The Hard Money Guy | The King Closer Reacts

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Transcript

“Flippers Shouldn’t Buy From Wholesalers”

SPEAKER_00 0:05

What's going on, everybody? Welcome to the King Closer Reacts. I am the King Closer, RJ Basin III, and this is the series where I watch a bunch of videos and tell you if I agree or disagree. But this week, we're gonna change it up a little bit. Somebody inside of TU sent me a reel from a gentleman known as the hard money guy. And the reel was about him saying that he doesn't believe flippers and developers should buy properties from wholesalers. And so without doing any more research, I just watched like the first 30 seconds of a reel. I said, let's do an entire episode just reacting to the hard money guy and see why he is so negative towards wholesalers and see if I agree or disagree. So let's get into the first episode.

SPEAKER_01 1:02

I'm gonna hold your hand when I say this, but good real estate flippers and builders do not buy from wholesalers. In one of my videos, somebody said to me, Why are you always bashing wholesalers? Aren't they like a potential lead source for you? Aren't you leaving money on the table by burning them like that? Yes, and I don't care. I don't want their deals. I don't need them, and I don't want them. Most of these wholesale deals are borderline criminal, in my opinion. And I've seen them consistently$30,000,$40,000,$150,000 wholesale assignment fees. This is bottom of the barrel when it comes to real estate investing. I don't consider you guys investors because you're not investing in real estate. In fact, you're just literally trying to do this without investing any money. Oh, but we pay for ads and shut up. Nobody cares. You take all the margins out of the deal. You do not deserve the bulk of the profit. The real estate developer who purchases the property and takes on managing the construction and carrying that debt, they're the ones that deserve the majority of that money. I can't stand wholesalers. I wish it would be banned in our industry. It's the worst.

Assignment Fees And Buyer Choice

Proof Of Funds Fraud Allegations

SPEAKER_00 2:27

Okay. He said some things. Overall, he didn't say a whole lot other than the fact that he just doesn't like wholesalers. Now, his point, I believe he's trying to make, is that he feels like wholesalers are taking all of the profits. And I agree with him in the fact that the developer or the in buyer should make the bulk of the profit. That being said, our assignment fee is irrelevant. If it's 5,000, 30,000, 150,000. Because if the bulk of the profit is still there for the end buyer, and oh, by the way, if the in buyer chooses to purchase the property, we're not forcing them to buy the property by any means. It's their choice, and they have plenty of choices, then it's their right to buy the property. Now, he his name is the hard money guy, so I'm assuming he's a hard money lender. That being said, if he is upset with the amount of profit that a wholesaler is making on a deal, it is also his right to not lend on that property. He can do that. I don't know why he hates us, though, for bringing a deal. Let's say, for example, if I were to go out and I were to source that deal, and yes, I do deserve to make profit because I am spending money and I am a for-profit organization. That is what I do, right? I make money. So I bring a deal to an end buyer, and the end buyer says, I want to purchase this, and it appraises, and it's a fair amount of profit for that in buyer for the investment and the work that they're making. Why does he care what I'm making as a wholesaler? Everybody along the way is happy. What would change if the end buyer were to go direct to seller or directly out to MLS and buy it for the exact same price? Why does he hate wholesalers? So he feels like we're taking all of the margins out of the deal. Well, then don't lend on those deals. That's your prerogative as the lender to say, I'm not going to lend on these deals. So I don't know why he hates us. He says we're the bottom of the barrel. Okay, fair enough. I'm the bottom of the barrel. I'm not a real estate investor. I've already claimed that. I don't identify as a real estate investor. I identify as a wholesaler. What is his point? Why does he hate us? Let's see if that comes out in the next four reactions.

SPEAKER_01 5:08

It is fraud. Wholesalers just continue to prove why they are literally the bottom of the barrel. There's a wholesaler on this app who's got a large following. And he recently posted that it's easy to get a proof of funds letter, that you can just Google generate one, and literally went into detail to suggest taking the name of whatever lender you feel like and generating your own proof of funds letter. That is fraud. I'll give you guys a quick story about proof of funds letters. I finance fix and flips and new construction projects across New England. I know how to pick good borrowers and I stay away from the bad ones. The bad ones do things like this. We would have issued a proof of funds letter in the past, maybe years ago, and they will take it and put it into some editor and literally doctor it, update it, change it, put different addresses, put different amounts, and then send them out with their offers. This is how stupid they are. When you send a proof of funds letter, which essentially is like a pre-approval letter with your offer, that seller's agent is going to call us to verify the proof of funds letter. And when that happens, we're not going to verify it. We're going to tell them we did not send this letter, we did not write this letter. What does that say about you? We could actually press charges if we wanted to. Wholesalers are just the worst, the absolute worst. And by the way, flippers also do this with proof of funds letters. The amount of times I've had to tell listing agents I did not write that letter. It's fraud. It's fraud. It's fraud, it's fraud.

FBI Visit And A Real Case

Ranking Investors And Attacking Wholesalers

SPEAKER_00 6:59

He saved himself there at the end when he was like, oh, flippers also do this. I was like, bro, your whole story there was from a borrower, aka flipper, landlord, developer, whatever you want to call them, the end buyer, not a wholesaler, committing the fraud. Now, to his point, do wholesalers do this? Yes. Should we? No. Do I? No. Do I teach this? No. Do I adamantly disagree with this practice? Yes. The people that are on that app that he's referring to, being TikTok, going on with a large following and saying you should just go to a hard money lender and get a proof of funds letter, and then you could just edit it or go to Google or Chat or Claude or whatever AI source to do this. Yeah, it's fraud. And he gave a story, but let me give my story about proof of funds letters. I was sitting in this office right here on a titanium university implementation call. Doing what? Teaching wholesaling to 100, 150 TU members, teaching them how to do it ethically, without lying, transparency, honesty, not teaching people how to get fake proof of funds, which by the way, I have never given a proof of funds letter in any of my training. And when I am asked, I tell them, go get it from a lender that actually has the funds and will say, Here is the proof that we will lend on that property. That's what I tell them. So I'm sitting here on this implementation call, and Cassie abruptly opens my office door and says, You need to end the call now. I'm right in the middle of a training. She's like, the FBI is here. Oh. Okay. That's serious. You know, that doesn't happen every day in my lifetime. It happened twice. This being the second time. So I knew how serious it was. Thank God they didn't kick the door down. So I go out and they say, are you RJ Base the third? I am. Uh we need to talk to you about some proof of funds letters. Yes, the FBI came to my office for some proof of funds letters. Now here's the funny thing about it. My proof of funds letters were legitimate. The issue was I submitted these proof of funds letters on offers that I made on properties on the MLS. The issue was the fraud was not done by me, it was done by the agent that I was submitting these deals through. They were taking those proof of funds letters, they were editing out the price that it was approved for and changing it to the price they needed my offer to be. And then they were taking my signature, they were increasing my offer, increasing the proof of funds letters so they could get their short sale approved. Well, that led to arrests being made, and I'm sure you know the rest of the story. Proof of funds are a serious thing. He is correct. That is fraud, and you can get arrested for it. So if you are one of those wholesalers, stop. It's not what we need to do in our industry, and this is why people like the hard money guy hate us. Here we are on our second video, and we're starting to realize why someone is out there bashing our industry. It's because of us. So we're two videos in so far. We deserve his hatred. Let's move on to video three.

SPEAKER_01 10:55

This is my ranking of people in the real estate investment world from the bottom of the barrel to the top of the echelon. Let's go. At the very bottom, we have the wholesalers. These people, these people are always broke. They can't close on their own deals. And let me tell you what their business model is. They try to find a seller that's in dire need to sell, very distressed. Either an elderly person, either people going through divorce, people going through probate, bankruptcies, all kinds of stuff. People that owe tons of taxes. Like these people are already in dire, dire situations. And wholesalers go to them and say, Hey, I'm gonna pay you cash for your house. And then they get it at a severe discount because they tell them they're gonna close quickly. They get it under contract, and then they assign that contract to probably a flipper. And they make a fee. Bottom of the barrel stuff. The next tier we have the flipper. The flippers are brutal to work with. I've made a video before, you guys have seen it. They never have any money. It's always the same thing. They want zero-down payment, they don't want to pay anything for the financing, they go from one flip to the next, and they'll be flipping for 10, 20 years, and they're still just a home flipper, and they never get ahead. The next tier are the people that build smaller, shitty new construction homes. You've seen them all over TikTok. Just go watch the home inspectors on TikTok. The ones that are inspecting these new construction homes, absolute dog crap. Above them are the Burr method people. Oh my god, this has to be like a cult. These people are unbelievably just difficult to work with. And they think that when they're cash flowing$200 a month on a piece of property, they're a real estate tycoon, and you just can't get through to them. Above that are the people building real luxury homes, like real new construction developers. Now we're getting into actual professionals. Above that are the people that are doing real rental properties. And by real rental properties, I mean like 10 plus units. Like these are real real estate investors, real landlords that do good work, that take care of their clients, that build nice properties. 10, 20, 200 plus units. That is a professional organization. And the very top of this list, in my opinion only, very similar to the investors holding 200 units, apartment complexes, and things like that, are the ones that hold really well maintained commercial property.

The Real Harm: Shady Closings

SPEAKER_00 13:32

So he hates everybody. Okay. I mean, I guess I feel slightly better in the fact that I'm at the bottom of the barrel because he hates flippers. He hates people that do new construction unless you're doing luxury or building small multi-units. And uh, he hates Burr. He thinks, you know, landlords are in a cult. So he hates all of us. Okay. I mean, I don't know many people that could just stroll right into, you know what? Never done anything in real estate before. But the first thing I'm gonna do, I'm gonna develop a 20-unit apartment complex. Just right out of the gates. No wholesaling, no flipping, no building a single family home, no owning rentals, no experience whatsoever. We're just gonna go right in. Otherwise, you're a piece of shit. I mean, bro, I was kind of on your side a little bit when you know you were talking about like, you know, the proof of funds and how we do shitty things and we lie. Yeah, I agree with you. But when you describe wholesalers, like we go to people in dire straits that need to sell their house. You're right. Except here's the issue. You said it like here's what wholesalers do. They go to people in bankruptcy and divorce and foreclosure, and they owe taxes, and they get their house under contract for an extreme discount, and then they assign it for a fee. Tonality matters. Here's what wholesalers do. We go to people that are in dire strait, desperate needs, foreclosure, back taxes, divorce, bankruptcy. They need help, and we buy their properties for a discount, and then we assign it to the people that pay cash for it, and we do that for a small fee, and we help those sellers out. Same thing, just a little bit of a different tone, a little bit of a different perspective.

SPEAKER_01 15:46

You're a wholesaler. Please stop calling yourself a real estate investor because you're not. You're not investing in real estate. You're investing in the fact that you can pull one over on sellers that are in a dire financial situation. You're investing on the fact that you can convince newbie flippers of your construction budget, which is always low, and your ARV, which is always high. You're investing in the fact that you've convinced yourself that you're actually helping these sellers, that you're helping them out of financial problems, that you're helping them out of their tax problems and their foreclosures and their probates. Reality is you're not doing any of those things. You're actually just the bottom of the barrel when it comes to people in real estate. And I hesitate to use the term real estate professionals because I don't think it's a very professional industry. Highly experienced real estate investors, whether they're flippers, new construction builders, buy and hold landlords, rarely buy properties from wholesalers these days, and for a good reason. It's no longer an off-market situation when the wholesaler, as soon as they get a property under agreement, is mass-blasting it to large cash buyer lists. It may not be on the MLS, but it's definitely on a market. And somebody always overpays, and many times it's you, the wholesaler, that's making the majority of the money. After ripping off an old lady by buying her house for cheap and screwing a newbie real estate investor by convincing them of numbers that aren't real. I'm not a fan.

Transparency, Regulation, And Industry Reform

SPEAKER_00 17:25

You just did. Nobody's buying deals from wholesalers anymore. It's definitely on a market. Somebody's gonna buy it and overpay for it. What is it? The hard money guy? Is nobody buying deals from wholesalers? Or is everybody buying deals from wholesalers? Cause you just said nobody's buying them, but they always get sold. I don't understand what your point is here. Other than the fact that you're just building a brand for hating on wholesalers and flippers. Is that your like stick? Is that your thing that you want to be known for? Cause I'm totally down for you bashing us for the stupid shit that we do. I was totally ready to be like, the hard money guy has some really good points. And so far, we're 80% of the way through, and you only had one good take so far. Like this was just you saying, bottom of the barrel, we steal properties from people. No, we don't. They they have the right to say yes or no, just like the flipper or the landlord or the developer. They could say yes or no. If they don't believe that there's enough profit in the deal, they don't have to buy it. If the seller doesn't like the offer that we make, they can say no. But there might be people out there that are in such dire need to sell the house that they actually do need to accept those offers. That's the people that we help. And they don't have to go through us, they can go through licensed realtors. Why aren't you bashing the licensed realtors for not getting in contact with these sellers before we do? Why don't they work harder? Why don't your clients, the flippers, the landlords, the developers, the people that you feel like are in the upper echelon, why aren't they getting in contact with these sellers before us? You said we're always broke, but that's not the case. Because otherwise, we wouldn't have the marketing budget to get in contact with these sellers. We wouldn't have a list of cash buyers and a market, the way you put it, to dispo these deals to. So again, you're talking out of both sides of your mouth. I'll give you one more take. Hopefully, it's a good one, because I actually wanted to agree with you.

SPEAKER_01 20:00

The wholesalers will dig their own graves. They don't need me to call them out. They do a great job on their own of giving themselves a terrible reputation. If you go look at the comments in the videos that I've done talking against wholesalers, the jokes just write themselves. Like they literally just keep digging a deeper and deeper hole. One of my biggest pet peeves with wholesalers is that they think they can command the transaction. They think they have any say. Fucking don't. Stay out of it. Don't call me, the lender, don't talk to the appraiser. Nobody wants to do business with you. Nobody wants you on the phone with them. Because all you do is nag, nag, nag, because all you care about is making sure this closes in the shadiest fucking way possible so that the original seller doesn't know. We're not gonna use any of your contacts because your contacts. I'm not gonna tag it here because I don't want to give clout to this person, but there was a wholesaler in one of my comments that said they want to debate me and tear apart my ideas, and none of it was spelled properly, and the grammar was all wrong, and I'm just like I rest my case.

Final Takeaways And Listener Question

SPEAKER_00 21:11

Fucking idiots. Grammar is important, commas are important, it makes an extreme difference. So I'll give them that. Spelling is important. I I hate it when you know sometimes I mumble mouse something in the captions on our videos are misspelled. I'm like, oh, that sucks. But do we control the transaction? Sometimes. Yeah. Sometimes we have great in buyers that come in, we assign the contract over to them. We just have to have normal communications throughout to make sure all parties are communicated with the in the motivated seller, the in buyer, the title company. Everybody's scheduled, everybody's on point, and the lenders perform. Unfortunately, for the hard money guy, hard money lenders are notorious for causing delays. So, not to turn this around and start bashing you because there are some fantastic hard money lenders out there, and this guy might be one. He sounds knowledgeable, sounds like he does a bunch of business. But it is an issue when delays come about. There are times where appraisers phone in an appraisal, and we need to have clarification. There are times where we need to understand what's taking place so we can communicate properly to the seller on the transaction. This is what we do. This is part of our role. And in reality, we outsource transaction coordination. So for the most part, it's not even us, the wholesaler. It's a transaction coordinator like Easy REI closings, which they're a third-party, unbiased to the transaction, just literally trying to make sure everybody is on the same page to get this deal close in an appropriate time frame. Not nagging, not trying to close in the shadiest way possible. In fact, I am in favor of the regulations coming down against wholesalers where we do have to disclose to the seller and the buyer that we are wholesaling. I also teach full transparency with sellers about the fact that we are going to be assigning our contract to an end buyer. So it's not about hiding that from the sellers or being shady, but that's us. That's the titanium way of doing wholesaling. And so, as much as I want to disagree with the hard money guy, he has a point. We as an industry do not do a good enough job of being transparent, and we do nag. We do try to close deals in the shadiest way possible without letting everybody know what's going on. And so he has a point. Does that make us fucking idiots? No. What it does show is that we had poor leadership in the past decade. And that's why people like me are stepping up and saying, enough is enough. We need to be better. We need to be better so people like the hard money guy don't come after us and point out all of our flaws. That being said, I don't think that he needs to be as harsh as he is because it's not really providing value. It's just stating his opinion about the fact that he doesn't want us to call ourselves real estate investors. I agree. We aren't. We are wholesalers. Let's just call it what it is. We aren't investing in real estate. Are we the bottom of the barrel? Today, we are. Do we have to stay there? No. We are valuable to the marketplace. There are end buyers out there that do buy deals from us. In fact, today I talked to a TU member that is based pretty close to this gentleman right here, who has multiple buyers that are buying 20 to 30 properties a month from wholesalers, building those portfolios and doing new commercial developments that he's talking about, that upper echelon. They are buying from wholesalers. So we don't have to stay as the bottom of the barrel, but we do need to be better so we can eliminate these kinds of thoughts and feelings about us as an industry. To the hard money guy, if you've made it this far, if you ever even watch this video, I appreciate your videos. I appreciate your content because you are calling out the negatives about us. The only thing that I would ask is moving forward, don't lump all of us together. There are some of us out here that are trying to make a change for the better for our industry and inevitably turn around and be better for your clients and for your business. All right, guys, that's our episode of The King Closer Reacts. Let me know. Do you agree with the hard money guy? Do you agree with my takes? Let us know in the comments. Regardless, show us some love, like today's video, and we'll see you guys tomorrow.