Hedge funds and iBuyers are the “buzz words” in the wholesale industry because of their seemingly unlimited buying power.

 

  • They are continuously purchasing thousands of homes, always raising money to buy more properties, and there always cash buyers.
  • This would make them a logical prospect for wholesalers to sell their deals and many are doing exactly that.
  • What these buyers are looking for is a very minimum rehab on the property, and preferably cosmetic only.
  • Most of their transactions come from listed properties that wholesalers can get under contract slightly below the list price, this source of deals depends heavily on the specified fund’s needs.
  • Every fund has specific guidelines that are available to anyone who asks and often funds will tell you what zip codes interest them.
  • There is a growing number of so-called “hedge funds” that are in name only, meaning a wholesaler simply names his LLC in the same manner as an actual fund and uses this as leverage to attract wholesalers.
  • I’ve seen these bogus funds use a proof of funds that you could see was “manufactured” by the “fund manager” but it got them deals.
  • When funds got active years ago, they would do assignments with investors and a few still do if the net profit to the wholesaler is less than a specific amount.
  • Nowadays, these same funds mostly do double closings on the same day as the investor purchases the deal, but a few have a guideline not to close for several days after the A to B closing.
  • These types of extended transactional findings are deal killers for transactional lenders because of the risk the fund doesn’t close after the A – B “leg” of the closing has been fully paid.
  • In my experience and insider comments by closing agents, the funds only close about 50% of the time.
  • Some funds are better than others, but you have a large risk right up to the day of closing.
  • Most funds use their own purchase contracts and their cancellation clause allows them to get out of the deal through the day of closing.
  • The other risks in dealing with these funds are they often want a discount for repairs just before closing which can take your expected profit to virtually zero.
  • If they cancel, you won’t have time to resell your deal because it is literally a retail property, and retail buyers take time to close as they are seldom cash buyers.
  • If your profit is substantial (over $35,000 as an example) the fund may cancel at the last minute and go directly to the seller and “steal the deal”.
  • These buyers can be fantastic, but they also come with “Seller Beware!”

 

If you have any additional questions, contact me directly at DaveDinkelQuestions@gmail.com.

If you need hard money instead of transactional funding, contact me for referrals to private hard money lenders.

Be sure to check out BestTransactionalFunding.com for all your same-day double closing needs, including a list of Investor-Friendly Closing Agents in various states.

We have more five-star Google ratings than all the other transactional funders combined.

 

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