| Real Estate Wholesaling |
So, what is wholesaling, anyway? Like the term “flipping”, which is a bastardization of
the original meaning thanks to prime-time real estate shows, the term “wholesaling” has
inaccurately become synonymous with “assigning contracts” in the real estate investing
‘education’ circles.
Flipping, originally, had more accurately described wholesaling. Flipping simply meant
acquiring and selling a property quickly, usually, without improvements. Flipping is
accomplished through a number of different mechanisms or transaction structures, like
the “double” or simultaneous closing, whereby the 2nd buyer’s financing is used to float
or close the first. Thanks to the network shows, flipping now means, what I would call,
“rehabbing,” buying below market value, fixing up and then selling at or just below
market value, “buying low, selling high.”
Although an “assignment” is a common mechanism used TO wholesale, the mechanism
inaccurately defines the term, wholesaling. Wholesaling is simply buying below market
value and selling below market value, typically without improvements or sometimes with
partial improvements, “buying low, selling low.” It doesn’t matter if the property is
assigned, or bought and sold outright. It’s still wholesaling!
Assignment of contract simply means assigning the rights of a contract to another
party, technically, through the use of an assignment form and, ordinarily, for a fee. In
the real world, however, assignments are usually realized through the use of a
subsequent purchase and sale contract followed by the structuring of an assignment at
the closing table. Now there’s some fodder for the ‘experts’ to bandy about!
Hello, my name is John Lydic, and I have a story to tell.
_____________________________________________________________________
The Road
“Two roads diverged in a wood, and I -- I took the one less traveled by,
and that has made all the difference.” -- Robert Frost
Growing up in a small boating town on Lake Erie; raised by a single Mom; go-carts,
Banana bikes, forts and a carefree ‘70’s lifestyle; drum sets, amplifiers and electric
guitars; sharing the same court date with my brother for missing too much school; a late
decision to go to college, grants, student loans and remedial catch-up; a Bachelor's
degree; dreams of advertising in Philly; a public relations stint in Cleveland; a Buick
wagon, my drum set and a pair of skis in Colorado; homeless in the North Georgia
Mountains; my record played on the radio in Atlanta … and countless minimum wage
jobs … all of which helped spin the delicate thread that held my desperate, but
determined struggle to achieve some semblance of freedom. Two roads diverged in a
wood, and I … I bought my first investment property in May of 1999.
A Real Estate Investor? Me? This was something that had never even crossed my
mind. I mean, that’s financial stuff, right? To me, a lowly English major who still
counted on his fingers, this would have been akin to being a financial wizard on Wall
Street or a neurosurgeon … far, far removed from reality in my modest world. This kind
of lofty idea was simply out of my league.
But with lust and infatuation comes inspiration. And there she was, stepping out of the
ultimate American muscle machine, a white, Chevy Corvette, at the mailboxes in my
apartment complex. The lines of her body were sleek, smooth and intimidating … the
girl’s, too. I’m not good at saying Hi or introducing myself; I’m more of a stalker. So
after I figured out which building the Corvette parked itself, right next to the community
carwash, basically a hose, I washed my car a lot.
One day, while washing my car, I noticed the subject walking from her building in a
swimsuit, draped in a towel. My chance! I continued washing my car, all nonchalant,
until I knew she was out of sight. Then I jumped in my car, raced back to my apartment,
threw on my trunks and headed toward the pool. I’m such a loser!
I unfolded a lounge chair on the opposite side of the pool where she was situated
reading a book. After taking a couple dips, soaking up the sun and practicing what I
was going to say in my head, I got up the courage to approach. I walked up and said, “I
hope I’m not being too forward, but I was wondering if you might like to have lunch
sometime?” I’m a loser AND a dork! An intimate relationship never developed, but an
intimate friendship surely had. We’re close friends to this day.
My new friend, Tia, was my inspiration and the reason I got into real estate. She was
just getting started in real estate herself. She was one investment property ahead of
me, but we both, basically, started at the same time. We both lived in the same low-
budget apartment complex. And within two years, we both moved into our own MTV-
style cribs, I mean, some really big, really nice homes. It was the first time in my life I
had ever earned any “real” money. I traded my pickup truck for a Ford Expedition and
a Lincoln LX. She upgraded to a Cadillac Escalade and a Porsche. I bought a $10,000
leather sectional with cash. Dumb, Da Dumb Dumb Duuuumb! I furnished the whole
place, big screen TV, refrigerator, washer/dryer, bedroom sets and the obligatory
“bachelor” pool table in the dining room … all with cash.
Most gurus don’t share their failures, but I will. Long story short, I lost everything,
everything material that is. I was simply living beyond my means, and the deals weren’t
coming fast enough. I basically had to start from scratch, once again. What I didn’t
lose was the hard-earned knowledge and expertise I gained in the process. Failure is
only the opportunity to start again, more intelligently and more wisely. I now focus on
cash deals and the REO market.
In this business, it’s easy to go from bountiful peaks to fruitless valleys. You’ll go from,
“Darn, that was easy” to scratching your head, wondering where your next deal will
come from. I cannot stress managing your personal finances enough. You might do a
deal every month; other years, you might earn all your income in just a few. Resist that
shiny new car, unless you have, at least, a six-month personal reserve to get you to
that next deal.
_____________________________________________________________________
How I Started from Scratch
“Sometimes you have to go out on a limb; that’s where the fruit is.”
-- Unknown
For at least a year prior to buying my first investment property, which isn’t too bad for
paralysis of analysis, I was banging my head against the wall. I wasn’t even aware of
the wholesaling concept at the time. So, buying a house, for me, was the result of
finally making myself do something. Everyday, I would ask myself AND my new friend,
“How do I, somebody with no money and bad credit, buy a house?” She always
answered the same way, “Just do it!” As commercial and cliché as it might sound, it was
the best advice I had ever received, and it’s the same advice I give to you. Just do it.
I lived and breathed real estate, or, at least, the thought of it. I definitely had the fire in
the belly. I read all the books that hadn’t already been stolen from the library, most of
which, by the way, taught me nothing about how to actually get started. But they did
help familiarize myself with real estate terms and made me begin to think about
numbers. Numbers were my biggest fear when I was getting started. Although, working
through financial scenarios was great brain calisthenics, I was glad to find out that I
could still be fairly “math stupid” in my new wholesaling career. For example, if I buy a
house for $40,000 and I sell it for $50,000, I make $10,000. That’s the kind of math I
can handle.
I even bought a pickup truck, just to make myself think I was about to use it, somehow,
for real estate. A wholesaler doesn’t need a pickup truck. A rehabber shouldn’t even
need a pickup truck. Regardless of your methods, it is almost always more cost
efficient to hire someone else who needs a pickup truck. You are an investor. An
investor needs paper, a car and a little knowledge. A contractor or handyman NEEDS
a pickup truck, not an investor. (Before someone calls me out, technically, wholesalers
are not investors. Those who buy and hold are investors.)
My friend and I, neither of us owned a computer. She bought a fax machine, and I
bought a fax machine. Because she already had way more of an entrepreneurial
mindset than I did, she used hers to fax “real” stuff like contracts. I used mine to pester
any real estate investor I could find. I would type letters, yes, with a typewriter, from the
floor of my apartment and beg people, “I’ll do anything,” or “I’ll intern for free,” etc.
Tia had taken me down to the “hood” in Atlanta for the first time to show me the house
she had recently purchased. (Apologies, if I’m not culturally licensed to use the term.
It's what I’m used to calling the older, inner-city neighborhoods.) And I got to meet the
homeless man who occupied it. I remember saying to myself, “There is no way I would
buy a house like this.” She explained to me, “This is your bread & butter.”
Still, paralysis of analysis had found yet another avenue to pacify my stagnation. I
would get a job in sales, face my fear of, well, speaking, and, somehow, this would help
me in real estate. I landed a job selling Sears vinyl siding. I once had a job carrying
rocks up the side of a mountain in Boulder, Colorado that provided more dignity than
this sleazy operation. I was actually given a lead to pitch vinyl siding at a home that was
four-sides brick! After a couple months of driving all over hell’s half-acre, chasing leads
to nowhere, I quit.
Only one more wrong turn to go, OK, I can’t do real estate with a day job, so I’ll get a
third-shift job and do real estate during the day. I landed a job on the graveyard shift
working in an archaic, limb and digit-risking envelope factory. It looked like one of
those classic, early 20th century sweatshops, straight out of a Stephen King novel.
Well, that didn’t work either, not enough time in the day for that nonsense, and my arms
were better suited for carrying a cell phone than inserting them all night into a
possessed mangler for $10 bucks an hour.
So, finally, with two weeks before my rent and car payments were due and no money in
the bank, I quit my last job. I learned what hard money was, real hard money, the kind
you get in a back alley. Really, I was referred to a private money lender, an individual
who lends money based on the deal, not your credit or finances. It’s expensive,
though. If you’re in dire straits, you might have to do some digging to find this kind of
money. The hard money you see advertised to investors these days is fairly
institutionalized, but still, comparatively, accessible.
I begged and convinced a wholesaler to give me a contract without requiring earnest
money, and I bought my first house for $36,000. It was a duplex located at 765 Bonnie
Brae Avenue in Atlanta, Georgia. I bought the place with a no-credit-check, hard
money loan at 10pts/18% interest, yikes.
The duplex I bought was already occupied, so I had immediate monthly income to pay
my note. On one side lived an older, slightly over-dressed, but classy, woman, “The
Madam,” and on the other side, a mountain of a man called, “Beer Man.” He sold single
beers, candy bars and other bootlegs. She sold, well, “space” in her unit.
I was able to pull some additional cash out of the repair escrow to stay afloat. For
example, maybe the roof didn’t actually cost as much as what was stated on the invoice,
and the contractor had given the difference back to me. Hey, in the early days, I did
what I had to do, no harm no foul. While putting on a new roof and painting the house,
a lady from across the street who managed a rooming house (or more accurately, a
drug dealer who managed a crack house) had come over to me and said she wished I
could do that to her house. I said give me the name and number of your landlord.
Within two weeks, I had seven rooming houses (drug houses) under contract, all from
one distressed landlord. These houses were beyond imagination, piled with filth, raw
sewage and, in all actuality, should have been bull-dozed.
Keep in mind, at the time I spoke with the neighbor’s landlord, I didn’t even know what
wholesaling was, let alone how to fill out a contract. So I called a wholesaler who was
already well established, who also happened to be one of the investors I was pestering
with my fax machine, my one and only piece of office equipment. I asked him to show
me what to do with the contracts and to help me sell the houses. I, in return, would split
my profits.
After I closed my first deal, I went to Office Depot and had a field day. I bought my first
desk and my first swivel chair. I bought my first computer, my first printer and my first
dry erase board. I even bought my first cell phone; and from that day forward, every
time it rang, it sounded like, cha-ching!
The stars may have lined up for me, but I certainly did a whole helluva lot to help line
‘em up. I ended up buying and selling four other houses on that same street. The
rehabilitation that was going on, in turn, had brought other investors into the area.
Over the course of a couple years, the whole street had turned from a war zone into a
neighborhood. Some homeowners complain about investors, citing more rentals and
lowered property values, but this would be a debate for the suburbs. My business is
lower-end, inner-city, and from my personal experience, what wholesalers do is positive.
You don’t necessarily have to be in dire straits, like I was, to start a wholesaling career.
Practically speaking, it should be much easier with some sort of stability and a cash
reserve. In reality, however, stability often breeds contentment. And contentment is
rarely conducive to change.
Once paralysis of analysis is confronted and cured, it shouldn’t take more than a few
months of feet on the streets to realize your first deal. And if you happen to come from
humble beginnings, like I had, your first check at the closing table will blow your mind.
If you would like to learn the nuts and bolts of real estate wholesaling, I have poured my
heart and soul into a practical, easy to read guide, which is now an affordable eBook.
Please visit my site below.
Thanks,
John Lydic
the original meaning thanks to prime-time real estate shows, the term “wholesaling” has
inaccurately become synonymous with “assigning contracts” in the real estate investing
‘education’ circles.
Flipping, originally, had more accurately described wholesaling. Flipping simply meant
acquiring and selling a property quickly, usually, without improvements. Flipping is
accomplished through a number of different mechanisms or transaction structures, like
the “double” or simultaneous closing, whereby the 2nd buyer’s financing is used to float
or close the first. Thanks to the network shows, flipping now means, what I would call,
“rehabbing,” buying below market value, fixing up and then selling at or just below
market value, “buying low, selling high.”
Although an “assignment” is a common mechanism used TO wholesale, the mechanism
inaccurately defines the term, wholesaling. Wholesaling is simply buying below market
value and selling below market value, typically without improvements or sometimes with
partial improvements, “buying low, selling low.” It doesn’t matter if the property is
assigned, or bought and sold outright. It’s still wholesaling!
Assignment of contract simply means assigning the rights of a contract to another
party, technically, through the use of an assignment form and, ordinarily, for a fee. In
the real world, however, assignments are usually realized through the use of a
subsequent purchase and sale contract followed by the structuring of an assignment at
the closing table. Now there’s some fodder for the ‘experts’ to bandy about!
Hello, my name is John Lydic, and I have a story to tell.
_____________________________________________________________________
The Road
“Two roads diverged in a wood, and I -- I took the one less traveled by,
and that has made all the difference.” -- Robert Frost
Growing up in a small boating town on Lake Erie; raised by a single Mom; go-carts,
Banana bikes, forts and a carefree ‘70’s lifestyle; drum sets, amplifiers and electric
guitars; sharing the same court date with my brother for missing too much school; a late
decision to go to college, grants, student loans and remedial catch-up; a Bachelor's
degree; dreams of advertising in Philly; a public relations stint in Cleveland; a Buick
wagon, my drum set and a pair of skis in Colorado; homeless in the North Georgia
Mountains; my record played on the radio in Atlanta … and countless minimum wage
jobs … all of which helped spin the delicate thread that held my desperate, but
determined struggle to achieve some semblance of freedom. Two roads diverged in a
wood, and I … I bought my first investment property in May of 1999.
A Real Estate Investor? Me? This was something that had never even crossed my
mind. I mean, that’s financial stuff, right? To me, a lowly English major who still
counted on his fingers, this would have been akin to being a financial wizard on Wall
Street or a neurosurgeon … far, far removed from reality in my modest world. This kind
of lofty idea was simply out of my league.
But with lust and infatuation comes inspiration. And there she was, stepping out of the
ultimate American muscle machine, a white, Chevy Corvette, at the mailboxes in my
apartment complex. The lines of her body were sleek, smooth and intimidating … the
girl’s, too. I’m not good at saying Hi or introducing myself; I’m more of a stalker. So
after I figured out which building the Corvette parked itself, right next to the community
carwash, basically a hose, I washed my car a lot.
One day, while washing my car, I noticed the subject walking from her building in a
swimsuit, draped in a towel. My chance! I continued washing my car, all nonchalant,
until I knew she was out of sight. Then I jumped in my car, raced back to my apartment,
threw on my trunks and headed toward the pool. I’m such a loser!
I unfolded a lounge chair on the opposite side of the pool where she was situated
reading a book. After taking a couple dips, soaking up the sun and practicing what I
was going to say in my head, I got up the courage to approach. I walked up and said, “I
hope I’m not being too forward, but I was wondering if you might like to have lunch
sometime?” I’m a loser AND a dork! An intimate relationship never developed, but an
intimate friendship surely had. We’re close friends to this day.
My new friend, Tia, was my inspiration and the reason I got into real estate. She was
just getting started in real estate herself. She was one investment property ahead of
me, but we both, basically, started at the same time. We both lived in the same low-
budget apartment complex. And within two years, we both moved into our own MTV-
style cribs, I mean, some really big, really nice homes. It was the first time in my life I
had ever earned any “real” money. I traded my pickup truck for a Ford Expedition and
a Lincoln LX. She upgraded to a Cadillac Escalade and a Porsche. I bought a $10,000
leather sectional with cash. Dumb, Da Dumb Dumb Duuuumb! I furnished the whole
place, big screen TV, refrigerator, washer/dryer, bedroom sets and the obligatory
“bachelor” pool table in the dining room … all with cash.
Most gurus don’t share their failures, but I will. Long story short, I lost everything,
everything material that is. I was simply living beyond my means, and the deals weren’t
coming fast enough. I basically had to start from scratch, once again. What I didn’t
lose was the hard-earned knowledge and expertise I gained in the process. Failure is
only the opportunity to start again, more intelligently and more wisely. I now focus on
cash deals and the REO market.
In this business, it’s easy to go from bountiful peaks to fruitless valleys. You’ll go from,
“Darn, that was easy” to scratching your head, wondering where your next deal will
come from. I cannot stress managing your personal finances enough. You might do a
deal every month; other years, you might earn all your income in just a few. Resist that
shiny new car, unless you have, at least, a six-month personal reserve to get you to
that next deal.
_____________________________________________________________________
How I Started from Scratch
“Sometimes you have to go out on a limb; that’s where the fruit is.”
-- Unknown
For at least a year prior to buying my first investment property, which isn’t too bad for
paralysis of analysis, I was banging my head against the wall. I wasn’t even aware of
the wholesaling concept at the time. So, buying a house, for me, was the result of
finally making myself do something. Everyday, I would ask myself AND my new friend,
“How do I, somebody with no money and bad credit, buy a house?” She always
answered the same way, “Just do it!” As commercial and cliché as it might sound, it was
the best advice I had ever received, and it’s the same advice I give to you. Just do it.
I lived and breathed real estate, or, at least, the thought of it. I definitely had the fire in
the belly. I read all the books that hadn’t already been stolen from the library, most of
which, by the way, taught me nothing about how to actually get started. But they did
help familiarize myself with real estate terms and made me begin to think about
numbers. Numbers were my biggest fear when I was getting started. Although, working
through financial scenarios was great brain calisthenics, I was glad to find out that I
could still be fairly “math stupid” in my new wholesaling career. For example, if I buy a
house for $40,000 and I sell it for $50,000, I make $10,000. That’s the kind of math I
can handle.
I even bought a pickup truck, just to make myself think I was about to use it, somehow,
for real estate. A wholesaler doesn’t need a pickup truck. A rehabber shouldn’t even
need a pickup truck. Regardless of your methods, it is almost always more cost
efficient to hire someone else who needs a pickup truck. You are an investor. An
investor needs paper, a car and a little knowledge. A contractor or handyman NEEDS
a pickup truck, not an investor. (Before someone calls me out, technically, wholesalers
are not investors. Those who buy and hold are investors.)
My friend and I, neither of us owned a computer. She bought a fax machine, and I
bought a fax machine. Because she already had way more of an entrepreneurial
mindset than I did, she used hers to fax “real” stuff like contracts. I used mine to pester
any real estate investor I could find. I would type letters, yes, with a typewriter, from the
floor of my apartment and beg people, “I’ll do anything,” or “I’ll intern for free,” etc.
Tia had taken me down to the “hood” in Atlanta for the first time to show me the house
she had recently purchased. (Apologies, if I’m not culturally licensed to use the term.
It's what I’m used to calling the older, inner-city neighborhoods.) And I got to meet the
homeless man who occupied it. I remember saying to myself, “There is no way I would
buy a house like this.” She explained to me, “This is your bread & butter.”
Still, paralysis of analysis had found yet another avenue to pacify my stagnation. I
would get a job in sales, face my fear of, well, speaking, and, somehow, this would help
me in real estate. I landed a job selling Sears vinyl siding. I once had a job carrying
rocks up the side of a mountain in Boulder, Colorado that provided more dignity than
this sleazy operation. I was actually given a lead to pitch vinyl siding at a home that was
four-sides brick! After a couple months of driving all over hell’s half-acre, chasing leads
to nowhere, I quit.
Only one more wrong turn to go, OK, I can’t do real estate with a day job, so I’ll get a
third-shift job and do real estate during the day. I landed a job on the graveyard shift
working in an archaic, limb and digit-risking envelope factory. It looked like one of
those classic, early 20th century sweatshops, straight out of a Stephen King novel.
Well, that didn’t work either, not enough time in the day for that nonsense, and my arms
were better suited for carrying a cell phone than inserting them all night into a
possessed mangler for $10 bucks an hour.
So, finally, with two weeks before my rent and car payments were due and no money in
the bank, I quit my last job. I learned what hard money was, real hard money, the kind
you get in a back alley. Really, I was referred to a private money lender, an individual
who lends money based on the deal, not your credit or finances. It’s expensive,
though. If you’re in dire straits, you might have to do some digging to find this kind of
money. The hard money you see advertised to investors these days is fairly
institutionalized, but still, comparatively, accessible.
I begged and convinced a wholesaler to give me a contract without requiring earnest
money, and I bought my first house for $36,000. It was a duplex located at 765 Bonnie
Brae Avenue in Atlanta, Georgia. I bought the place with a no-credit-check, hard
money loan at 10pts/18% interest, yikes.
The duplex I bought was already occupied, so I had immediate monthly income to pay
my note. On one side lived an older, slightly over-dressed, but classy, woman, “The
Madam,” and on the other side, a mountain of a man called, “Beer Man.” He sold single
beers, candy bars and other bootlegs. She sold, well, “space” in her unit.
I was able to pull some additional cash out of the repair escrow to stay afloat. For
example, maybe the roof didn’t actually cost as much as what was stated on the invoice,
and the contractor had given the difference back to me. Hey, in the early days, I did
what I had to do, no harm no foul. While putting on a new roof and painting the house,
a lady from across the street who managed a rooming house (or more accurately, a
drug dealer who managed a crack house) had come over to me and said she wished I
could do that to her house. I said give me the name and number of your landlord.
Within two weeks, I had seven rooming houses (drug houses) under contract, all from
one distressed landlord. These houses were beyond imagination, piled with filth, raw
sewage and, in all actuality, should have been bull-dozed.
Keep in mind, at the time I spoke with the neighbor’s landlord, I didn’t even know what
wholesaling was, let alone how to fill out a contract. So I called a wholesaler who was
already well established, who also happened to be one of the investors I was pestering
with my fax machine, my one and only piece of office equipment. I asked him to show
me what to do with the contracts and to help me sell the houses. I, in return, would split
my profits.
After I closed my first deal, I went to Office Depot and had a field day. I bought my first
desk and my first swivel chair. I bought my first computer, my first printer and my first
dry erase board. I even bought my first cell phone; and from that day forward, every
time it rang, it sounded like, cha-ching!
The stars may have lined up for me, but I certainly did a whole helluva lot to help line
‘em up. I ended up buying and selling four other houses on that same street. The
rehabilitation that was going on, in turn, had brought other investors into the area.
Over the course of a couple years, the whole street had turned from a war zone into a
neighborhood. Some homeowners complain about investors, citing more rentals and
lowered property values, but this would be a debate for the suburbs. My business is
lower-end, inner-city, and from my personal experience, what wholesalers do is positive.
You don’t necessarily have to be in dire straits, like I was, to start a wholesaling career.
Practically speaking, it should be much easier with some sort of stability and a cash
reserve. In reality, however, stability often breeds contentment. And contentment is
rarely conducive to change.
Once paralysis of analysis is confronted and cured, it shouldn’t take more than a few
months of feet on the streets to realize your first deal. And if you happen to come from
humble beginnings, like I had, your first check at the closing table will blow your mind.
If you would like to learn the nuts and bolts of real estate wholesaling, I have poured my
heart and soul into a practical, easy to read guide, which is now an affordable eBook.
Please visit my site below.
Thanks,
John Lydic
John Lydic is the author of the popular eBook, “How to Wholesale Houses,” an
essential guide to real estate wholesaling. John was never homeless in the cardboard
box sense of the word; he had a Buick wagon and a pup tent. It was more like
transitional homelessness. He was between jobs, states and life direction. Below is a
glimpse into his improbable start as a real estate wholesaler.
essential guide to real estate wholesaling. John was never homeless in the cardboard
box sense of the word; he had a Buick wagon and a pup tent. It was more like
transitional homelessness. He was between jobs, states and life direction. Below is a
glimpse into his improbable start as a real estate wholesaler.
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