By Tod Snodgrass
Wholesale Contract Flipping (WCF) means simply to buy, and then quickly sell (assign) a property. The advice that follows is confined to SFRs (Single Family Residences).
Potential (different) WCF Roles to Play
- Birddog/Property Scout. Your job is to unearth “diamonds in the rough” properties than can be successfully flipped for a profit. Caution: Make sure you have a well-written contract with those to whom you provide leads to ensure you actually get paid, in full, for your efforts, i.e. $500-$5,000 per done deal.
- Finance person: You are the “money guy/gal” who helps fuel deals (provide earnest money deposit funding, transactional funding capital, invest in other WCFers), etc. You can offer your funds as debt, equity or as a joint venture.
- Sales lead guru: Through yellow letters and signs, running Craigslist ads, answering CL ads, chasing down FSBOs (For Sale By Owners), seeking out expired MLS listings, or “driving for dollars”: drive around and look for houses that are run down, empty, etc. You offer leads to the WCFer and split the profits. See “Caution” above for advice on how to make sure you get paid for what you do.
- Actual WCFer: You follow up the leads, call on homeowners, put properties under contract, etc. Here you wear (or coordinate) all the hats needed, from scouting out a deal to assigning it to someone else. It helps if you have a mentor who can walk you through the first few deals.
WCF Marketing Options
- Buy, then sell. This is still the traditional way to work the WCF market. You find a distressed property at a very attractive price. You put it under contract. Then you go find a likely buyer for the property…and hope you can get the property sold before the time runs out on your time-sensitive contract (i.e. the contingency period during escrow…often 14-17 days or so).
- Sell, then buy. Also known as “reverse wholesaling”, here you switch around the equation. You find out from ready cash buyers what THEY want to purchase. You then use your skills and resources to find the house that the buyer wants to purchase; put it under contract; assign it to the cash buyer = earn a payday.
- Tranactional Funding (TF). Sometimes a WCF simply cannot be successfully concluded in the short amount of time allowed by a contingency period. In that event, there are TF firms that can assist by helping you do a double close (i.e. back to back escrow). It will cost you some of your profit, but when done right, it can work out quite nicely for all parties concerned.
Who to Assign to
- Sell to retail buyers. Best accomplished with an already-identified, all-cash buyer who knows exactly what he/she wants, and can move on the deal in a matter of a few days. These are rare, but out there.
- Co-wholesale. You will probably make less net money this way, since you are essentially “sharing” the profits with another wholesaler. But it can be a very good match since the deals can happen quickly.
- Sell to a rehabber: Similar to a co-wholesale. You have to make sure the rehabber knows exactly what they are doing, has ready cash lined up (hard money, private debt/equity, etc.) and can move very quickly.
- Retired Landlord. Eventually, even the heartiest of them gets tired of the three Ts: tenants, toilets and trash. The good news is that many of these SFRs are owned free and clear. That brings up the possibility of seller financing, which can, in turn, make your job of assigning the rental property a lot easier.
- Code violations (AKA “red tag specials”). They can be very tricky, so be extra cautious. Some violations involve little more than fixing a broken pipe or replacing some broken windows. Others are so bad that the house needs to be scraped & rebuilt. How to find red tags: Government agencies often post lists of them online.
- Insurance-related (fire damaged properties). These may or may not be “red-tagged”. Read local newspapers for the addresses of homes that recently burned. Sometimes they can be picked up for a song.
- Probate leads: One method is to read the obits in the newspaper and follow up in a few weeks. Another is to go to the courthouse and look at the lists. Probate attorneys are another audience to cultivate.
What We Do: Quickly provide short-term, first position funding, in smaller amounts, to investors who own property free/clear but cannot or will not use hard money lenders or conventional funding sources.
Contact info: Tod Snodgrass, firstname.lastname@example.org, 310-408-7015