When should I double-close or wholetail a deal?

Question

Hi BP Community!

(This is my first forum post - super excited!)

I just locked up my first purchase agreement that has substantial potential after a quick rehab...now the question is: what's next? Given the large spread between the ARV and purchase price, should I use private money and double close? With only surface-level knowledge of house flipping, I'm not exactly sure of the nuances and costs that come along with "wholetails" and flips.

Please let me know your thoughts - thanks!

Mike

Mike Lofton · Answer

@Tchaka Owen - Your advice is very much appreciated - thanks! Knowing that I have several exit strategies makes me feel much more relaxed about the deal.

I'm not familiar with the private money process, but I'm relatively confident that I can get approved and double-close. Would you happen to have a network of private lenders with reasonable financing terms? If so, please send me a PM. In regards to my cash buyers list, its currently a work in progress, as wholesaling is a new avenue for me; I was a "buy and holder" in the past.

Mark Sewell · Answer

I haven't done one yet, but to me it just seems that the wholetail approach is SO much better than trying to mess with the wholesale/assignment timeline, for a variety of reasons.  Only try to assign that deal if you really know your buyer, you know they have a track record, you know they can close and you feel comfortable with working with them.

Mike Lofton · Answer

@Mark Sewell - thanks for your feedback, Mark. I was leaning in that wholetail direction too, but it feels good knowing there are multiple exit strategies available.

Tchaka Owen · Answer

@Mike Lofton - being conservative with the numbers and excluding the cost of money (because I don't know your situation), I think you hold 3 winning hands. If you go the rehab route, you'll make $55k+ (if you're a licensed agent you'll save 3% on the sell side thus adding $12k). If you wholetail, you're looking at around $25k (+$10k if you're licensed). My suggestion is option 3: wholesale it for $20k. A rehabber with money and a real estate license could pick that up for $300k, spend $30k and make a nice little profit. And I'm using $400k as the ARV. Why do I suggest that? Because even though you'll make a little less, it's fast and you're on to the next deal. Do you have a solid buyers list?

Mike Lofton · Answer

@Tchaka Owen - Thanks!

Some basic details include:

Purchase Price: $279K

ARV: $400K- $415K

Repairs: maximum $30K (cosmetic: flooring, cabinets, countertops, etc.)

Bare min. repairs: maximum $5K (new paint, cleaning, etc.)

Wholetail ARV: $340K to $350K

Tchaka Owen · Answer

@Mike Lofton - congratulations!As far as your questions go, could you provide more info? What's the purchase price? Amount of rehab needed (in dollars) and what would the ARV be? If you were to wholetail, how much rehab to do the bare minimum so that it looks decent? And what would that ARV be?

When should I double-close or wholetail a deal?

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