Any idea what the largest wholesale fee could be? can it simply be a function of the sales price and/or ARV? I would think that on a $4 million dollar property that the fee could be substantial - like $200,000 or something like that.
at the end of the day, does it really matter so long as the end buyer is getting a sweet deal?
If you should do a double close on a wholesale deal that nets $10,000 or more, how many closes should you do on a $200,000 net profit deal?!! Haha
Well I'm not sure I have the answer... but here is a link to a discussion on what is likely one of the largest. A $7M wholesale...I'd say that ranks right up there for "largest".
I think it is all about the end buyer getting the property at the correct price with room for him to make his profit and rehab cost. The amount of the wholesale fee is all about buying the property right so you can make a large amount and still price it right for the end buyer. If it is not a deal for the end buyer then it will sit and you will end up lowering your profit margin anyways.
IMO, the real fee is going to come in repeat business. Providing value to your end buyers, thus having more end buyers.
It's a whole lot easier to crank out (20) quality wholesale deals a year, where you net a 10k fee each vs. that one big $4mm whale where you take down a 200k fee at once.
@Ryan Billingsley totally agree with you.
@Sam B. i agree about the repeat business but disagree with the amount of work. one deal that brings in 200k is easier than 20 at 10k. with the latter, you have to find 20 different sellers and get 20 different offers accepted, etc.
one thing i'm carrying over from my futures and stock trading experience is that you should always limit your losers and let your winner ride. meaning, if you can still make money for your end buyer and preserve or enhance the relationship, then don't limit your fee based on some arbitrary number. just my opinion.
don't forget, a listing agent's commission on a $4,000,000 house is $120,000. Add a buyer's agent and now the total cost to the seller is $240,000. If I, as a wholesaler don't need a realtor, that's an immediate $120,000 saved. so perhaps the fee here could be more like 60k - 75k. which is almost enough for that "item" we were talking about @Ryan Billingsley :)
@Patrick Britton My apologizes for the late reply.
You know your market better than I. If it's easier for you to find (1) 4mm wholesale deal every year vs (20) 200k deals every year, power to you. It would be my opinion that the (20) 200k deals would be much easier to find but again, you're going to know your market better than I.
That's cool that you come from a trading background...I find quite a few of us REI (spot currencies trader here!) come from that background - even our own @Joshua Dorkin
I completely understand your statement of cutting losers and letting winners ride. That being said, you have to back test extensively and understand your strategy enough to know that most of those winners you're letting ride won't swing back and stop you out...and that maybe you should be taking some of those smaller wins because over the long run, there those will be more plentiful than the big knockouts. Win/Loss vs Risk/Reward. All fun stuff. And all depending on what your market can yield.
Best of luck, looking forward to hearing how you come along.
Updated over 3 years ago
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