How to Double Close and Become a TRUE Real Estate Wholesaler
Real wholesaling done right is rare, and only a few people in every market really do it. What do I mean? All wholesalers are NOT the same.
Sean Cole, who has been wholesaling since 2012 and has completed over 350 that have generated over $2.5 million in gross profit, is one of those rare wholesalers. In a recent conversation, he explained why all wholesalers are not the same, as well as what he does to differentiate himself from other investors and how you can do the same.
All Wholesalers Are NOT The Same
Sean believes there is a distinction between “wholesaling” and simply assigning contracts. The main difference is that the former has skin in the game, while the later does not. “I think that wholesalers get a bad rap because they don’t have skin in the game,” Sean speculated. “Maybe they don’t have the ability to close, but when I come to the closing table, I pay for every house.” Sean continued, saying “what we try to do is differentiate ourselves from a lot of beginners that are just figuring out the business that call themselves ‘wholesalers’ but they’re really just assigning contracts.”
How does Sean differentiate himself? Rather than assigning contracts, he follows the double close wholesaling strategy, which is also referred to as the simultaneous close.
How Does a Wholesaler Double Close?
Sean outlined the double close process in five steps:
· Find Property: “We go out and find a property that’s a good deal for an investor.”
· Due Diligence: “[Next], we do all of the due diligence necessary. It is real due diligence. It is not a 3,000 square foot house that we say needs $10,000 in work to be a half million dollar house.”
· Create Rehab Budget: “We go through the house, [and] we put together a detailed rehab budget for the house with a breakdown of where that money is going to be spent.”
· Find a Buyer: “Then we find an investor that wants to buy the house and fix it up and we sell them the house.”
· The Double Close: “We also close on the purchase. I buy the house in the morning and sell it to [the investor] in the afternoon and I make a little bit of money in the middle for doing that work.”
Sean explained that “[the double close] is pretty similar to what people would call wholesaling but we are not just moving contracts around. We have skin in the game on buying house. We have the ability to close and we do close and buy every house that we re-sell.”
Essentially the main difference between Sean’s double close strategy and assigning contracts is that Sean actually “flips” the property, rather than just “flipping” a contract.
What Advantages Does a Wholesaler Have With the Double Close?
Sean provided four advantages of the double close over assigning contracts:
· Skin in the game: “One of the big advantages is having skin in the game for our customers understanding — the folks that we’re buying from and that we are selling to — that we have the ability to buy.”
· Fix-and-Flip Back-up Plan: “We aren’t out buying a house that we wouldn’t rehab ourselves.” For example, last year, Sean had a property under contract that he couldn’t find a buyer for. Since he was going to close on it anyway, he just closed it, fixed it up, and resold it himself.
· Advertising Flexibility: “There are a few advantages that revolve around some real estate advertising laws here in Cincinnati. If you’re assigning a contract, you can’t really talk about the house at all because you’re selling a contract, not a house. But for us, we are actually selling the house, so we’re able to do some things a little differently with advertising.”
· Hide “Assignment” Fee: “It also let’s us hide from our customers. Sometimes we find really great deals where we can make a lot of money. If we do an assignment, that’s disclosed to your buyer upfront. We’ve had situations in the past where folks decided not to buy a house after they saw how much money we make. When you double close, it’s not private forever, but it’s private until after the transaction closes.”
Ding ding ding!! That last point — hide the assignment fee — is HUGE. I’ve heard and read many stories about wholesalers who’ve had their fees cut at the very end because the end buyer saw how much money they were making off the deal. I’m sure the seller was thinking, “wait a second. I’m getting a good deal but you’re getting too good of a deal. I don’t know about that!”
There is a difference between “wholesaling” and assigning contracts. According to Sean, true wholesalers are the ones who double close. The double close involves actually purchasing the property at closing and then “flipping” the property to an investor later that same day.
There are four advantages that the double close has over assigning contracts:
· The wholesaler has skin in the game, which is comforting for both the investor selling the property and the investor purchasing it.
· If the wholesaler can’t find a buyer, they can take down the property themselves, rehab it, and sell it.
· Since the wholesaler is selling the property and not selling a contract, they have more flexibility when advertising the property.
· The biggest advantage: the buyer won’t see the wholesaler’s “assignment fee” at closing.
If you have the capital to double close, based on these advantages, I would highly consider adopting that strategy! If not, another strategy would be to continue assigning contracts and save up your assignment fees until you are able to follow the double close strategy.
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