Build Your Vetted Cash Buyer And Motivated Seller List
Crooked and Legal Methods Cash Buyers Use to Get Their Money
Don’t have one lense when viewing cash buyers because they can be both crooked and legal. When dealing with a fraud you are left in a world where you do not know what is real. When you deal with trustworthy cash buyers you earn profits and have good feelings.
These are some of the ways cash buyers are both crooked and legal.
Your Cash Buyer Might Be a Middleman
Sometimes buyers are really middlemen that build relationships with buyers. There is an article on BiggerPockets by Craig Covert that recommends to real estate investors that want to take on less risk to become millionaires should become wholesalers. He says: "The safe bet if you elect to be a Million Dollar Middleman is to be a wholesaler who usually works with cash buyers... The Middleman’s secret is to work backwards; marketing to find buyers first before finding good deals to sell to them.” Many Consultants also find end buyers and are middlemen. You are not dealing with an end buyer when the buyer is really a middlemen that finds money. You want to deal directly with principal buyers.
Your Cash Buyer Might Not Be Real
When most of the industry doesn’t have cash you spin your wheels a lot trying to put a deal together. It is key to build the right relationships with end buyers and vet them. You will not know if they are the end buyer until you have experience with them. Even bank statements supplied by buyers are forged. This is also how long Daisy Chains of middlemen saying that they know a buyer when really they know someone that thinks they know a buyer when they really don’t. The real estate industry is full of entrepreneurs that find it easy to get into the industry and try to put deals together and do not invest in their own marketing systems to vet buyers. That’s why I have the Flock where, after finding your own buyers, you can have them vetted by the marketplace without risking losing control of your buyers. Bring them to the marketplace.
Your Cash Buyer Might Be Laundering Money
Marc Cohodes, who used to run one of the largest Wall Street hedge funds thinks that money launderers are actually killing people and cannot explain where they get their money from after buying million dollar houses in Vancouver, according to this video on Global News with Amy Judd. Cohodes believes that the Vancouver market could go down 50%. He says that the Chinese government wants money to stay in China and that it is flowing out. He says it’s "not a supply and demand thing, it’s a follow the money, money laundering, thing.”
I wouldn’t dismiss Cohodes comments as racism because he seems to believe he is advocating and voicing his concerns about a real problem. I know that there are a lot of fraudulent people that claim to be big buyers and this problem could be more widespread than I initially thought; There are a few big cities across North America that could be facing bubbles and it might be due to money laundering from foreign buyers. I asked Cohodes what makes him think that it is money he says he cannot explain it all in a few tweets. I am waiting to hear back whether we will do a longer interview.
Your Cash Buyers Pool Funds
I was at the Edmonton Real Estate Investors Association and they were educating investors on how to set up a fund that uses other peoples’ retirement savings fund to earn a higher return on investment than average investments like stocks and bonds. They mentioned that they aim for 10-12% return and I do not think that it’s worth doing this type of strategy because you can earn that return by investing in a REIT (Real Estate Investment Trust) fund with less risk because REITs are larger, have a more diversified portfolio, and more professional management.
Your buyer can be a REIT or hedge fund that pools money from everyday working people. These buyers can have billions of dollars. It’s hard to tell who is really a billion dollar hedge fund when you are talking to them because they are too good to be true when you speak to them. It’s good to act like they are the real deal when you meet them. Protect your sellers contact information.
Your Cash Buyers Have Day Jobs And Get Mortgages
Some of your cash buyers are ordinary people that work. They aren’t entrepreneurs in the sense that they get in the middle of trying to put deals together. They are mostly investors. They have the cash. They might not have billions of dollars but they can help average real estate professionals close real deals. Their story is more believable so there is less chance of fraud.
Lots of cash buyers build relationships with lenders all of the time because they use funds from mortgages to buy investment property. I don’t know how realistic it is for your cash buyer to already have taken out a mortgage and be ready to buy because mortgage brokers and real estate brokers generally work with these types of buyers to prepare them to make a purchase. I have seen in my database cash buyers get their funds from mortgages nonetheless - even high interest rate mortgages - and are ready to buy.
Some buyers use vendor financing. Vendor financing require that the buyer have direct access to the seller so that they can negotiate with the seller to provide a mortgage for them. You can also try to negotiate the deal for the buyer and seller.
These are some of the ways that cash buyers are both real and fake.
What have you done to determine whether your cash buyers are real?