Kent, WA Wholesale: $80,000 Deal

5 Replies

Investment Info:

Single-family residence wholesale investment in Kent.

Purchase price: $370,000
Cash invested: $10,000
Sale price: $450,000

JUST CLOSED on a wholesale deal here in Kent, WA - here's how it went down!

To get the deal, I got a list of homes in two separate cities all older than 1990 and sent out 16,000 "We Buy Houses" postcards to the addresses - roughly $6,000 all-in. These went out over the span of 4 weeks (4,000/week) and within a couple days, the calls started coming in and I set 4 appointments in one weekend - this was one of those appointments!

I set the appointment and went to meet the seller and check out the house - the home was in great condition, just original to 1962 so it was a 3 bed 1.5 bath cosmetic fixer. I asked permission to take photos and video of the house and did so, and I learned that she had just moved her elderly mother out of the home and had already talked with several realtors about listing the property. She wanted to avoid the hassle of the real estate market and was interested in how our offer would save her closing costs, so we looked at the numbers and it turned out that yes, she would net a few thousand dollars more by listing but I shared that selling off the market would be less hassle on her part, plus I would cover all her escrow fees and close in as little as 1-2 weeks with no contingencies. At the house I offered her $365,000 and she countered at $370,000 - I accepted and wrote her the offer. She signed a few days later and I got to work finding a buyer!

The ARV of the property is $520,000 and rehab cost would be about $30,000 (~77% margin). I posted the house for sale on the WA State Real Estate Investing Facebook page for $400,000, going for a $30,000 assignment fee.

I received 40-50 inquiries from that one post. For each person interested I emailed them the additional photos and video walkthrough I had of the property and let them know that if they would like to see it to please send me their proof of funds PLUS proof of downpayment (since most will be hard money financing). 4 people responded and their proof of funds checked out so I scheduled them to view the property at 30-minute appointment intervals all on the same day. Here's where it gets interesting -

Of the 4 potential buyers, they were all interested and I let the fourth buyer know we already had bids above $420,000 and I was fully prepared to take one of those offers. At this point I didn't think the fourth buyer would go for it but they were pretty unique - not only were they paying 100% cash out of pocket, they also had a 1031 exchange to fulfill so they had no issue bidding the price up to $450,000 and offered just that. He was an elderly man (with his adult children involved helping him) and was looking to keep the property as a rental, not even to flip (despite being old it was still livable). So he found his perfect property!

I tried to proceed per usual by using an assignment contract to "sell" them the Purchase and Sale Agreement, but I quickly learned that the 1031 exchange agent needed a Purchase and Sale that says $450,000 as the purchase price in order to release funds - the assignment contract didn't fulfill this as the assignment is stated as an additional "fee". At this point I could've moved on to a different buyer to simplify the process, but in order to make this work and NET more money, I decided to close on the house with a hard money loan with the seller, then sold it to the end buyer for $450,000 a few days later.

There were more fees this way, but like I mentioned I still netted more money as opposed to assigning the property for less.

Here's how the numbers played out:

Purchase:

-$370,000 Hard Money Loan

-$14,501.47 Closing Costs (out of pocket)

Sale:

$450,000 Sale Price

-$12,000 Selling Agent Commission

-$9,352.33 Closing Costs

-$369,737.24 HML Payoff

=$59,649.55 Profit

Notice the buyer did have an agent so I factored her commission in. If I had wholesaled the property the "traditional" way for $420,000, the profit would have been about $50,000 so I still came out ahead by jumping through hoops to sell the property at the bid up price.

Lots learned during this process - while "double closing" the property was quite unconventional for typical wholesaling, in this case it was worth it because the numbers worked, even after tons of selling costs. At times it felt like a waste that just because of the buyer's 1031 exchange, the "easy" way was to double close and pay all those extra costs, but I remember that it was because of the 1031 that they were willing to pay so much. At the end of the day, everyone won and I gained a lot of experience by going through that process. Very grateful for the work I do and I'm excited for the next one!

Originally posted by @Jonathan Casares :

@Vayna Jerabek

As a broker did you just use a P&S agreement? And how did you incorporate your exit out in case you couldn't assign it. Do you just put it on a blank addendum?

Hey Jonathan,

Yes I used a PSA. I put down $500 non-refundable earnest money, and my backup plan was to flip the house myself if I couldn't assign it. The only contingency I use is a 7-day title contingency. I make sure I have several options whenever I put a property under contract so I don't get stuck if I can't assign it.

Hello, 

I’m brand new to this industry and have not started my first property yet. But, I do understand the assigning, however, do you find these people to assign these deals to on your own or do you generate leads? Or was that the post you were talking about? What’s some physical guidance you can give to someone like myself who’s never done a wholesale or fix and flip? How do you find your contractors? Any and all help is much appreciated. 

Thanks 

Mia 

Originally posted by @Vayna Jerabek :

Investment Info:

Single-family residence wholesale investment in Kent.

Purchase price: $370,000
Cash invested: $10,000
Sale price: $450,000

JUST CLOSED on a wholesale deal here in Kent, WA - here's how it went down!

To get the deal, I got a list of homes in two separate cities all older than 1990 and sent out 16,000 "We Buy Houses" postcards to the addresses - roughly $6,000 all-in. These went out over the span of 4 weeks (4,000/week) and within a couple days, the calls started coming in and I set 4 appointments in one weekend - this was one of those appointments!

I set the appointment and went to meet the seller and check out the house - the home was in great condition, just original to 1962 so it was a 3 bed 1.5 bath cosmetic fixer. I asked permission to take photos and video of the house and did so, and I learned that she had just moved her elderly mother out of the home and had already talked with several realtors about listing the property. She wanted to avoid the hassle of the real estate market and was interested in how our offer would save her closing costs, so we looked at the numbers and it turned out that yes, she would net a few thousand dollars more by listing but I shared that selling off the market would be less hassle on her part, plus I would cover all her escrow fees and close in as little as 1-2 weeks with no contingencies. At the house I offered her $365,000 and she countered at $370,000 - I accepted and wrote her the offer. She signed a few days later and I got to work finding a buyer!

The ARV of the property is $520,000 and rehab cost would be about $30,000 (~77% margin). I posted the house for sale on the WA State Real Estate Investing Facebook page for $400,000, going for a $30,000 assignment fee.

I received 40-50 inquiries from that one post. For each person interested I emailed them the additional photos and video walkthrough I had of the property and let them know that if they would like to see it to please send me their proof of funds PLUS proof of downpayment (since most will be hard money financing). 4 people responded and their proof of funds checked out so I scheduled them to view the property at 30-minute appointment intervals all on the same day. Here's where it gets interesting -

Of the 4 potential buyers, they were all interested and I let the fourth buyer know we already had bids above $420,000 and I was fully prepared to take one of those offers. At this point I didn't think the fourth buyer would go for it but they were pretty unique - not only were they paying 100% cash out of pocket, they also had a 1031 exchange to fulfill so they had no issue bidding the price up to $450,000 and offered just that. He was an elderly man (with his adult children involved helping him) and was looking to keep the property as a rental, not even to flip (despite being old it was still livable). So he found his perfect property!

I tried to proceed per usual by using an assignment contract to "sell" them the Purchase and Sale Agreement, but I quickly learned that the 1031 exchange agent needed a Purchase and Sale that says $450,000 as the purchase price in order to release funds - the assignment contract didn't fulfill this as the assignment is stated as an additional "fee". At this point I could've moved on to a different buyer to simplify the process, but in order to make this work and NET more money, I decided to close on the house with a hard money loan with the seller, then sold it to the end buyer for $450,000 a few days later.

There were more fees this way, but like I mentioned I still netted more money as opposed to assigning the property for less.

Here's how the numbers played out:

Purchase:

-$370,000 Hard Money Loan

-$14,501.47 Closing Costs (out of pocket)

Sale:

$450,000 Sale Price

-$12,000 Selling Agent Commission

-$9,352.33 Closing Costs

-$369,737.24 HML Payoff

=$59,649.55 Profit

Notice the buyer did have an agent so I factored her commission in. If I had wholesaled the property the "traditional" way for $420,000, the profit would have been about $50,000 so I still came out ahead by jumping through hoops to sell the property at the bid up price.

Lots learned during this process - while "double closing" the property was quite unconventional for typical wholesaling, in this case it was worth it because the numbers worked, even after tons of selling costs. At times it felt like a waste that just because of the buyer's 1031 exchange, the "easy" way was to double close and pay all those extra costs, but I remember that it was because of the 1031 that they were willing to pay so much. At the end of the day, everyone won and I gained a lot of experience by going through that process. Very grateful for the work I do and I'm excited for the next one!

I'm actually a little upset I can only like this post once.

What impresses me the most about this isn't even the amount of money, which is amazing by the way.

You did what 99.9% of all wholesaler's won't do. You put your money where your mouth was and took down the property yourself AND MADE EVEN MORE money because of it.

People come on here and complain about the ethics of wholesaling or whatever but you did your own LEGIT marketing to locate the seller, offered them what YOU were willing to pay and able to CLOSE on and made the deal happen.

A lot of people would be on here asking for advice on how to hide the difference between the contract price and the sales price from the seller which in my opinion is foolish.

Hat's off to this one. That's a pro move in my mind if ever I've seen one.

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