HELP!!!! Can i make $40k on a wholesale deal if house has ARV of $315k

25 Replies

Just wondering if $40k is too high of an assignment fee?

Need more info, 

But personally 40k is a really high assignment fee, and I think is being a little greedy. The seller might be pissed. 

Only way around that is to hide what you are making by doing a double close (double escrow) same thing. Just have to find a title company that will allow you to use the buyers funds... either that or use a hard money loan. Also with double close you pay twice in closing fees

what would be a good assignment fee?

What is acquisition price and scope of work needed to hit exit of $315,000? Depending on your market, investors are going to want to see a 10-20% cash on cash return unless it is a buy/hold investor that can cash flow it.

How much was the purchase price? What is the estimate of rehab cost?

ARV , $315k, Purchase price is $220k- $20k rehab = $200k. A 20% assignment fee = $40k. - $200k Seller gets $160k. Buyer gets the rest of the meat on the bone. I'm still piecing together the deal. So any advice is very much accepted. Thanks

Sounds like a good deal to me. The numbers add up. But the seller might be a little upset when they find out you are making 40k off their house, so I'd advise a double close. 

Honestly,  I'd settle for 20k, and give an extra 20k to the seller or buyer. It's better business lol

Good Point!  @Jacob, I think I might do just that. Thanks.

@Carl Trent  I would get it under contract for the least the seller is willing to accept, that's why we ask "What is the least you would be willing to accept, knowing that I am a cash buyer that will close quickly with no inspection contingencies and an investor that will not be living in this property and need room to rehab and turn a profit". You don't know if you will have trouble unloading this property and it is safer to have room to negotiate with cash buyers. Plus, you worked for this deal don't let anyone tell you you are making too much for being able to market, meet, analyze and negotiate a deal they are jealous of. Good cash buyers don't care how much you make off the deal as long as the numbers work for them.

As a buyer, I might look at 40K and not be happy, however, if the deal is a great deal then that would be the determining factor. Have you considered a buy and hold? Assignment fees are nice but generally they are the least profit (but also least headache) in a RE transaction.

I thought about the buy and hold strategy,  but I am looking specifically for a buyer that I have lined up already. So I am on a manhunt for properties for my buyer.

You said ARV will be $315K an $20k rehab. Where did you get those numbers? A buyer will run his own ARV and rehab cost.


Joe Gore

Better get a contractors estimate and scope of work completed to show your prospective buyer. However, I'd go for the $40k. Your goal is not to make an investor happy with what he pays you, but to create a win for the seller, yourself, and the buyer. If your rehab costs are accurate (seriously, get an estimate) and you can present a good deal to a buyer with this info, then who cares? Everybody wins, and everybody is happy.

And if the buyer makes a low-ball offer, then you can lower your fee to close the deal because you have a lot of room to play and still make a good profit.


Joe Gore

?????  That was my initial plan from the beginning.  Thanks everybody for all the Help and feedback. 

?????  That was my initial plan from the beginning.  Thanks everybody for all the Help and feedback. 

?????  That was my initial plan from the beginning.  Thanks everybody for all the Help and feedback. 

@Carl Trent  Yes.  And @John Thedford  is right.

What matters is that it is a deal to the end buyer.  You could make $100K if you still provided an awesome deal to the end buyer.

It is true that I would be irked knowing you were getting a $40K assignment fee.  But I would be foolish to pass up a great deal just because I was irked.

You can mitigate the irked factor by doing a double closing.  That way the end buyer doesn't know what you paid--at least at first.

Obviously I haven't seen the property or know the condition it is in but a 20k rehab seems kind of low for a 315k ARV. So I would go for the 40k assessment fee which leaves you room to negotiate with the buyer if his estimates for rehab are higher than yours. Just my 2 cents from a beginner.

Originally posted by @Cody Brownfield:

Obviously I haven't seen the property or know the condition it is in but a 20k rehab seems kind of low for a 315k ARV. So I would go for the 40k assessment fee which leaves you room to negotiate with the buyer if his estimates for rehab are higher than yours. Just my 2 cents from a beginner.

 I agree, that seems a bit off.

What is the reason the seller is selling? What kind of motivation do they have?

Carl, my brother. lol. If the numbers work for everyone Than it's no problem making 40k. if everyone else is 100% happy with what they are making, then you should have no guilt sir. We are in this business to make a living to provide for our families. Your next wholesale could only be $3,000 profit. It all balances out. You should definitely double close this one. Congratulations, my man. Good job.

All the best
Corey

Thank You @Corey. And the seller is facing foreclosure and got the house for $1. Cant afford the house anymore @johnathan

Originally posted by @Carl Trent:

?????  That was my initial plan from the beginning.  Thanks everybody for all the Help and feedback. 

One aspect that hasn't been mentioned where you can net your $40K without any ill feelings from anyone is using transactional funds. It's still a double close but you would be coming to the table with seemingly your own funds, i.e. transactional lender funds. Give me a shout. 

Indeed @Copeland. I will be in touch...

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