What should I expect to make in a deal??

Question

I'm hearing a lot of different expectations, but what is realistic. It doesn't seem logical for a seller to take 45-60% of the asking price, yet for the wholesaler to only make $2,000. For example, I had a gentleman whose property was worth 78,400 say he would take 66,000, and another investor told me this was a bad deal.

Dell Schlabach · Answer

It does sound like a bad deal unless you are buying it to live in it.

Wanna put some numbers together and show how it's a good deal for anyone else?

You want to wholesale it to someone else.

If you buy for 66,000 + 5,000 wholesale fee =71,000 if your buyer fixes it up say he only puts new carpet and paint in it cleans it up, and it costs 10,000 now you are at 81,000 if he lists it and sells it for 78,000 he just lost 3,000 , if he listed it with a realtor and paid 6%commission, he lost an extra 5,000+ closing costs say another 3,000 , if he had to borrow the money maybe another 5,000 that's without figuring holding costs taxes, insurance, utilities etc. So your buyer just lost 13,000 .. He is not likely to buy more houses from you :-)

These are some very rough numbers but hopefully gives you some perspective

Need to learn  how to crunch the numbers if you want to play the real estate game..

Wish you the best

Brandon Schlichter · Answer

It all depends on what you want to do. If you want to find people who are willing to sell their property at a slight discount and then you want to sell to other people and make a few grand, then just get your RE license and become an agent. In this market it's darn easy to find somewhat reasonable sellers, connect them to reasonable buyers and make a little bit of money off the deal.

Wholesaling is about finding screaming deals, deals so good that anyone would be stupid NOT to throw money at you to get the chance to buy them. When I look at deals, I want to START at 70% of market value and work towards lower values. For an investor, there's all sorts of crap that can go wrong when buying a property - Unknown condition issues, title blemishes, crazy sellers that don't move, drug raids, and so on. Buying under ARV helps assure that you're profitable most of the time. If you're bringing a property at $40k and the  ARV  is $120k with only $10k in repairs and you have a well researched, competent plan, there's no reason a wholesale buyer would be afraid to pay a $10k or even higher finder's fee. The thing the wholesale buyer is doing is paying for time, expertise and connections.

Jay Craig · Answer

lol I thought it was a good deal until read Dell's reply.

Great thread

Dishant Pandya · Answer

Hello Brandon

yeah the numbers aren't right. most of the wholesale deal (55%-70%) will be from distressed sellers and some from wholesaler looking for other investor to market their properties that they couldn't sell their property and yes you are looking to make somewhere between 5k-10k but the less profit you make the more houses you will able to push in short period of time. instead of making larger profit

because 10,000+ per deal that could take you 2-4 weeks to close bc fees/numbers are high.

or  $4,000 less/more fees per deal and you will be able to close at least 5-7 in 3-4 weeks if you market your property right and you get it under contract with right numbers!

Dishant

Brandon Whittaker · Answer

okay I'm starting to see how it works. So should I be aiming for properties more in the 100-200k price range? I've only contacted sellers in roughly the 80k and under category, and none of them are really interested in this type of discounted price. Thanks for your help guys!

Dominic Lucarelli · Answer

Closing costs, Realtor fees, and other fixed costs will always show up if not accounted for.

Others have quoted aiming around 70% FMV to be the sweet spot all in. Or lower, of course. If your goal is to get $5k out of the deal, you'll need to price in your fee before offering it up to wholesell.

In your example, if you wholesell this to an investor 70% FMV is $54k (including your fee). So you'd need the seller to agree to sell to you at $49k, giving you the $5k you seek.

Good Luck, and keep us posted!

Dell Schlabach · Answer

To more specifically answer the question, our wholesale fees are typically 5,000-10,000 for houses retailing 100,000-250,000. Some people make more, but my buyers only buy from me so I make sure they consistently get really good deals.

What should I expect to make in a deal??

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