The Art of Wholesaling Other Books by Aram Shah

REO BOOM: How to Manage, List, and Cash in on Bank-Owned Properties 100% Commission Brokerage and Death of the Big Box Realty The Art of Wholesaling Properties How to Buy and Sell without Cash or Credit

Aram Shah and Alex Virelles Contents

Foreword by Robert Shemin xiii Preface: The Three Building Blocks to Wealth in Trading Real Estate Paper xv 1. The Wholesaler’s Mind-set 1 Why the Perfect Time to Start Wholesaling Is Now 3 An Appreciating Works for You 4 Cash Buyers Are Looking for Deals 4 Points to Remember 6 2. What Is Wholesaling? 7 Securing Hard-Money Funds and Transactional Funding 8 A–B and B–C Transaction Defined 9 Points to Remember 11 3. Getting Started: Finding Cash Buyers 12 Why You Must Find Your Buyer Before Finding Your Property 13 How to Build a Strong Cash-Buyers List 13 The #1 Way to Get Cash Buyers: Bandit Signs 14 Additional Methods for Building Your Cash-Buyers List 17 Use the MLS to Check Cash Buyers’ Stats 18 Points to Remember 21 4. Finding the Juicy Deals 22 Secrets to Finding Distressed Sellers 23 Criteria You Need to Give Your 24 Starting Your Search 28 Find Off-Market (Non-MLS) Deals 30 How to Work Direct Mail and Drip Campaigns 35 The Art of Speaking with FSBO Sellers 37 Dialing for Dollars and the Magic 50 Percent Formula 38 Sellers Lead Sheet 39 Handling the Two Most Common Objections from FSBOs 40 Points to Remember 41 5. The Art of Making a Winning Offer 43 Choosing the Perfect Comps 44 Seeing the Property for the First Time 48 Using the MAO Formula to Make an Offer 52 Filling Out the Contract 54 Your Initial Meeting with the Seller 59 Using the 20-20 Rule to Lock Up Properties 61 Points to Remember 63 6. Marketing Magic: How to Secure an End Buyer Once You Find a Deal 64 Property Marketing Secrets 65 Scripts for End Cash Buyers 68 Avoiding Pitfalls with Tenants 70 Points to Remember 71 7.  the Deal: Double-Closing Versus Assigning 72 Is Your Cash Buyer for Real? 73 Follow the Money 73 The $10,000 Question 75 Using A–B Transactional Funding 76 Maneuvering the B–C Transaction for Double-Closing 77 Receiving Deposits from the End Buyer 77 Points to Remember 85 8. Foolproof Exit Strategies to Get Out of a Deal 86 Use Inspection Periods to Back Out or Renegotiate 87 The Art of the “Subject to” Clause 89 Use Liens and Violations to Exit or Get Discounts 89 Can’t Exit? Get Creative 90 Points to Remember 92 9. The Seven Biggest Pitfalls When Wholesaling Properties 93 1. Skipping the Inspection 94 2. Not Using Your Title Company or Attorney for the Deal 96 3. Marketing Properties That Are Not Yours 98 4. Not Using a Joint-Venture Agreement with Other Wholesalers 100 5. Not Staying on Top of Cash-Burning Deadlines 101 6. Marketing Before the Contract Is Executed 104 7. Burning Bridges 105 Points to Remember 107 10. Putting the Wholesaling on Autopilot 108 Understand Your True Net Worth 109 How to Pick Your Dream Team and Pay Them Right 109 Maximize the Three Ways to Make Money in Wholesaling 112 Leverage Your Way to a Fortune 113 Points to Remember 116 Epilogue 117 Appendix K—HUD-1 Settlement Statement 120 Appendix L—Your Wholesaling Resources 123 Appendix M—Cash Buyer Question List 129 Appendix N—Motivated Seller Question List 131 Appendix O—Offer Packet 133 Appendix P—Assignment Agreement 145 Appendix Q—Joint-Venture Agreement 151 Appendix R—Sample Marketing Blast 153 Appendix S—Memorandum of Interest in 156 Index 158 About the Authors 165 Foreword

When I was twenty-eight years old, I had no money and no credit, and that’s when I got started in real estate. I did real estate backward and the hard way. Like many others, I thought that the only way to make money in real estate was to borrow money, buy property, fix property, and fight with tenants. Although it worked and I made decent money, it was an uphill battle. After five difficult years of being a , I started using some of the techniques in this book. The first year that I practiced what I’d learned about and wholesaling, I handled more than fifty properties and made well over half a million dollars—with little risk and without using my own money or credit. Wholesaling is awesome. There are a lot of great real estate books out there, but this is definitely one of the best. If you are ready to learn from real experts, read on. Aram and Alex will take you step by step and show you how they’re making a fortune in real estate every day. All you have to do is keep reading, learn from the best, and follow in their footsteps. Make sure to pay special attention to all the techniques—and especially the “insider’s tips,” which will help you make, and save, a ton of money. You’ll learn strategies that can work in any market, with low-end properties, middle-end properties, and high-end properties. With the formula for success contained in this book, you’ll be able to build your own sustainable business.

xiii If you think it can’t happen to you, think again. Okay, maybe your first windfall won’t be as large, but it would still be realistic to think you could make, say, $9,000 or $14,000 cash on your first deal. I have many students who see that kind of check monthly, even two or three times a month.

This business is all about your mind-set. External forces in society try to impose limits on what and how we can think, or what we should and should not do and say. The minute you realize that the world is open, that there are no ceilings on what you want to accomplish, and that you won’t allow anyone to come between you and your goal— then you can achieve what you envision. The 2006 documentary The Secret summarizes exactly what the rich and powerful figured out a long time ago: bend your mind and thoughts around an idea, focus hard on it, and envision it every single day, and the entire universe will follow your mind and will. It might sound somewhat bizarre and antilogical, but nevertheless, I can tell you that it works. It worked for me countless times, and I will show you exactly how it can work for you.

xix There is a reason you are reading this book today. You deserve greatness and success. I learned very early on that success is a mind- set. No matter where you are in your real estate career—whether you are brand new or own your own home, or whether you’re just sick and tired of your job and you want to make some cash on the side (and hopefully never go back to work again)—stay tuned. You’re about to witness some hard-core, serious money-generating secrets. Let’s get started. No ceilings!

Aram Shah @Shah of Miami (Twitter/Instagram)

xx 2 What Is Property Wholesaling?

Property wholesaling is simply a way to buy and sell real estate without actually owning it. Right now, imagine making tons of money with no credit and little to no income. It’s too good to be true, you’re probably thinking. Actually, it’s not. In fact, many millionaires have kick-started their financial independence using this very method. leaders charge thousands of dollars to learn this technique. And because there is room at the top for everyone, I’m sharing this invaluable information with you. By the time you finish this book, you should be able to do your first deal with confidence. You’ll be well on your way to making a ton of money in this exciting business. I want you to succeed. You may be aware that what some of the seminar gurus out there provide is a ton of motivational fluff and fakery that give you a false sense of confidence, and then they tease you into buying “further ” at a ridiculous price. What you’ll be coming away with after reading this book, though, is real knowledge. And knowledge is power. Once you know what you’re doing, the confidence will come. Now, let’s get to it. What exactly is property wholesaling? You may have heard the terms real estate day trading, assigning contracts, double-closing, or flipping contracts. These are all terms for essentially

7 Aram Shah and Alex Virelles the same thing. Wholesaling a property entails buying it without actually owning it or holding title; selling or flipping it to a cash buyer while you have it under contract; and making a profit. (Note: I said cash buyer. This is critical.) The idea is to get the property under contract at a discounted price and then resell it at a price that is still attractive to the investor or end buyer. It’s called wholesaling because you get the property at a wholesale price. You start off by building a solid cash-buyers list. Once you have a decent number of serious cash buyers who are looking for property in your target area, you start hunting for deals. When you find a deal, you get the property under contract, and then you can either sell the contract for a fee (assignment) or do a double or simultaneous closing. With an assignment, you get paid a flat fee (or assignment fee) for assigning all your contractual rights to the buyer. As a result, the end buyer is stepping into your shoes and taking over your position as the buyer to close on the property.

Securing Hard-Money Funds and Transactional Funding When you do a double-closing, you actually close on the property, either with hard-money funds or transactional funding. Then you immediately turn around and resell it to a cash buyer on the same day. Hard-money funds are private wealthy investors who lend money to real estate investors for short periods of time (up to twenty-four months) and charge higher interest rates than banks, as well as percentage points of the loan amount (known as points). A typical hard-money lender would charge a 12 to 14 percent interest rate, payable interest-only every month, as well as three to four percentage points of the loan amount up front at closing. A traditional lender might charge you a much lower interest rate but would require a mountain of paperwork and wouldn’t be able to fund the deal in just a few days, which a hard-money lender would be able to do. You’d only use a hard-money loan if you had no end buyer ready and waiting to purchase the property from you and had to close the transaction yourself. If you had a buyer lined up, you’d use transactional funding. This should be your primary goal. In transactional funding, the money comes from the same

8 The Art of Wholesaling Properties hard-money investor, but it’s considerably cheaper because of the time frame—the whole transaction is concluded within twenty-four hours. You obviously would want to go with transactional funding if possible, since your obligation is only the day of, but sometimes you may not have a choice. Here’s a chart showing typical transactional funding costs:

0 to $100,000...... $750.00 flat fee $100,001 to $150,000...... 1.50 % $150,001 to $300,000...... 2.00 % $300,001 to $500,000...... 2.50 % $500,001 to $1 million plus...... 3.00%

With both hard-money and transactional funding, you are not using any of your own money. The beauty of real estate is that if you find a good deal, you will find the money. If you find a great deal, you will find an abundance of money competing to do business with you. Instead of these investors placing money in the volatile stock market or negative-earning CDs, they invest it with you—the real estate investor. You reap what you sow. Your hard work will determine how big your payout will be—very unlike throwing money into the stock market and praying for the stock to go up. Remember: in the wholesaling business, you don’t need cash or credit. You will be using OPM: other people’s money. Will it cost you? Sure. But who cares as long as you’re not using any of your money? Charge it to the game.

A–B and B–C Transaction Defined With double-closing, your name actually appears on the title, but you will resell the property the same day to another buyer. For example, you, as the buyer (let’s call you B) close with your seller (we’ll call him A) on a crisp clear blue-sky Friday at 9:30 a.m. Then you turn around, become a seller, and sell to your end cash buyer (we’ll call that person C) an hour later, at 10:30 a.m., with the same title company or attorney. On closing day, your transactional money is wired to the title

9 Aram Shah and Alex Virelles company to pay for your A–B transaction—the purchase price plus your closing costs as indicated on the HUD-1 settlement statement (see appendix A). An hour later, when you sell to your end cash buyer and collect your profits, the same title company wires back the transactional funding plus the fee to the wealthy investor and gives you the rest. The spread between what you buy the property for and what you resell it for (less your fees) is your profit. For example, let’s say you buy the property for $100,000 and resell it for $120,000. There are $5,000 in fees associated with the transaction. Therefore, your profit will be $15,000 ($120,000 minus $5,000 in fees, minus the $100,000 original cost). Here’s a real-life example to give you a better idea of how this process works. Let’s assume you find an incredible deal with a distressed seller who’s getting a divorce and needs to unload a property immediately. “Please just take this property off my hands so I can get rid of her,” he says. It’s a three-bedroom, two-bathroom home. Through your research into comparable sales (which I’ll show you how to do in chapter five), you find that the house is worth $250,000. This poor guy is desperate and accepts your lowball cash offer of $180,000. Now you have the property under contract for $180,000. Naturally, you want to mark up the price to give yourself room to negotiate with your end cash buyer and still make a nice profit. You advertise the property for $199,000. The end cash buyer makes you an offer of $192,500. You accept. You just made $12,500 ($192,500 minus $180,000), and you spent little to no money. How sweet is that? This is why wholesaling is so awesome. You can control the property without owning it, and you spend little to no money getting the property sold. The end buyer is happy because he got a deal under market value, the seller is happy because it was a fast cash closing, and you’re happy because you got a nice fat check. It’s a win-win-win.

10 3 Getting Started: Finding Cash Buyers

One of the biggest mistakes beginning wholesalers make is that they try to find deals and focus on the supply of properties before they find their cash buyers and zone in on the demand side of the business. Unquestionably, the first thing you need to do is build a big, bad buyers list. Without buyers, you can lock up and put hundreds of properties under contract, but they will all slowly decay if you can’t feed them to cash investors.

++Insider’s Tip Whether you plan on doing this part time or be a warrior-like entrepreneur and do it full time, your first step is to incorporate. I suggest an LLC or S-Corp, but talk to your tax advisor or attorney to see what he or she recommends for you. Once you have your LLC or S-Corp in place, you are ready submit offers and start wholesaling properties.

12 The Art of Wholesaling Properties Why You Must Find Your Buyer Before Finding Your Property Before you try to analyze deals or even locate them, you’re going to need buyers. Think quality, not quantity. As you delve further into the business and gain experience, the number of buyers you get will become quite impressive, but remember this: buyers enter and exit the market. A person may have just come into some money from an inheritance, or just sold a home and have some cash at the moment. In five months, after buying one or two properties, this person may not even want to hear about real estate. Therefore, keep your list fresh. Keep it up-to-date with the top players in your market. I know what you’re probably asking yourself: How do I find buyers for something I’m not selling? It’s simple. Some in the industry feel it’s better to find a property first and then try to market it, whether or not you have buyers lined up. While it’s true that there will never be a shortage of buyers for a good deal, reputation is big in this business, and having a stellar reputation will take you a long way. Do you want to be known as a person who ties up properties and can’t get the deal done? I don’t. I want my deals to turn over lightening fast. I want great deals to sell themselves and great buyers to buy them. If you don’t find a buyer, you can lose money if you aren’t on top of important dates and stipulations in the contract. Therefore, my advice is: find some real buyers first, before you make offers.

How to Build a Strong Cash-Buyers List How do you find real buyers? Go where buyers go. Auctions are awesome—there are tons of cash buyers there, all bidding for houses. Some may be buying up tons of properties, and some may not be. Get to know as many of them as you can. Hand out business cards and let them know who you are and what you do. Talk to the guy sitting next to you. Talk to the guy getting a drink at the water fountain. He may think, Who is this weirdo? Who cares? It’s a numbers game. Get your name out there. Your pitch will be that you acquire discounted properties and you’re looking to sell them to cash buyers. At the auction, though, many are hip to the game; you can just say “I’m a wholesaler” and

13 Aram Shah and Alex Virelles they’ll get your drift. Get names, numbers, and e-mails if you can. Any serious investor will have a card. Worst case, give them yours. Your business card can look something like this:

COMPANY NAME YOUR NAME ACQUISITION SPECIALIST (TITLE) CONTACT INFO (PH/FAX/EMAIL) FRONT BUSINESS CARD

I BUY HOUSES CASH. ANY AREA, ANY CONDITION YOUR NAME CONTACT INFO (PH/FAX/E-MAIL) BACK BUSINESS CARD

The best color for cards is yellow, with a black font. It’s simple and stands out. On the back, you can offer a free marketing report on “How to Sell Your Home in Seven Days or Less” as a call to action and list your website. The goal is to get buyers to call, as well as to encourage sellers to get curious. Keep it simple. Have one message. Also, make sure to get the high-gloss two-sided cards, minimum quantity 1,000. Actually, get 2,500. You should use up your supply within thirty days. Get serious.

The #1 Way to Get Cash Buyers: Bandit Signs Next, put some dummy ads out there. You can use Craigslist, the newspaper, and even bandit signs to attract buyers. Bandit signs are the signs you’ve probably seen staked in the ground at stop signs in your neighborhood. They’re cheap. You can get about a hundred signs for $100 (see appendix B). The reason they’re called bandit signs is that some communities and cities prohibit them. You don’t have to be a bandit though. Just make sure you get the proper approval from

14 Appendix C Cash Buyer Question List

Use this script with potential buyers who call you in response to your marketing signs.

1. Are you a cash buyer? Notes: You need to know if you’re dealing with a cash buyer from the start to avoid wasting time. If a caller is approved through a bank, refer that person to your real estate agent partner. This will motivate the agent to continue to work for you and find juicy deals. Tons of financing buyers will call you in response to your signs that say “cash only.” Alternatively, if you have a real estate license, you just got a bigger bang for your buck.

2. Which property are you calling about?

3. What was the price on the sign? Notes: Typically, you shouldn’t advertise more than one property at a time at a specific price so it’s easy to keep track of your deals. For instance, don’t advertise two properties at $129,900; market one at that price, and the other at $130,000.

4. Are you a wholesaler? Notes: Key question. Remember: you want to avoid other wholesalers tying up your property. Tell any wholesalers that they may advertise your property or show it to an interested cash buyer, but you won’t lock it up with them in advance.

129 Appendix D Motivated Seller Question List

Use this script when speaking to motivated sellers when you meet them in person or on the phone.

1. So, can you tell me more about the property? Notes: Your goal is to let them talk. Find out how many bedrooms/bathrooms, type of construction, year built, any illegal additions, liens, or violations. Remember: you should already have this information via your power fifteen-minute fact-finding session, so let the seller validate (or invalidate) your info. Better the latter; you can use that to negotiate the price even lower.

2. If there’s anything you could improve in the property, what would it be? Notes: Your goal is to tactfully determine the extent of necessary repairs. Be careful—it’s their home, and you don’t want to offend anyone by saying their home is a dump on bricks and sticks.

3. Are you occupying the property or do you have tenants living there? Notes: Your goal is to find out occupancy status. If the homeowners are living there, you’ll know you can have a smoother transition as they will be moving by the day of closing. If there are tenants, you’ll have to deal with keeping them in the property or evicting them (and then the costs can be subtracted from the offer price). Also, if the tenants are going to stay based on their rights, you need to find out whether the payments are on time or not.

131 Appendix F Assignment Agreement

Disclaimer: This is for educational purposes only. Please have an attorney draft your state specific agreement. THIS AGREEMENT FOR ASSIGNMENT OF CONTRACT (“Agreement”) is made and entered into this by and between YOUR NAME LLC (hereinafter referred to as “Assignor”), and XYZ Consulting Inc. (hereinafter referred to as “Assignee”), whose address is , and whose telephone number is XXX-XXX-XXXX . WHEREAS, Assignor, as “Buyer,” entered into that certain Deposit Receipt and Contract for Sale and Purchase (the “Contract”) with as “Seller,” a copy of which is attached hereto as Exhibit “A,” for the property located at 1234 MAIN STREET, YOUR CITY, YOUR STATE 33333 (the “Property”); and WHEREAS, Assignee desires to purchase the Property for a purchase price of (the “Purchase Price”) in accordance with the terms and conditions of the Contract; and WHEREAS, Assignor desires to assign all of its privileges, rights, title, and interest under the Contract to the Assignee. NOW, THEREFORE, in consideration of the sum of TEN DOLLARS ($10.00), the mutual covenants herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and/or to be paid at closing, Assignor and Assignee hereby agree as follows:

1. The above recitals are true and correct, including the recital of consideration.

145 Appendix G Joint-VentureAPPENDIX Agreement G

151 Appendix H Sample Marketing Blast

NEW WHOLESALE PROPERTIES WEEK ENDING [DATE] CONTACT [YOUR NAME] WITH OFFERS [email protected] [YOUR NUMBER] HOT DEAL #1 5/3 perfect for handyman, no extensive repair needed; structure in great shape. Needs new kitchen, bathrooms, floorings. Estimated rehab is $10K. After repair value is $140K. This is a true wholesale deal; it’s OFF MARKET … Will not last.

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