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Hi Moguls, Steph Davis here with a clear explanation of how I structure my co-wholesale deals. This lesson is in response to a question from a student of mine. Usually when one student asks a question, I know others are probably wondering the very same thing. So here we go…
This question comes up when you have a property under contract and another wholesaler brings the buyer to the table – or vice versa – you have a buyer and the other investor brings the deal.
Either way, it seems to be a foggy area that needs clarification. I’ve seen this done many different ways - different investors use different paperwork and methods.
But in this lesson, I’m giving you two things:
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The way you shouldn’t structure your co-wholesale deals.
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The way I do structure my co-wholesale deals.
First, How Not to Structure Your Deals
On occasion, a wholesaler may approach you with a deal in hand and is looking to you to bring a buyer into the picture. This wholesaler may suggest that they assign the contract to your buyer, collect the fee, then divide it between the two of you after the deal closes.
I strongly suggest you not go this way.
If the details are not in writing – and signed – there’s nothing to keep the other investor from taking the entire check and you never seeing them again. You want to protect your interest – and you do that by getting everything in writing.
Also, this becomes a gray area of possibly appearing to be brokering without a license. You are receiving money and there is no contract or assignment documents – that could spell trouble for you.
A Case Study
Here’s an example of a deal I recently closed by using a co-wholesaler. He had a property in an area that I’m very familiar with. I had a buyer (a cash buyer – but not an investor) who was looking for property in that area. It was a great fit.
This co-wholesaler had the property under contract for $80k and my end-buyer was willing to pay $88k. We did a double assignment.
The wholesaler who had the property under contract, assigned the purchase and sale agreement to me for $4k. I did another assignment of contract between me and my end-buyer. I assigned my contract to the end buyer for a $4k fee. The title company cut a check for $4k to the other wholesaler and $4k to me.
And that is the way I structure deals with my co-wholesalers. It’s very straightforward.
I know other wholesalers use a joint-venture agreement. I’ve never done that simply because the way I do it has always worked for me.
The main takeaway here is that you always get the agreement in writing. Never simply trust that you will be paid. Plus, you don’t want to get in trouble by being paid outside of closing without having some type of document in place.
How Do You Co-Wholesale?
What type of structure do you use? I love hearing back from you, so leave your comments in the comment box below.
Actively seek out other wholesalers to partner with – this guarantees more deals and more income.
Structure your co-wholesaling deals with a double assignment.
Always make sure everything is documented, in writing, agreed upon and signed.
Steph Davis
started wholesaling in October of 2006. At the time, she had been stuck at a job bartending for the past 10+ years. She was broke and miserable, and desperately wanted out of the bar scene, which I had been stuck in for the last 10+ years.
She ended up closing four wholesale deals by the end of 2006.
Since then, she's closed more deals than she can count, has written two best selling wholesaling courses (Flip This REO and The Cash Buyer Ninja) and continues to teach others how to wholesale with videos, interviews, and as much useful information as she possibly can, because she knows what it’s like to be a broke beginner, struggling to get that first deal.