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How to Buy your Next House Wholesale and Save you Thousands
By Dan Grenier, Ph.D., President of PE Real Estate Solutions Inc.
Chapter 1 – Introduction You are finally ready to invest in real estate and buy a house, what’s your first move? Call a realtor, of
course. Realtors are constantly scouring MLS looking for great homes for buyers. They have
tremendous training and resources in real estate transactions, it is only natural to seek their help
whenever you are looking for your next fixer upper, or your next rental, and of course your next
personal home. Some realtors are great at finding great houses that may fit your criteria. Yet when it
comes to putting in an offer, it doesn’t appear to matter what you do, you are always competing with
everyone else. You did your due-diligence ahead of time, perhaps came in with a clean offer, and yet if
you really want that house, then still you better pay full market value, or even worse… above asking.
What if I told you it doesn’t have to be that way? What if I told you that buying houses well below
market value is possible? Would you then be willing to take just a few minutes to learn these simple
tricks that could save you tens of thousands of dollars on your next deal?
At PE Real Estate Solutions, we are constantly marketing for our next deals, and each month come
across dozens of distressed houses and motivated homeowners looking to sell quickly at a deep
discount, often between 10-40% below market value. We come across more deals than we can
undertake and look to wholesale these deals to cash buyers like yourself. Learn how to become an
effective cash buyer and how to buy a wholesale deal, and you too can take advantage of these
incredible deals and save you thousands of dollars.
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Chapter 2 – Understanding a Wholesale Deal
What Is A Wholesale Deal? The individual or company who first put the property under contract (Buyer 1) may not necessarily be
the one who buys the property. In a wholesale deal, an assignment of contract may occur where Buyer
1 may sell the contract to another buyer (Buyer 2) for a small fee. In such cases, Buyer 1 is relieved from
their duties to execute the contract and buy the property, and Buyer 2 is now responsible to execute the
contract and buy the property. See below an example of a wholesale deal PE Real Estate Solutions sold
to a local investor. In this example, the investor paid $115,000 for the purchase of the house, and
$10,000 to purchase the contract for a total of $125,000, which was still $25,000 below the estimate
market value.
Address: 1234 Fairview Blvd, Windsor
Purchase Price: $115,000
Assignment fee: $10,000
Est. As-Is Value: $150,000
Est. After Repair Value: $250,000
Est. Repairs: $65,000
What Kind of Deals Are Available? At PE Real Estate Solutions, we wholesale properties to home owners looking for a great deal on their
next family home, landlords looking for a great return on their investment, and rehabbers looking for a
great profit on larger repairs. Our broad marketing will find great opportunities for you no matter the
type of deal you are looking for or the price range you can afford.
Is Wholesaling Legal? Just like anything else you do in real estate, you should always consult first with an attorney. Our team
of experts have trained extensively on wholesaling and have reached out for legal assistance to ensure
that all our wholesales methods are 100% legal and our contracts are firm and binding.
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Benefits of Working with Us There are three things that separate great wholesalers from the average. Dealing with a great
wholesaler can save you time, money, and substantially reduce your risk. At PE Real Estate Solutions,
we always make sure to provide you with the following three things:
1) Comprehensive wholesale package
2) Opportunity to go see the interior of the property
3) Payments for the wholesale fee are made 100% upfront into YOUR lawyer’s trust account
Comprehensive Wholesale Package
The table below presents the differences between an average wholesale package, and one you would
obtain from PE Real Estate Solutions.
PE Real Estate Solutions The other guys
Monetary Details Complete May avoid including repair cost or after repair value
Property Details Complete Complete
Pictures Interior and Exterior Front of house only
Repair details Listed with estimated cost Not provided
Comparables Minimum of 3 similar properties Not provided
Est. After Repair Value Description of appraisal provided Guessed only
Opportunity to see the interior of the property
Have you ever bought a property sight unseen? No worries, we don’t expect you to either. Anything
otherwise would be considered a large gamble. We always make sure to allow cash buyers a chance to
view both the interior and exterior of the property before completing any assignment of contract.
Payment Is Made Into YOUR Lawyer’s Trust Account
This can’t be emphasized enough. We don’t get paid until your lawyer has effectively confirmed that you
are the new owner of the property. Although the assignment fee is due in full at signing, PE Real Estate
Solutions will never request for the funds directly. Instead, funds are to be held in trust with your
lawyers, and only proof of funds are needed at signing. It is with this level of trust that we are PE Real
Estate Solutions can ensure you a successful investment purchase.
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Chapter 3 – Tools Needed to Buy Wholesale Unlike the retail market where the best offer wins, wholesale deals are often first come first served. It is
important to have the necessary tools ready to act quickly and decisively to beat out the competition.
The three most important tools are your finances, repair estimator, and deal analyzer.
Line-up Your Finances First The definition of a cash buyer is such that there is no condition upon financing. It is absolutely a must
that you have your finances lined-up and ready to go before you look to buy a house wholesale. The
type of lending you need to obtain depends mostly on the type of properties you are looking to buy.
The table below identifies three types of buyers with three different types of lenders. Investors such as
rehabbers and landlords typically look for houses at a great discount. To get these discounts, homes are
in very poor condition and sellers typically want a quick close. To buy these homes wholesale, access to
cash must be quick and conventional bank financing is no longer an option. Instead rehabbers and
landlords must look at using private lending or lines of credit.
Private Lending
Line of Credit
Bank Financing
Rehab √ √
Rental √ √
Personal Home √ √ √*
*Only for smaller discounted homes that are in fair condition
Homeowners looking for a personal home who have access to private lending or lines of credit can also
take advantage of deeper discounted properties. Homeowners who simply want to avoid the market
competition and are happy with around a 10-15% discount may also be able to take advantage of
conventional bank financing. In such cases, PE Real Estate Solutions will require proof of a mortgage
commitment letter from an institute before allowing to show the property. Please note that larger
national banks are typically less willing to provide such letters. Instead consider working with an
independent mortgage broker.
It is extremely important to understand that private and conventional lenders will lend based on the
purchase price of the home. The additional assignment fee, which is typically between $5,000 and
$15,000, cannot be financed, won’t count towards a deposit, and must be paid up front.
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Repair Estimator Every investor has different views on what needs to be repaired, the extend and quality of the repairs,
and whether they will do the work or pay for labour. Do you have a system for estimating the repairs?
Does this system account for all costs including demo and permits? Have you verified your costs with
your contractor?
When buying wholesale, it is first come first serve, and so you typically will not have more than one shot
at viewing the property. It is crucial to have a quality repair estimator ready to go to help you estimate
your own cost of repairs.
Deal Analyzer Analyzing a deal if you are looking for a personal home is straight forward. Can I get it at a discount to
market value without competing with others? If you are buying wholesale from PE Real Estate Solutions,
then the answer is an astounding, YES!
For all other cases, analyzing a deal can be more complicated. The purchase price and repair estimate
are only two pieces of a much larger pie. Other costs to consider are buying transactions, holding costs,
lending costs, and closing transactions. Are you looking to hold or sell? Do you know how long you will
take you to sell the property? What are your buying, holding, and lending costs? Are you going to stage
the property and sell with a realtor (both highly recommended)? Having answers to these questions
ahead of time will allow you to determine more rapidly the quality of a deal.
Due-diligence Buying a wholesale deal is rarely about emotions and more about the numbers. The final step in
checking your numbers is about doing your due-diligence on the property. What are the comparables on
the market? Are there any outstanding permit issues? Are there any zoning conflict? Is there a septic
tank and does it need any repairs? Are there foundation issues, fire damage, or mould growth, and
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what is the costs associated with addressing these issues? Not doing a proper due-diligence on the
property may leave you on the hook for thousands more in repair costs.
PE Real Estate Solutions once purchased a duplex from a previous owner. Although the property
was used as a duplex for decades, it was only discovered after the fact that it was never registered
as such with the municipality. A retrofit inspection found major flaws in the fire separation between
both units and additional repairs were needed to bring it up to code. A good due-diligence ahead of
time would have found this issue and we could have negotiated a better price for the property.
We always complete our due-diligence before removing any conditions on our purchase of sale offer,
and we are happy to share our due-diligence when wholesaling a property. To protect yourself, we
always encourage you to do your own due-diligence as well.
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Chapter 4 - How to be an Effective Cash Buyer We learned in Chapter 3 that lining up funds is crucial to buying a wholesale property. For those who
don’t have the funds readily available in their bank account, this chapter will discuss in greater details
ways to obtain funding. The table below list the many ways of getting access to funds.
Fund Source Type of fund Typical Rate of Interest
Time Required to obtain Funds
Own Funds Personal
Free Immediate
Mutual Funds 3-7%* 5 days
Secured line of credit
Credit
Prime + 1% Immediate
Unsecured line of credit 7-10% Immediate
Credit cards 10% Immediate
Balance transfers (Credit Cards) 0-1% + 1 point Immediate
Private Lending Private
8-12% 7-10 days
Hard Money Lending 10-15% + few points 3-7 days
Conventional Financing Banks Prime 14-28 days
*Depends on the interest rate lost by pulling the money out of your mutual fund
This report will focus on credit, private, and bank funding.
Credit Funds
Secured Line of Credit Do you have equity in your home? Refinancing to obtain a secured line of credit (typically using your
home as collateral – this is also known as a home equity line of credit or HELOC) is the #1 absolute best
way to secure funding. These lines of credit are cheap with interest as low as prime + 1.0%.
Furthermore, interest is only applied when you use it. Finally, it is the only type of credit where the limit
of funds available is reasonably endless and based on your collateral and credit management abilities.
To find out if you have equity in your home, setup a meeting with a local independent mortgage broker.
Buyer beware, you cannot use a HELOC if you are planning on selling your home.
Unsecured Line of Credit On a smaller scale, an unsecured line of credit provides the same flexibility as a HELOC yet come at
slightly higher cost. With no collateral tied to the funds, these lines of credits are solely based on your
credit management abilities, so are typically capped very low. To find out if you can be approved for an
unsecured line of credit, talk to an associate at your local bank.
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Credit Cards Credit cards are given a bad rap due to their unusually high interest rates; yet used properly are a great
way to fund the repairs needed on a project. There are great credit cards with lower interest rates,
often at around 10%, that can be used to buy material. Stores like Home Depot and Lowes also have
credit cards offering financing at 0% over 6-24 months.
Balance Transfers The most effective way to use credit cards is to setup balance transfers deposited directly into your bank
account. Many cards offer promotions with balance transfers at an interest of 0-1% for anywhere from 6
to 12 months with an initial fee of only 1%. Balance transfers are also a great way to fund a down-
payment on the purchase.
Private Funding Private funding is the absolute best way to get started and to grow when funds are otherwise not
available. This type of funding is a bit more expensive, even though it is secured, because private and
hard money solely look at the deal and your credibility, not your personal credit.
Private Lenders Private lenders are individuals like your friends, family, neighbour, dentist, or doctor. They often are
looking for a better and more secured return on investment than the volatile stock market. Expect to
pay returns around 8-12% for private lenders. At PE Real Estate Solutions, we use private lenders on
most if not all our rehab deals.
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Hard Money Lenders The only difference between a private lender and hard money lender is that hard money lenders will
lend money professionally. Their costs are typically higher, with rates ranging from 10-15%, and expect
to pay fees ranging from 1-4% of the loan amount. The advantage of hard money lenders is their deeper
pockets and abilities to obtain loans quickly and effectively.
Bank Funds Conventional financing is the most effective long-term funding option. Banks will always look at both the
deal and your credit management abilities, so be prepared to share it all. The timeline for banks to
approve a mortgage can be very long, ranging from 2-4 weeks. Therefore, having a commitment letter in
place before buying wholesale is crucial. Larger banks have many limitations, and do not provide
adequate commitment letters. We at PE Real Estate Solutions recommend reaching out to your local
smaller banks and credit unions or speaking with a local independent mortgage broker. They will most
often be able to provide you with a solid commitment letter.
In all cases, banks will require an independent appraisal be done on the property. This may take up to a
week if not more to complete. Because rehab and rental wholesale deals sell usually within a week,
bank financing is not a great option. Retail market wholesales, where the discount is typically around
the 10% mark, have less competition and may stay on the market for a few weeks. For this reason, bank
financing may be a great option. But as it is with all wholesale deals, it is a first come first serve, so bank
financing should be kept as a last resort.
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Chapter 5 – Repair Estimator Wholesale deals are almost always on distressed properties where repairs are needed. When preparing
a wholesale package, we at PE Real Estate Solutions will provide you a list of repairs we have observed
are needed along with the estimated cost of those repairs, labour included. This is done using a
complete 5-page repair estimator listing the most common issues found in a home and the associated
costs of repairs. This chapter will discuss the main factors you need to create your own repair estimator.
Creating your List The more comprehensive your list, the less likely you are to have unexpected costs. Below are items to
consider when creating your list. It may be useful to break down these items further. For example,
electrical costs can have subsections including cosmetic updates only, minor electrical repairs, new
panel, or new wiring throughout. Knowing your list and getting to know how to use it is crucial when
estimating the repair costs.
EXTERIOR INTERIOR
Roofing/Gutters Windows Painting Framing Foundation
Siding/masonry Garage Flooring Insulation HVAC
Decks Landscaping Wall Tiles Drywall Plumbing
Fence Driveway Kitchen Doors/Trim Electrical
Pool Septic Bathroom Waterproofing Demo
Cost of Repairs The next step is to identify the cost of each item. These values vary greatly depending on who is doing
the work and what material is to be used. There are many resources online to identify the cost of
material, none better than your big box stores. We always recommend sitting down with your
contractor to determine what is a good estimate for labour. If you are doing the work yourself, consider
your limitations regarding working at heights, mechanical, electrical, and/or plumbing work.
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Miscellaneous Items Don’t forget about the following few items that are not as obvious yet should not be ignored when
calculating your repair estimate. Things can get pretty ugly real quick when you miss very expensive
items.
ITEM COMMENT
Permits Contact your municipality
Disposal It costs money to dispose of debris
Asbestos removal Must be properly remediated
Mold removal Problem may be larger than what is visible
Fire remediation Smoke damage needs to be addressed
Architect/Engineer May be required for structural changes
Contingency Every project has unknowns that come up, including higher material and labour cost, or unforeseen
repairs needed once the project begins. We at PE Real Estate Solutions always apply a contingency
ranging from 5-15% of the repair cost depending on our comfort with each project and our contractor
pricing. Depending on your comfort of the costs and the project, we always recommend adding a
realistic contingency to ensure your projects are on budget.
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Chapter 6 – Deal Analysis Remember this lovely pie chart presented earlier in Chapter 3? To analyse a deal, each of these sections
need to be quantified. In Chapter 2 we looked at the purchase price of a wholesale. In Chapter 3 we
discussed the tools needed to analyse a deal. In Chapter 4 we looked at getting a lender and their
associated costs. In Chapter 5 we looked at the repair estimate. In this chapter, we will put it all
together to see if the deal makes sense.
What is Your End Strategy? Are you looking for your home? Are you looking for a rental property? Are you looking at a rehab?
Your end strategy will determine if this is a deal. Again, analyzing a deal if you are looking for a personal
home is straight forward. It is all about whether you are buying below market value. When buying a
wholesale property through PE Real Estate Solutions, you can be certain that you are buying below
market value. A bit more math is involved when reviewing a rental or a rehab.
Buying a Rental Property Do you know what is the capitalization (CAP) rate? Banks will want to know the debt coverage ratio
(DCR). You will want to know your cash flow and your ROI. Don’t know where to start? Don’t sweat it.
I’ll let you in on a little secret that you won’t find anywhere else. We at PE Real Estate Solutions have
prepared a quality rental calculator just for you. It can be downloaded at the link below:
http://www.perealestatesolutions.com/wp-content/uploads/2018/06/ROI-CALCULATOR.xlsx
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If you are looking at a distressed property to fix prior to renting, often a wholesale is then purchased
with a line of credit or private funds. Once the rehab is completed, the property is then refinanced, and
tenants are brought in. For this calculation, first consider looking at the costs when rehabbing a
property. This will help identify if the property is bought below market and is worth the investment.
Buying a Rehab Property Let’s go through the equation:
After repair value - Profit - Closing transaction costs - Lending costs - Holding costs - Buying transaction costs - Repairs
Purchase Price
Profit
What is your time worth? What kind of profit margin are you willing to take for the risk involved?
Closing transaction costs
Sit down with your lawyer to see what costs can be expected. You will most likely also be paying for
your lenders legal fees. Are you using a realtor or stager? What kind of marketing costs are being used?
Note that if you are looking to rent the property afterwards, the only costs that may be incurred are
legal fees to discharge your private lender and setup a conventional loan on the property.
Lending costs
What is the amount of the loan and the interest rate? Are there any initial fees? How long is the project
expected to take? For deals where the end goal is to sell the property, don’t forget to consider the time
needed for the property to closel after the rehab is completed.
Holding costs
When holding a property there are ongoing fees one cannot avoid. Those are property taxes, condo or
home owners associate fees, utility fees, rental fees if any (example, hot water tank), and insurances.
Talk to an insurance broker to ensure you have the right kind of insurance for the project.
Buying transaction costs
Again, sit down with your lawyer to see what costs can be expected. This will also include your land
transfer tax and title insurance. You will most likely also be paying for your lender’s legal fees.
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Repairs
Are you doing the work yourself or are you hiring a contractor? Have you considered everything, and
have you given yourself a good contingency?
Purchase price
There you have it. Does the deal make sense for you?
Examples of deals Below are three great examples of deals that were available through PE Real Estate Solutions.
Retail Home In this example at 1364 McKay, the property was in good liveable condition and needed little repairs.
Purchase Price $86,000 Wholesale fee $5,000
As-is costs $91,000 As-Is value $100,000 Discount = ($100,000 - $91,000) / $100,000 = 9.0%
Rental Two examples will be showcased. The first is a review of 1364 McKay if purchased as a rental. The
second is another wholesale deal that needed some rehab work prior to turning it into a rental. All
examples accommodate a rate for vacancy, maintenance, and management fee.
1364 McKay Rental
Mortgage amount $68,800 (80% of $86,000) Deposit & Legal $18,800 Actual money invested $18,800 + $5,000 = $23,800 Estimated rent $850 / month DCR 1.35 CAP 6.3 Cash Flow $125
ROI 17%
The magic happens when it is refinanced in five years. Assuming the property value and rents increase
by a conservative amount of only 3% annually, in five years it would be worth $100,000 x 1.035 =
$116,000 and the rents are at $1,000/month. Let’s see what that looks like.
Remortgage amount $92,800 (80% of $116,000) Legal $500 Money return $92,800 - $68,800 = $24,000 Actual money invested $23,800 + $500 - $24,000 = $300 Estimated rent $1,000 / month DCR 1.26* CAP 5.86 Cash Flow $115
ROI 1,264% *Banks typically refinance on good credit with a minimum DCR of 1.25
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1787 Glendale Rehab/Rental
Estimated Rehab time 2 months Purchase Price $80,000 Wholesale fee $15,000 Rehab $17,500 (including labour) Buying costs $3,500 Holding costs $1,500 Lender fee $4,500 (2pts + 12%) Closing costs $1,000 (legal fees for discharge of lien)
Total cost $123,000 After-repair-value $145,000 Discount = ($145,000 - $123,000) / $145,000 = 15.2%
Remortgage amount $116,000 (80% of $145,000) Legal $500 Actual money invested $123,000 + $500 - $116,000 = $7,500 Estimated rent $1,150 / month DCR 1.27 CAP 5.9 Cash Flow $154
ROI 65%
Rehab Address 1234 Fairview Blvd., Windsor Estimated Rehab time 6 months Purchase Price $115,000 Wholesale fee $10,000 Rehab cost $68,000 (including labour) Buying costs $3,800 Holding costs $4,800 Lender fee $9,600 (10% interest) Closing costs $18,700
Total cost $229,900 After-repair-value $260,000
Profit $30,100
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Chapter 7 – How to Structure the Deal Isn’t buying wholesale deals exciting? You can get a house at a discount without the competition. You
can get a rental and receive enormous returns on your investments. You can even pay a lender 10%
interest, pay your contractor their labour, get a realtor at 5% commission, and still make around $30,000
on a rehab deal.
So, once you got all your tools in place and you have received an opportunity to buy a wholesale deal,
what’s next? This chapter goes over the 5 steps on how an assignment of contract is performed.
Step 1 – Sign-up to become a VIP buyer Congratulation, you have already joined our VIP buyer’s list by signing up at
www.perealestatesolutions.com/wholesales. Keep an eye out for our next wholesale opportunity. If
you know anyone else who can benefit from our services, have them join our VIP buyer’s list as well.
Step 2 – Receive and Review the Wholesale Package At PE Real Estate Solutions, we are consistently marketing for our next wholesale opportunity to bring to
you. Keep your eyes open for our next opportunity.
Once you receive it, you must act quick. Review the numbers and details provided and with your newly
acquired tools, you’ll be able to determine if this is an opportunity you want to take on.
Step 3 – Call and Setup an Appointment Again, don’t hesitate. If you like the deal, have the funds and resources ready to go, give us a call.
During this call, we will qualify you as a quality cash buyer for this property. If you have all the tools
necessary to get the deal done, we will then schedule a time to visit the property.
Step 4 – Go to Site This is usually a 30 to 45-minute walkthrough of the entire property. During this time, you are invited to
take pictures and complete a repair estimate. There are a few ground rules during this walkthrough
regarding conduct, including refraining from using any pictures for anything other than personal use,
and we will be glad to discuss them with you prior to the walkthrough.
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It is asked that you be prepared to complete your full due-diligence in that one visit. In some cases, due-
diligence calls for another visit to site. You may be allowed to have an appraisal or home inspection
completed at your cost. PE Real Estate Solutions will be happy to work with you to ensure you are
comfortable with the deal. However, we want to remind you that these deals are first come first serve.
They will not be held for anyone while a home inspection or appraisal is being done.
Step 5 – Complete Your Deal Analysis If you have your tools all ready to go, it’s simply a matter a plug and play. The quicker you are at
conducting an effective analysis of the deal, the better chance you have of receiving the deal.
Step 6 – Pay Assignment Fee and Sign Assignment Agreement Great! You are now ready to buy a wholesale deal. During the walk-through, you would have been
provided an Assignment of Contract Agreement. This agreement has clauses that dictate the wholesale
fee, who is taking over the responsibility of the original Purchase and Sale Agreement, and how the
money is to be paid. Once you have looked it over and agree to the terms, call to confirm you are
looking to buy the wholesale deal. You will then receive confirmation whether that the deal remains
available and, if so, will receive a timeframe to place the funds for the assignment fee “In Trust” with
your lawyer. Immediately submit a signed copy of the Assignment of Contract Agreement along with
proof of funds in your lawyer’s account. Immediately upon receipt of the signed agreement and proof of
funds, we at PE Real Estate Solutions will sign the agreement and return it to you and the deal is
complete. Be sure to send the agreement to your lawyer.
Step 7 – Close on Property At closing, you will need to bring the funds to cover the actual purchase price and all closing fees. Upon
closing, your lawyer will then pay the wholesaler the assignment fee using the funds you have left in
trust.
Congratulations. You are now the proud owner of a discounted property. We hope that you have taken
the steps to learn the tools needed to attack this property with full force to give you the best chance to
enjoy the home, and/or maximize your profits.