Commercial Real Estate Investing For Dummies. Peter Harris

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СКАЧАТЬ fee, they are now competing with thousands of other properties that are listed by professional commercial brokers. These brokers are good at marketing and presenting properties. On top of this, the brokers usually have a listing with a longer time period to find a buyer than the time that a wholesaler has to move a property.

      We know we’re driving this point home here. Make sure that you have enough equity in the deal to be able to add your wholesaling fee while still giving your buyer a great deal. This means that your buyer is able to purchase the property below its actual value, or in some cases below the proforma value. This would apply to a property you’ve found with rents that are well below market rates, as one example.

      You’ll want to make sure that you are able to qualify your buyer. Just because a buyer comes back after looking at your deal and is willing to sign your assignment agreement, doesn't mean that they are actually going to be able to close on the deal. If you don’t qualify your buyers correctly, this could ruin your deal and adversely affect your reputation. You’ll want to make sure you understand what your buyer’s needs are and make sure they can perform.

      

Watch out for buyers who plan on “re-wholesaling” your deal. This is where they agree to pay you an assignment fee without having the ability to purchase the property themselves. This puts your profits and your reputation into jeopardy because they may not be able to find another buyer (who’s willing to pay even more for the property).

You’ll want to verify that your buyer has already spoken to a lender who is willing to provide a loan for the property. You can do this by asking your buyer to provide a pre-approval letter from their lender. Since pre-approval letters are not final approval, we like to contact the lender to determine what else they’ll need from the buyer to actually fund the loan. You also should verify that your buyers have the money available for the down payment and closing costs. Ask them for a “proof of funds” which can be a copy of their bank statement showing an adequate amount of money on hand.

      Step five — close and get paid

      The simplest and cleanest method to do this is to collect your entire assignment fee up front as an earnest money deposit from your buyer. After giving your buyer time to inspect the property and complete their due diligence (usually this is completed within 30 days), the earnest deposit becomes non-refundable.

      If your assignment fee is larger, then get a portion of this up front as the earnest money deposit. (We’ve seen wholesalers with deals where they are making $100,000 to $200,000 or more.) Get as much as you can up front when you assign the deal and then collect the balance after your buyer’s due diligence period with you expires. While you might have to wait until closing to get all of your fee, the sooner you’re paid the less likely it is that someone’s going to try to trim your wholesaling fee down at the closing.

Buying From Wholesalers

      Once you’ve gotten your feet wet by wholesaling a few commercial properties you’re likely to wonder, “Why am I giving these away when I could be keeping the entire deal for myself?” The good news is that getting started by wholesaling to others provides you with great practice at finding good deals. You can then use the wholesaling fees you’ve made for earnest deposits and down payments when buying commercial properties for yourself. So where do you go from here?

      In addition to continuing to look for properties to wholesale or to keep for yourself, start networking with other wholesalers and let them know you’re looking to purchase commercial properties that have an upside.

      Bob, one of our mentees, met Mike about a year ago in a Facebook wholesaling group. Mike found a few single-family homes and wholesaled them to Bob at a price that allowed Bob to make a nice profit on each one. Now that he’s moved up to commercial real estate investing, Bob makes a habit of letting everyone he talks to know that he’s looking for commercial properties.

Mike said he’d found a 40-unit apartment building and had it under contract at a great price. It was owned by a non-profit corporation that had owned it for three years and they wanted to get rid of it. Mike arranged a conference call with the owners and Bob discovered this was a mixed-use property with 40 apartments plus 3 retail storefronts, located about 100 miles from his home in Oregon.

      Mike assigned his position in the purchase contract over to Bob. This gives Bob the ability to buy the property (which is worth $3.1 million) for a total of $2.5 million. In this case, we helped Bob structure the deal where Mike gets paid $200,000 as his wholesaling fee from the closing.

      Some investors might question paying $200,000 as a wholesaling fee. After all, Mike hasn’t put much effort into earning that fee, right? The answer is that we look at the total cost of the property to see if it makes sense or not. In this case, after accounting for Mike’s $200,000 wholesaling fee, Bob’s total purchase price is $2.5 million, and the property is worth $3.1 million. After increasing the rents to market rates, the property will be worth considerably more.

      Mike has followed most of the steps in this chapter to make a nice wholesaling profit of $200,000 on his first commercial deal. And since this is Bob’s first commercial property, he’s earned the Key Award. This is an award that Peter Conti gives to his clients to celebrate getting their first commercial deal. Getting your first commercial property may feel like it’s the hardest, but it unlocks the key to your future success with commercial real estate.

Other Tips to Closing a Wholesale Deal

      In addition to qualifying your buyer (step four in the previous section), you’re going to do three other things to succeed while wholesaling commercial real estate.

       Keep your marketing going. First off, you’re going to keep your marketing going for other buyers so that you have backup offers in hand in case your buyer is unable to perform for some reason.

       Move your closing date up. Number two, you’re going to set a deadline with your buyer well ahead of the date you need to close the deal with the property owner. This gives you the time you need to have another shot at putting the pieces in place to make the deal work if you need it. Rookie wholesalers stop their marketing for a buyer, and they don’t set closing dates ahead of time like we’re talking about here. Don’t make that mistake.

       Have a plan B, or C, or D. We’ve seen plenty of commercial deals that didn’t close on time for all kinds of reasons. The third thing for you to do, ideally, is have a plan B that enables you to ensure that the property is sold if your buyer doesn’t come through.

      If you follow our advice on this, you’ll never end up in a situation where you’ve made a promise to the seller that you can’t keep. That can be embarrassing; it will affect your reputation; and depending on how you’ve structured the deal, you might even lose your earnest money.

      Make sure you help the seller

      You probably don’t want to think about this, but several of your plan B options might include situations in which you don’t end up getting your wholesaling fee. This makes more sense when you realize that if you can’t put the pieces in place to successfully wholesale a property, then you haven’t earned your fee have you?

      Despite this, if you can still help the seller, you’re going to build relationships and get referrals that will pay off for you down the line. You could work with a broker who might СКАЧАТЬ