Wholesaling To Flipper: How To Make An Offer

Wholesaling To Flipper: How To Make An Offer

Wholesaler · Fairfield, CA · Member since 2017 · 472 posts · 145 votes

Hi BP,

I am scrambling right now to make the right offer in the right way by tomorrow noon. I am in the nor cal market and the house has ARV 360 so I figure my max offer allowable is 360-(55k repairs)-(my 10k wholesale fee)-(60k for holding costs and flipper profit) = MOA of 235k

I figure my intitial offer should be around 215k. 

What do you guys think? Even if you dont know the market some advice would be better than none and guesstimates are better than nothing. Is this too low for a seller to accept or too high for a flipper to think it is a good deal?

My negotiation strategy is give them my 215k lowball offer and then if they object ask how close they can come to that number? Then to whatever they say I will reply with "is that the best you can do?". then to whatever they say I reply "So if I pay you all cash and can close quickly how much lower can you go?" 

Then I figure if they arent anywhere near 235 by that point I say "I want to put this money in your pocket but it has to work for both of us. How much lower can you go? I'll have to get on the phone with my partner because we set a certain number I could not go higher than."  

If you can help with any aspect of this problem please feel free.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y

cody lets just do simple math.  of how a flipper would look at this deal.

ARV 350k Minus 10% for selling costs which includes the realtor fee tax's insurance utls etc while holding it.

now most flippers ( myself included) are going to borrow money some where so lets be generous and say 2 points and 10%  plus closing costs.. so lets say they borrow 200k for a round number  that 4k in points 10k in interest so that's 14k for financing lets just say 15k.

Now lets say your SOW is 55 in your mind lets say in reality its probably 65k. 

So we have 65k rehab  your fee of 10k  35k resale cost and 15k holding costs.  about 125k to get it done.

350 - 125 = 225k  and most folks are going to want to make 15% on gross  so right at 55k HOPEFULLY although now a days you might find someone that would take a swing at this for 25 to 30k but most won't.  225k - 55k  and the flipper will want to pay 170k ish for it...

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  • Wholesaler · Fairfield, CA · Member since 2017 · 472 posts · 145 votes
    8y

    This is great stuff. Would it be a good idea and ethical to make a flip book and proof of funds with my mentor's info? He dang near owns half the county! He is always ready to close so that is not an issue (30 flips or more a year, as many deals as he can get his hands on). I have quite a few legit buyers/people coaching me waiting to buy any property I bring to them so my ability to close is rock solid.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    @Cody Evans  issue is your acting as a real estate agent without a license when you do that,  that is clear. but once your licensed you walk in and say I have a client that will pay this for it.. and my fee is this for putting it together for you.. that's how the industry works.. this wholesaling thing is just that a thing to sell how to info.. its one thing to assigne the occasional contract.. but to assign all of them then your smart think it through are you really selling real estate in a non licensed capacity.

    your buyers don't care .. they just want the deals.. they could careless were they come from.. your just a means to their end.. unless they are paying you up front for your cost and your marketing.. then that is what I call a true mentor or business partner..

    I mean I am a mentor you can bring me any deals ... I may buy I may not but I am not giving you one dime up front.. LOL. see how that works.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    Cody let me give you an example of how license works.

    I just closed last Thursday on a lot in Charleston I am going to build on.

    the agent found the deal... its a smoking deal for me.. he made 9k double ended commish from the seller. and I paid him a 10k bonus.. so all legal all above board and on a 150k deal he made 19k..

    plus he will get the list backs on two 650k houses .. so even with broker split he stands to make another 30k or so.... so that is 50k basically with NO exposure.. and just doing what a top producing licensed agent does.

    you CAN make your commish and legal sell. if your mentors are any good they will pay you buyers brokers bonus if you are bringing in good deals.. and you get in the power position.. you have control..

    you have a listing and

  • Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
    8y

    @Cody Evans never sssume they are 100% solid. Until you have done deals with them, they may say that, you bring them the original deal asking $235k, and none of them bite... now you are stuck with either trying to close on your own, or backing out.

  • Wholesaler · Fairfield, CA · Member since 2017 · 472 posts · 145 votes
    8y

    @Jay Hinrichs

    The last part of  your post cut off.

    You have a Cali brokerage license. Do you use it here? I am getting my license this summer or ASAP. I apparently need 3 courses to qualify for the license test and then once I pass I can be an agent. I can probably convince a school to give 3 accelerated one month courses in June so I could start by mid July. Would you be interested in hiring me or what would I need to do to be attractive to a brokerage/find a good one I can learn from and get good commission/bonuses from?

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    @Cody Evans  Yes I am an active CA RE broker.. but I have not sold anything in about 18 years.. LOL and no I don't have any interest in managing agents.. been there done that  with 3 past brokerages.

    what you want is to find the cheapest NO frills agency that just charges you a modest monthly fee.. since your going to try to do investor style real estate .. unless of course you change directions.

    also do interview with some commercial brokers... its a long long apprenticeship in commercial but if you make it at that business you will be quite wealthy 20 years from now.. that I can promise.

    if I had brokerage only to do all over I would have gone the commercial route.. selling 5 to 100 million dollar deals and dealing with the ultra successful.. I was good with the down on their luck mom and pops but.. its not a career that's why I have not done it in 20 years now.. it was a means to an end.

  • Wholesaler · Fairfield, CA · Member since 2017 · 472 posts · 145 votes
    8y

    @Brian Pulaski

    I have a few guys that have legit websites and have met with at a meet up where people recognized who they were. I am just trying to not be lazy; everyone always says "oh yeah I'm getting my real estate game solid ONE HUNNID." I'll ask "Oh when are you going to do that?" "Oh you know..someday.. probably this summer in June."

    I'm basically killing time and getting experience with marketing for deals so I know what works until I can get More time to pursue my license to generate capital/network   or More money to drop it into my own deal. I figure what else better do I have to do? I won't be able to get my license until summer because of my 2 jobs (Apparently I have to take college courses for a license and not just pass the test) and no real money for a year or more.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    Cody  have you checked in with Anthonys  or chamberlin real estate schools.. ?  check with them on pre license courses.. I remember hearing about the collage stuff.. not sure whats what there.. but that is one reason even though I have not used my CA brokers license basically since 2001  I keep it current just in case  LOL. I take the continuing ed every 4 years for 225.00 then I pay the 300 or so for 4 years of license and then it just sits.. I get to hang it at my brother in laws office in Pt. Richmond..  

    although a few times in the mid 2000 I made some nice referrals when I ran into someone who wanted to buy a home were I used to live at Silverado and they paid 1.4 mil for a second home I made a nice 20k spiff on that referral.. just getting them with a friend of mind that works that area.. so who knows.

  • Wholesaler · Fairfield, CA · Member since 2017 · 472 posts · 145 votes
    8y

    @Jay Hinrichs

    I will definitely search up those schools.

    Anyway, I called the seller today and broke the costs down. I'm actually proud at how well I did compared to how well I used to perform will sellers but unfortunately the guy was still unrealistic trying to get 270k for the property. Since he wasn't budging I just told him to save my number and give me a call if anything changes. I also educated him on the best chance he has at selling his property within the ballpark price he is looking for. I told him a story about a couple I am friends with that bought a fixer upper for 310k which had a market value similar to what his does. I told him that he probably wouldn't be able to swing it for 310k because my friends payed tens of thousands more than what they could have gotten for the house. I then left him with the advice to try and find a realtor and maybe market it himself on craigslist but to beware because that is where newbie investors that don't have a pot to you know what in go to search for their first deal so he will likely get a lot of calls from people that can't really close or have no clue what they are doing.

    I just wanted to help the guy out and build some trust in case he changes his mind later on down the road. Do you think it was a bad idea to try and tell him about other avenues of getting his house sold?

  • Investor/ Real Estate Agent · Burton, OH · Member since 2015 · 167 posts · 53 votes
    8y

    $100 bill on the table... :)

  • Wholesaler · Fairfield, CA · Member since 2017 · 472 posts · 145 votes
    8y

    I am for sure doing that. What a baller move; probably stole it from a movie xD

    *stretches out dollar bill* See that, thats the power of real estate baby 

  • Schaumburg, IL · Member since 2017 · 38 posts · 49 votes
    8y

    There's a  lot going on in these post responses!  Nobody said anything about checking the existing financing.  You need to be prepared if you might offer less than what is owed.  It will have to be a truly motivated seller!

    I also disagree about getting licensed.  I'm not.  There are special protections that apply to the general public that don't apply to license holders.

    Good luck!

  • Colorado Springs, CO · Member since 2017 · 117 posts · 45 votes
    8y
    Jay Hinrichs thank you for investing the time into all of your posts. I’m new and you are teaching me a ton!
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    @Mark Elkins in my day when I did this.. I had a full spread sheet of all my targets.. title company would give me date downs on everything.. my secretary had my sheet all updated. Excel we tracked EVERY NOD in our 2 million pop MSA plus all code enforcements.. I know in Chicago that would not be possible there are probably 2 million code enforecements LOL alone.. not so much in our area, plus 3 years tax delinquent with no mortgage.. etc etc.

    when I went into a sit .... I knew what they owed if they were in default.. what the tax's were anything and everything that was public record I already knew..

    Now to be fair we have it pretty good out this way..

    WE have Property RADAR which if anyone on the West coast does not have this app.. they are really hurting themselves.

    and we have unbelievable customer service at our title companies.. and they will help most clients obviously me owning a real estate brokerage and being quite active I got tip top service from them.

    in many other states title and escrow is attorney driven so in these instances your really have a hard time attorney shops simply don't have customer service data base like we do..

    Lastly Being licensed for 40 some years has NEVER hampered me in the distress space.. I have bought literally hundreds of distressed properties and probably over 1000.. and never once had an issue.

    the only thing I have to do is disclose I am a broker and I am buying for Profit or LOSS.. as long as you disclose those two things your good to go.

    Where ANYONE licensed or not CAN get in trouble is telling a unsophisticated seller that their house is only worth 75k when its clearly worth 400k.. unconscionable profits are actionable licensed or not. and the folks that think having a license gives them more liability.. and they think they have none.. well that's not the case..

  • Flipper/Rehabber · Knoxville, TN · Member since 2017 · 130 posts · 72 votes
    8y

    @Jay Hinrichs

    You mentioned talking about the idea of both profit AND loss when talking to the seller - I get the general idea of it but do you mind unpacking that a bit more?  What are you really hoping to accomplish by talking about the loss aspect of it - that you are still taking a risk in purchasing the property?

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    @Tae C.  exactly some sellers think you are going to lose on the purchase and you are acknowledging you are buying for PROFIT which we hope to get and they acknowledge that.. and if we take a LOSS its on us.. gives them comfort.. it works.. believe me.

  • Wholesaler · Fairfield, CA · Member since 2017 · 472 posts · 145 votes
    8y

    So Jay, when I get my license I can still wholesale/buy flip a few properties here or there so long as I disclose I am an agent and my brokerage agrees it's ok? I figure I will quickly transition to flipping after the money starts flowing in but the occasional property I cant make work can just be assigned to my buddy so long as I disclose? 

  • Flipper/Rehabber · Knoxville, TN · Member since 2017 · 130 posts · 72 votes
    8y
    Originally posted by @Jay Hinrichs:

    @Tae C.  exactly some sellers think you are going to lose on the purchase and you are acknowledging you are buying for PROFIT which we hope to get and they acknowledge that.. and if we take a LOSS its on us.. gives them comfort.. it works.. believe me.

     Yep, that makes a lot of sense to me - it's a very possible reality.  As others have stated, I always appreciate and respect the full, honest disclosure approach - and always great to see people such as yourself who have had great success doing it in such a manner.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    @Tae C.  some of these folks are not the sharpest tool in the shed  but they are not totally ignorant either they understand the ONLY reason we are there is to make a profit..

    now some of the direct mail I would see on pre foreclosures was pretty comical..

    for instance did you know that a good % of folks that spend the thousands to send direct mail to pre foreclosures. were once themselves broke and living in a car.. and they are just trying to help these poor people because they too were in the exact same situation..

    Once a person gets direct mail piece with this line of BS  and gets it from about 10 different people they can put 2 and 2 together.

    and for sure we have lost money on deals.. many times.. it goes with the risk reward scenario.

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