Tim Bell introduces wholesale real-estate "exit strategies," defining an exit strategy as the method to leave a wholesale deal with a check in hand (not clauses to void deals). He outlines several tactics—buy-and-resell (using your own funds), assignment of contract, simultaneous/double close, and transactional funding—and previews pros and cons (capital needs, closing-cost erosion, ownership timing).
Now let's move on to wholesale strategies. There are three basic exit strategies for a wholesale deal. Now, when I say exit strategies, please don't hear weasel clauses or ways to get out of the transaction on a failed transaction. Okay? We will talk about those later on, but we're not going to talk about those right now. Right now, we. When I say exit strategy, I mean, what strategy am I going to use to walk away from that property with a check in my hand? Obviously, that's our primary goal, is to get paid to do our wholesale deal. So when I say exit strategies, I'm not talking about weasel clauses or ways to get out of the deal. What I'm talking about is ways to exit that deal such that we have a check in our hand. That's what we're talking about. Okay? Now, there are three basic exit strategies that are listed here. Okay, There is one strategy that's not listed here that is a viable strategy. The reason it's not listed here is because it may not be the best strategy. Okay, so the one that could fit in up above assignment of contract would be for you to buy the property from the seller with your own money and then immediately turn around and resell the property to the buyer for a little bit more money. That's viable. You could certainly do that. Or, okay, the problem with that strategy is twofold. Number one, you may not have the money to take down the property with the seller in the first place. If you don't have that money, that's not going to be a viable strategy. Here's the thing, though. Even if you do have the money to take down the property with the seller in the first place and then immediately turn around and resell it to the buyer, there's typically going to be closing costs that are involved in both of those transactions. And those closing costs could be such that they would erode a portion of your wholesale fee. So let's say, for example, that you built in a $10,000 wholesale fee, but you had $4,000 in closing costs for your deal with your seller, and you had 2,000 in closing costs. And those are just arbitrarily chosen amounts. $2,000 in closing costs for your transaction with the buyer. Well, 4000 plus 2000, that's 6000. So now your $10,000 wholesale fee is down to 4000, not as good. So again, it's certainly a viable strategy. And if you choose to do that, that's terrific. There's nothing wrong with it. It's just that the number one problem is you got to come up with the money to take down the property with the seller in cash. And number two, even if you do have that money, then the closing costs that are involved in both of those transactions could be prohibitive and could erode your wholesale fee to the point where it may not be worthwhile for you anymore. Okay, so let's talk about some strategies that are viable, some strategies that I do recommend. Now, I will tell you that there are some people that teach people about wholesaling that don't consider simultaneous close or double close and transactional funding. They don't consider those as wholesale exit strategies. Okay, I do lump all three of the exit strategies together. The reason they don't is consider them wholesale strategies is because technically you do own the property for a short period of time, a very short period of time, when you're using the simultaneous close and you're using the transactional funding. Okay? With an assignment of contract, you never own the property. You're basically controlling the property and you're selling the agreement, the contract, the paperwork, rather than selling the property because you never close or never own the property.
