You can never have too many friends. –James Garner
Colleagues, acquaintances, referrals and yes friends can play an important role in the successful career of all real estate investors (REIers). In this day and age, those contacts may be in person, on the phone, via email or text or virtual via websites, blogs, webinars, etc. Whatever form they take, the potential importance of those contacts in terms of your future in this business cannot be overemphasized; they often form the core, over time, of whatever success you will enjoy as a REIer. Relationships can take many different forms: property scout providing leads to wholesalers, wholesalers co-wholesaling properties to rehabbers, etc. Co-wholesaling involves making friends with your competitors by effectively turning them into business partners. By creating a cooperative business relationship with them, the potential exists to create a win-win situation for both of you. The truth is, even though it appears counterintuitive to make friends out the competition, co-wholesaling to other wholesalers can help make your REI business grow bigger and faster than trying to do it alone.
How to get started with building co-wholesaling relationships
1. Identify who they are: a. Look for “bandit” (We Buy Houses) signs. b. Read Craigslist (CL) ads run by wholesalers. c. Run your own CL ads seeking wholesalers. d. Contact investor-friendly realtors.
2. Join REI and similar MeetUp groups and reach out to other members with any co-wholesale opportunities you can offer them. Read their blogs, classified ads, haves/wants, postings, etc.
3. Inquire: a. What geographic area(s) each potential co-wholesaler prefers. b. What types of properties they specialize in from both a buying and selling standpoint: SFRs, multi-door, commercial, industrial, raw land, notes, etc. c. What is their preference about: How many bedrooms, bathrooms, square footage of the house, lot?
4. Are they desirous of straight wholesale property flips themselves or buy/rehab/sell or buy/hold?
5. What price range(s) are they seeking?
6. Make sure you’re dealing with actual cash buyer/wholesalers, who have the money now to close deals
7. What type of profit-splitting arrangement are they looking for, 50/50?
8. How many deals are they used to doing per month, annually?
Terms, Conditions, etc.
1. What kind of deal do you want for yourself, i.e. what profit margin you are looking for? Keep in mind that you need to be BUYING properties at below-retail-price in order to create enough room for you and your co-wholesale partner to both make money; A good source of such deals are Distressed, Motivated and Flexible (DMF) homeowners who are in pre-foreclosure. Make them a cash-for-keys, deed-in-lieu basis offer at a substantial discount off of the current FMV (Fair Market Value).
2. NOTE: One good reason to co-wholesale a property is that you can sell it to another investor “as is”.
3. Timelines: How soon are you and/or the co-wholesaler prepared to move on a particular deal?
4. Make sure you actually have the property under contract with the seller before divulging critical info to the cash buyer/co-wholesaler; you do not want to provide them with the opportunity to go around you and deal direct with the seller, effectively cutting you out of the deal.
5. Some wholesalers go so far as to insist that the potential cash buyer/wholesaler sign a Non-Compete/Non-Disclosure (NCND) agreement before they will email off any details about potential properties that might be for sale, now or in the future. To be safe, use a NCND with each co-wholesaler.
6. What follows is a series of suggested (protective) steps that you should consider employing, from initial email to your cash buyer/co-wholesaler list through to two signed (buy & sell) contracts, finally to a profitable and successful conclusion to the transaction. The wholesaler (you):
a. Identifies a deeply discount property he/she thinks will be a good buy.
b. Eblasts specs to the cash buyer list (but not the actual property address, for obvious reasons)
c. Secure a tentative verbal commitment from a qualified cash buyer
d. Secure a LOI (Letter of Intent), signed by the seller, that is a precursor to, and lays the groundwork for, an eventual signed (purchase) contract.
e. Secure a LOI, signed by the buyer that is a precursor to, and lays the groundwork for, an eventual signed (sell) contract.
f. Secure a signed purchase contract with the seller, based on the previous LOI.
g. The property address can now be divulged to the cash buyer/co-wholesaler who then verifies the info, etc. and signs off
h. Secures a signed (sell) contract with the buyer, based on the previous LOI.
What We Do: Quickly provide short-term, first position, private capital (WPFF) funding, to real estate wholesalers, among others. Contact info: Tod Snodgrass, email@example.com, 310-408-7015