I am starting an investment company

11 Replies

I am going to be a wholesaler.. My company will connect buyers and sellers via contract assignment. When it comes to an assignment fee. What is the best way to approach how I will determin my assignment fee? A percentage rate? If so what would be the average here in Houston and Pearland Texas? I am also looking for the right contract forms to use, and contingencies.

You get as much money as you can. Basically the difference between the negotiated price from your seller and whatever you can get from your buyer.

Ok well that sounds great! Thanks Brian! But I also assume I should consider the fact that the buyer and seller will see what I got in the end? I hear double closing eliminates that problem, however, when I looked into double closing it seems it gets murky. I say that because from what I understand, you need thee funds from the second closing in order to close the first. On the opposite side, you have the second closing that depends on the first to go through. What about that? I'm from Texas... might I add..

@Alyssa Mallot

I doubt you'll find a title company in Texas that will allow you to use the end buyer's funds to close your purchase...TDI regs don't allow for it.  

You have to know values and exit strategies for the end buyer as well as your own. If the property is a good flip opportunity, there must be enough meat on the bone for the end investor regardless of what you make. 

Guy Gimenez, Buying Texas Today | [email protected] | (512) 270‑7279 | http://www.BuyingTexasToday.com

Alyssa, welcome to BP.

Use the trec forms.

Let the deal dictate your fee.  Make sure your end buyer makes good money.

There is no need to double close. Ask for a blind HUD from the title company. This will keep the seller from seeing your fee if that's important to you, it will not keep the buyer from seeing your fee. We have had some pretty fat wholesales and a good buyer won't care as long as you are leaving lots of meat on the bone for them as well.

Medium facebook profile logoSam Craven, Senna House Buyers | [email protected] | 832‑722‑4815 | http://www.SennaHouseBuyers.com | Podcast Guest on Show #137

Personally my experience with wholesaling is as an end buyer - and I like to know exactly what your take is going to be on each specific deal.

In my opinion relationships are the #1 priority in the wholesaling business. As a buyer if I'm sitting at the closing table (or rather, just reading a HUD on my email) and that's where I learn what you're cut is, I may be really turned off by that number. I might be the biggest buyer on the planet (I wish), but because you didn't tell me you were making XXXX dollars, I will never buy anything through you ever again.

However if you were to tell me upon our first discussion of the deal how much you're going to be taking away from it, this gives me the opportunity to digest the deal completely and either be okay with it, or possibly negotiate that amount.

I have had hundreds of thousands of dollars worth of deals that I've walked away from at closing because I was either misled as to what the wholesaler was making, or was straight up lied to.  Not only do I never deal with these people again, anybody who calls and asks for references of those wholesalers ends up hearing a story that is very different than what they've been led to believe.

Honesty is the best policy, and maintaining relationships should be at the top of your priority list. 

@Alyssa Mallot

Call around and see what other title companies have to offer.  Not all title companies are the same.  Some will work with you..  Don't let title companies discourage you from becoming who u want to be.

Originally posted by @Blair Poelman :

Personally my experience with wholesaling is as an end buyer - and I like to know exactly what your take is going to be on each specific deal.

... I might be the biggest buyer on the planet (I wish), but because you didn't tell me you were making XXXX dollars, I will never buy anything through you ever again.

However if you were to tell me upon our first discussion of the deal how much you're going to be taking away from it, this gives me the opportunity to digest the deal completely and either be okay with it, or possibly negotiate that amount.

I have had hundreds of thousands of dollars worth of deals that I've walked away from at closing because I was either misled as to what the wholesaler was making, or was straight up lied to...

THE Flip side of the coin is I have met over the years many investors that would not use your services (Real Estate Agent) because "if you weren't involved the price would be cheaper." Imagine my surprise on the HUD statement to find that the Realtor got paid by the bank

 $1500 for property management to watch the house that was boarded up for 6 months (right of redemption period)

$2500 Commission (both sides)

$1000 Selling agent bonus

All on a house I was buying for $1500

But it didn't really matter to me if they paid her $50,000 was the house worth what I was buying it for?

 

I'm thinking that in Texas, your plan will require you to have a license, having a site putting buyers and sellers together, if internet sales is your goal, I'd be very careful putting deals on the internet.

Next, you said you were starting an "investment company" which is what brought me here. In business (of any kind) certain words have legal meanings, investment is one of them. You really don't want to go there, IMO, as the IRS, the SEC, your state finance department and other agencies will all be interested in an "Investment Company". There is nothing "investment" about your wholesaling.

Again, I suggest you learn real estate before some method of trying to deal in real estate. Good luck :) 

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

@Richard Dunlop

I hear you there - I'm not bagging on anybody (so please don't interpret this as me being a turkey or trying to argue).

The difference between the 2 situations is disclosure.  Buyers and sellers know that an agent gets paid a commission, and they can calculate those commissions based on information readily available to the parties.

Similarly, buyers and sellers SHOULD realize that a middleman (wholesaler) is going to make something, however because the wholesale position is not regulated and requires no disclosure of fees, commissions, payments, etc... the wholesaler's cut can be completely unknown to the parties until after closing - or sometimes completely hidden from one party or the other

I like to know what I'm getting into and like I said in my previous post - I might be ok with whatever fee the middleman is making, or I might not be.

Thank you, everyone, for your input! Am I really wrong to consider it an "investment company" even though I want to basically partner with investors in which I acquire their investment properties for them? Granted I also will be working with sellers and "buying" their homes, but what is wrong?

Blair, noticing the stance you have on knowing the cut I would get, I want to mention that don't mind disclosing, but that of course is in hopes that YOU don't mind the number. That is where negotiation would come into play. Speaking of which, I am still working on the approach I will have negotiating. However, if I can use an HUD like Sam said to, I would be able to cut out at least one of the two opinions of my cut presuming that it decreases the odds that I run into that kink.

@Sam Craven undefined,

@Richard Dunlop undefined

@Sonny Ngo

@Guy Gimenez

@Bryan H.

@Blair Poelman