Am I being greedy on my wholesale fee?

12 Replies

Heres the deal. I got a 3 family that already has condo docs in place. All 3 units are immaculate! All the buyer has to do is close and relist right away. No rehab! The multi is going for 649,000.00 to him. He will then turn around and sell 2 units for 289k conservative and one unit for 259k. Total profit after holding costs would be 130,000.00 and I believe he can turn this around in 2-3 months.

Do you think 20,000.00 for my fee is reasonable? Or is that too much?

Thanks for any advice.

There is no reasonable or unreasonable wholesale fee. I don't get why this comes up so often.

If you rehab a house, do you sell it under list if you are going to make $40,000 and that is a "reasonable" amount to make on a rehab so you shouldn't ask for more?

No, you let the market dictate what it is worth and what you make and you pat yourself on the back for a job well done.

I've had wholesaler make 30k on a deal.. We ended up only netting like 5k... It's the risk we took. But as long as everyone is Making money everyone should be happy. Knowing that he made that much, an we made what we made, we will be careful with the deals he brings and will most likely not do them or have him get paid a percentage of what we sell it for instead.

Originally posted by @Nick Wing :
I've had wholesaler make 30k on a deal.. We ended up only netting like 5k... It's the risk we took. But as long as everyone is Making money everyone should be happy. Knowing that he made that much, an we made what we made, we will be careful with the deals he brings and will most likely not do them or have him get paid a percentage of what we sell it for instead.

Hey Nick, are you a rehabber as well as a lender?

I'm curious, did you pick this deal up last summer/fall?

Originally posted by @Tim Gordon :
There is no reasonable or unreasonable wholesale fee. I don't get why this comes up so often.

If you rehab a house, do you sell it under list if you are going to make $40,000 and that is a "reasonable" amount to make on a rehab so you shouldn't ask for more?

No, you let the market dictate what it is worth and what you make and you pat yourself on the back for a job well done.

I don't get why this comes up so often either. I think calling it a fee may be part of the issue. I've never re-sold something with a fee. I've assigned contracts, double closed contracts and now I mostly close on everything before I resell. I've never once used the word fee. I'm a principal. I have an asking price. Buyers will pay it or they won't. The word "fee" sets up the notion of fee for service. I'm not providing a service. I'm selling a property and/or my interest in the property.

Originally posted by Kristine Marie Poe:
Originally posted by @Tim G.:
There is no reasonable or unreasonable wholesale fee. I don't get why this comes up so often.
If you rehab a house, do you sell it under list if you are going to make $40,000 and that is a "reasonable" amount to make on a rehab so you shouldn't ask for more?

No, you let the market dictate what it is worth and what you make and you pat yourself on the back for a job well done.

I don't get why this comes up so often either. I think calling it a fee may be part of the issue. I've never re-sold something with a fee. I've assigned contracts, double closed contracts and now I mostly close on everything before I resell. I've never once used the word fee. I'm a principal. I have an asking price. Buyers will pay it or they won't. The word "fee" sets up the notion of fee for service. I'm not providing a service. I'm selling a property and/or my interest in the property.

BINGO!

And, on the flip side to this. If we sent out a junk deal with an assumed "fee" we probably won't get it as the value isn't there. This is a two way street, we only deserve an amount equal to what the property is worth. Nothing more, or less.

If you are bringing a good deal to someone else the pay, fee, profit that you take shouldn't make any difference to the buyer. If it is a good deal for them they will buy. If it isn't they shouldn't. Have you ever heard of anyone refusing to buy a stock or mutual fund because the seller was making too much money? Buyers who get hung up on what the seller is making are often inexperienced and miss good deals because of this. I see the same thing with funding deals. Borrowers will want private money but they state they won't pay more than 8% (or whatever). Good for them but they are missing the point. If they can make money paying 15%, 20%, whatever, and they can't secure financing any other way they have just flushed a deal that would have put money in their pocket. Very strange.

As far as a fee...from the buyers perspective assuming your numbers are actually real:

840,000 gross sales

84,000 10% costs of sales/closing

30,000 holding costs

10,000 initial closing and condo doc completion/implementation

$124k costs

Net Proceeds after sales-- $716,000

Net proceeds less acquisition price: $67,000

After $20,000 fee to you; $47,000 maybe, best case

The risk/reward doesn't seem that attractive.

@Wayne Brooks there's a buyer for everything though!

What is garbage to one investor is a great deal to another. I'd say 99% of the deals I've done would have been crapped on by the bigger pockets deal evaluating consensus. Luckily, they weren't buying them.

Make it happen @Matthew Dovner

Originally posted by @Tim Gordon :

BINGO!

And, on the flip side to this. If we sent out a junk deal with an assumed "fee" we probably won't get it as the value isn't there. This is a two way street, we only deserve an amount equal to what the property is worth. Nothing more, or less.

I don't know about where you are, but where I am there's too big and variable buyer pool to confine oneself to a buyer's list. I've sent deals to rehabbers and landlords who begged to be on my buyer's list. I have no problem if they do they not want it, but some will take the time to criticize the deal and tell me I'll never sell it at that price. I've turned around and put the same deals on the MLS using a flat fee listing. I get multiple offers, end up paying a buyer's agent 3%, and still make more than if my buyers list investors had paid my asking.

My buyer's list is on hold for now. :)

Originally posted by @Tim Gordon :
@Wayne Brooks there's a buyer for everything though!

What is garbage to one investor is a great deal to another. I'd say 99% of the deals I've done would have been crapped on by the bigger pockets deal evaluating consensus. Luckily, they weren't buying them.

Make it happen @Matthew Dovner

Too funny. BP continues to teach the SoCal masses and others in hot, low inventory markets the 70% rule on rehabs. And the 2% rule for rentals. Impossible and stupid formulas that are not relevant in many parts of CA. Can't tell if that's to be helpful or to keep others from becoming the competition. People are making money everyday in hot markets all over the country without regard to broad formulas.

Justin Williams' recent thread is really great on this.

dang id be happy with a 10k deal. wish i could learn this stuff

Originally posted by @Matthew Dovner :
Heres the deal. I got a 3 family that already has condo docs in place. All 3 units are immaculate! All the buyer has to do is close and relist right away. No rehab! The multi is going for 649,000.00 to him. He will then turn around and sell 2 units for 289k conservative and one unit for 259k. Total profit after holding costs would be 130,000.00 and I believe he can turn this around in 2-3 months.

Do you think 20,000.00 for my fee is reasonable? Or is that too much?

Thanks for any advice.

If you dont feel bad for asking or guilty for trying, then I wouldnt worry about it. The worst they can say is "no" and then the negotiations begin. No one cares about your money more than you do!