How To Factor Your Wholesale Fee?

7 Replies

Hi Everyone,

I have a question. I am hoping that this will be my first wholesale deal. I have a motivated seller who owns a condo in a very sought out neighborhood in DC. It's a 1 bedroom 1 bath condo about 502 sq. ft. Condo fees are $467, yearly taxes are $2,062. It's in poor condition. Condos are selling for $300k in the building. The taxed assessed value is $242,600. 

Things that need renovating:

The kitchen

The bathroom

New floors (or rebuffed)

All new paint

New cabinets

All new appliances

New counters

I have an investor that is willing to offer $150-200k for it. I think this would be a good price for the owner, she is elderly and needs some savings.

What would be a reasonable wholesale fee be? I have a hard time factoring those numbers and what a good rule of thumb is.

Thank you in advance!

$150k for a unit worth $300k after rehab borders on robbery.  You could rehab 502 sf, and then plate all the surfaces with gold leaf, and still be under $300k.

That seller needs a realtor.

@Frantzces Lys

If you're dealing with an investor who knows what they're doing then he/she is going to want accurate numbers on the total repair cost. You say that those condos are selling for 300K make sure that's an accurate Comp as well. The formula a lot of investors go by is ARV x .70(or .65) - Repair Cost - Wholesale Fee= Your offer Price. What I've learned from a lot of successful wholesalers or Investors who are buying from the wholesalers is not to be too greedy with the wholesale fee. Leave some meat on the bone for the end buyer as they say. Good Luck I hope this was of some help to you.

Originally posted by @Darrell Jones:

@Frantzces Lys

If you're dealing with an investor who knows what they're doing then he/she is going to want accurate numbers on the total repair cost. You say that those condos are selling for 300K make sure that's an accurate Comp as well. The formula a lot of investors go by is ARV x .70(or .65) - Repair Cost - Wholesale Fee= Your offer Price. What I've learned from a lot of successful wholesalers or Investors who are buying from the wholesalers is not to be too greedy with the wholesale fee. Leave some meat on the bone for the end buyer as they say. Good Luck I hope this was of some help to you.

 I think Darrell Jones is spot on here with what a flipper wants to get it for, although the margins have been dropping, and many are doing 70 or 75% in that formula above.. The flipper also have holding costs (loan usually - although this is at a low price point..), real estate commission, etc..

Great information Account Closed I really appreciate. I really want a win win solution for everyone in the deal. So I will take that into serious consideration.

@Frantzces Lys  regarding your fee, I'd say at a minimum what do you think your time and effort is worth?  When you decided to do wholesaling, did you determine what your minimum fee would be on deals you get under contract?  While you have a deal at hand and I'm sure need to act quickly - once this one is done (and hopefully you get a nice check) you may want to sit back and think about your wholesaling goals.  I think many wholesalers try to net a minimum of $5k for each deal but that can fluctuate up or down depending on the deal.  I would never do a deal that might net me less than $2k.  

From the looks of this deal, you may be able to pull off a nice pay day.  Get your comps #'s straight, determine your max allowable offer, and get it under contract quickly.  Not sure how well you know your potential end buyer but if they are already talking about purchase price they may circumvent you.  I would hope most investors aren't like that but as a newbie myself I just don't know.

I calculate my selling price as follows:

((ARV x 0.9) x 0.8) - (repair costs)

ARV x 0.09 should represent what the buyer will net once the property is resold on the open market.

I multiply that number by 0.8 and subtract repair costs from that number to ensure that they'll see an 20% ROI, which is very fair. I use conservative repair estimates. My "fee" is the spread between the price I put it under contract at and the selling price.

Thank you @Shvonne C.  Thank you! How did you come up with the numbers .9 & .8?

I really appreciate all of you for answering my question!

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