I just paid an $80,000 wholesale fee...

89 Replies

Another investor in my network recently got a property under contract, and was looking to assign it. I saw it on Monday, and he gave me his "buy it now" price (ie: don't wait to see if any other investors are interested and potentially the price could be higher or lower).

The numbers worked for me so I went firm, not knowing how much his wholesale fee was but knowing it would be a lot. I don't care - it's a good deal.

He had this bungalow in Toronto, Ontario under contract for $520,000, and assigned it to me for $80,000. I both flip and wholesale, but the largest assignment fee I've ever received on a wholesale was $70,000, and now I'm paying an $80,000 fee!

However, what does that matter? I'm paying $600k. It needs a lot of work, which I'm anticipating will cost $120k. The comps at the moment show this would sell between $900k-$1m. I'll likely make well over $100k on this to share with a partner.

If you every have a buyer balking at your wholesale fee, they're either inexperienced, or there isn't enough meat left on the bone for the buyer.

Everyone should make money when we;re doing deals!

I personally would never pay that amount for that skinny of a deal.. I paid 125k last year for a 7 million dollar subdivision that will profit close to 10 million net.. that I would do .. but 80k to make 100k and wholesaler walks with no risk.. Nope not me personally.. and its not that I am inexperienced..

It's funny how this goes to show that each person's perspective of a great profit, great deal, risk level are so varied and really...there's no right or wrong answer. 

I know people who are thrilled to make $20k on a flip. 

I know people who won't get out of bed for under $100k. 

Both those people are doing better then they were before investing *shrug*

Originally posted by @Jay Hinrichs :

I personally would never pay that amount for that skinny of a deal.. I paid 125k last year for a 7 million dollar subdivision that will profit close to 10 million net.. that I would do .. but 80k to make 100k and wholesaler walks with no risk.. Nope not me personally.. and its not that I am inexperienced..

 Jay, you're likely at a different level than me. I can make between $100k to $200k on this, and would be happy with either. I should mention that the average detached home in Toronto is $1.36m at the moment, so I'm not selling what would be considered a high end hoe that is unattainable. It should sell quite well being under the $1m mark. 

I aim for a minimum 10% of my purchase price in profit on a cosmetic flip. This is a bit of a larger flip, cosmetic but with some necessary waterproofing. At this price I would take the deal with solid comps showing me $70-80k profit, so I'm ok paying a large wholesale fee to make a larger amount than that.

With your experience and network, you likely have greater opportunity to do these than me. I'm still growing with 17 deals last year and likely on track to do about 20 this year, and I'd be very happy if I could make this kind of profit regularly.

Originally posted by @Natalie Kolodij :

It's funny how this goes to show that each person's perspective of a great profit, great deal, risk level are so varied and really...there's no right or wrong answer. 

I know people who are thrilled to make $20k on a flip. 

I know people who won't get out of bed for under $100k. 

Both those people are doing better then they were before investing *shrug*

 For sure Natalie! I know Jay isn't a troll, he does high profit deals and this might not be worth it for him. But it works for me! And I'd be happy to pick up another 100 like it.

Originally posted by @Luc Boiron :
Originally posted by @Jay Hinrichs:

 so I'm not selling what would be considered a high end hoe that is unattainable. It should sell quite well being under the $1m mark. 

 Ya, you'd be in a whole different industry if you were selling high end unattainable hoes ;) 

Originally posted by @Natalie Kolodij :
Originally posted by @Luc Boiron:
Originally posted by @Jay Hinrichs:

 so I'm not selling what would be considered a high end hoe that is unattainable. It should sell quite well being under the $1m mark. 

 Ya, you'd be in a whole different industry if you were selling high end unattainable hoes ;) 

 Hahaha I mean house. $1m hoes are likely a lot harder to find.

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I wish I could have a network like Luc has for someone to approach me with this kind of opportunity. Different perspectives depending on where you sit.

Originally posted by @Natalie Kolodij :
Originally posted by @Luc Boiron:
Originally posted by @Jay Hinrichs:

 so I'm not selling what would be considered a high end hoe that is unattainable. It should sell quite well being under the $1m mark. 

 Ya, you'd be in a whole different industry if you were selling high end unattainable hoes ;) 

 LOL. Nice job Natalie, I love it. 

As for the OP, I agree and also agree with Natalie. Also, 80k is I assume Canadian, which would be closer to $55-60k here? Still a chunk of money, and I personally wouldn't be crazy about a 1:1 take doing all the hard lifting and risk, but if everyone is making money then it still makes sense from a financial point of view. 

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@Jay Hinrichs did I read that right? 125k cash to make 10 mil? what island did you buy on the low low

Originally posted by @David Zheng :

@Jay Hinrichs did I read that right? 125k cash to make 10 mil? what island did you buy on the low low

NO  I paid a 125k assignment fee.. for a contract to purchase a 7.5 million dollar dirt deal that will if it don't rain and the creek wont rise we will make 10 million over 3 years building it all out.. 

Loving the different opinions.

@JD Martin You're right that it's in Canadian dollars. I agree it is a bit of a mental block if the wholesaler makes as much as me, but like you said, what matters is that everyone is making money.

For the naysayers, I always try to think of what the deal is worth to me, not what the other person makes. If this person had gotten the property for $100k, and sold it to me for $500k, would I be upset? Not at all! I would be over the moon, because a got a property where the unrenovated comps are around $750k+ for only $500k. It doesn't matter that he would make $400k, because I'm making good money. What the wholesaler makes on a deal doesn't change what it's worth to me.

Awesome post, really stoked to hear about your deal and the approach you took to it. The numbers are the numbers, feels like its ego and emotion that create the amusing responses we're seeing in this thread. 

@Luc Boiron everyone is making money but the seller who is obviously being taken advantage of by being a fool. Other than that Win/Win
Originally posted by @Steve B. :
@Luc Boiron everyone is making money but the seller who is obviously being taken advantage of by being a fool. Other than that Win/Win

I don't know that I agree. The seller inherited the property and hasn't maintained it, and has hoarded in it. It's a hoarder situation mixed with animal feces mixed with some water infiltration in the foundation. It could sell on the MLS I'm sure, but an agent wouldn't list it as is. I think there would at least be a substantial cleanup and that is likely too much hassle for this seller.

Originally posted by @Tim Gordon :

Awesome post, really stoked to hear about your deal and the approach you took to it. The numbers are the numbers, feels like its ego and emotion that create the amusing responses we're seeing in this thread. 

 Thanks for the kind words Tim. I agree, emotion is what has people upset over large wholesale fees.

I wholesaled a property to another investor last year for a $70k wholesale fee. He just sold it and made $111,000. He's very happy. He even presented about the deal at the meetup I host. The seller on that one was so thankful to me for having bought her property as well.

I just bought my ticket last week to Flip Hacking Live (run by Justin Williams/house flipping HQ). I noticed you're in San Diego, I'll be there on Oct 18-21 to attend that conference. Never been to one of his events but I like his podcast.

@Luc Boiron my issue is with the wholesaler really not the buyer but I probably wouldn’t be for legislation and regulation to fix it.  

You can’t really keep fools and their money together by making laws.

Also don't we know for a fact they would have sold it on the MLS with the feces and all? You would have been a buyer at 30k under what you paid and the seller could have made 30k more leaving enough for the agent as well

Originally posted by @Steve B. :

@Luc Boiron my issue is with the wholesaler really not the buyer but I probably wouldn’t be for legislation and regulation to fix it.  

You can’t really keep fools and their money together by making laws.

Also don't we know for a fact they would have sold it on the MLS with the feces and all? You would have been a buyer at 30k under what you paid and the seller could have made 30k more leaving enough for the agent as well

Our markets down east are not stupidly on-fire like in TO, but a real estate agent here is not going to list a hoarder disaster on MLS ... they'll slide it directly to some one like us.

I'm getting away from wholesaling and into rehabbing/rentals due to the simple fact that if I can make a large wholesale fee, I know the greater profit potential is likely worth the additional time and effort. If someone will pay a wholesaler $50k, then that is obviously a screaming deal. Hard money is so easy to get nowadays. With that type of spread on an assignment, you can get the financing for the deal and might even be able to raise private money to finance your down payment, if you come up short. I just don't think there's any longevity in strictly wholesaling, especially in hot markets. The cost per deal is getting so high that you almost have to rehab and sell a house in order to recoup your marketing costs and make a profit.

Additionally, the whole dance of getting buyers in the property and possibly renegotiating with the seller if your buyers' offers are too low isn't necessarily ethical. Also, it doesn't help out your brand reputation if you're constantly asking for reductions or you're hoping an uneducated buyer will come along and buy your overpriced deal. By the time you find your buyer and close, you could have closed yourself, had a contractor come in to touch up the property, and list it. This isn't true in all situations, but this is definitely possible for the ones that need light repair work.

I know this isn't the popular opinion with a lot of folks here on BP, but take this from someone who was stuck in the "wholesaler mentality" for a long time. I just look back in frustration at all of the deals that my company gave away that we could have easily closed on and listed with minimum repairs needed.

I have no issues with paying large wholesale fees, but your margins on this seem tight. You're buying it after repair and selling expenses for about 80-87% of the ARV. As the market sits you only have an approximate 15% margin for error. If the market shifts downward or the renovation goes up, then there could be trouble.

As someone who is also from Toronto and knows the market, I would have jumped on this deal no problem! I don't really care how much the wholesaler makes, I just wanna know how much I can make and how much of a margin for error I have.

I'm going to send you a PM!

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