .7 – repairs – your wholesaling fee = your purchase price. With a traditional wholesale deal you are finding a cash buyer to assign the contract to. I wholesale properties that need major repairs because in my opinion major rehabs are a waste of time (I do paint and carpet most).
Pretty house wholesaling is when you wholesale a property subject-to the existing financing. Many people know that I specialize in purchasing properties subject-to and think this is by far the best way to buy a house. You use very little (if any) of your own cash and none of your own credit. However, in order to purchase a property subject-to you should get at least $30,000 of equity (for the back end profit) and positive cash flow of $100.00 a month. Since everyone knows that real estate is a numbers game, only a small percentage of leads end up being subject-to deals that you can purchase for yourself.
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Now, when most people get leads where they can’t pay cash (doesn’t meet the 70% criteria) and it won’t cash flow, well, they usually throw them away. Don’t do this. You could be throwing away thousands of dollars every single month! When you get a call where the sellers would be willing to have you take over their payments, but the property won’t cash flow, then you should be thinking pretty house wholesale.
Here is the script to use when “pitching” a pretty house wholesale deal. Let’s pretend that you get a call from a motivated seller and they will let you take over their payments. After you research the property you realize that it would put you $200 a month in the hole (never do negative cash flow). “Mr. Seller, we have researched your property and the good news is that we have a solution for you. Your property is a perfect fit for our matchmaker program. Since you already mentioned that you would allow someone to take over your monthly payments, then what our company will do is find a retail buyer who will come in and give you immediate debt relief from your mortgage payment. They will take over your payments and buy the house, so you will never again have any hassles with the property. Also, our service is 100% free to you, because we get paid by the buyer, who we help to own their own home.”
In order to get the seller to do a pretty house wholesale, you have to be on your “A” game. You must know your scripts and objections cold. A pretty house wholesale is probably one of the toughest solutions to sell. It’s easy to get a seller to do a subject-to when you are buying the house, because you guarantee you will make the mortgage payment. However, when a retail buyer is purchasing the property, you can give no such guarantee. The most common objection that I get when talking with a seller is “how do I know that the buyer you put into the property will make my mortgage payment?”. And the script that you use will be “Mr. Seller, our company thoroughly screens these individuals. We run their credit, we check their pay stubs and we check their savings and checking accounts. We have a strict screening process and only let qualified individuals purchase your house.”
I am going to repeat again, that you must be on top of your game. Trying to get a seller to do a pretty house wholesale is not for amateurs. Once you have a seller agree to the wholesale, then you will sign all of the purchase documents with the seller (using the sub-2 contract) and immediately begin advertising for your retail buyer. In your ads you will emphasize how $9,997 moves them into their own house and they don’t have to use any of their own credit, etc. After you have a qualified buyer, simply assign the contract just as you would with any wholesale deal, go to closing and get paid.
Please learn how to do this, so you aren’t wasting leads. Also, make sure that you give your sellers full disclosure that you will not be purchasing the property yourself, but that you are assigning it to a retail buyer. (This is a very rarely used solution/technique/method that separates the amateurs from the pros. Which one do you want to be?)
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