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

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

Luc Boiron
Specialist · Toronto, Ontario · Member since 2016 · 564 posts · 425 votes

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!

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Natalie KolodijBusiness Member
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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
8y

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*

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  • Luc Boiron
    OP
    Specialist · Toronto, Ontario · Member since 2016 · 564 posts · 425 votes
    8y

    @Josh Collins My average flip is 4-5 months from close to close. I expect this to be the same, but with the timing of the closing it could get longer. There is a good amount of grading and exterior work to do, I'm only closing in October. If I'm not able to get the outside work done before winter hits, I'll need to finish in March. So 4 months should be doable, but could take up to 7.

    Also, the expected profit already accounts for leveraging the purchase price at 80% LTV, so the return would be on a $300-350k capital investment.

    1Reply
  • Jason Wade
    Silver Spring, MD · Member since 2016 · 48 posts · 14 votes
    8y
    Originally posted by @Claude Boiron:

    @Sam B. I've heard arguments like yours for the past 10 years, so forgive me for having become immune. I'm the first one who would like to see a correction, but sadly, I don't see it happening soon.

     Agreed I've heard people like @Sam Barrow myself saying that since I started in 2012 and honestly I'm not going to hoard a bunch of cash now and wait for the market to correct. That's still going to have me waiting on the sidelines. I just know I have to have a strong exit strategy for each property in my portfolio. 

    1Reply
  • Adrian Erives
    Member since 2017 · 7 posts · 0 votes
    8y
    @Cornelius Garland any tips on finding hard money lenders??? Newbie
    0Reply
  • Calvin Thomas
    Developer · New York City, NY · Member since 2015 · 812 posts · 718 votes
    8y

    OP, ever hear of buyer beware?

    0Reply
  • Luc Boiron
    OP
    Specialist · Toronto, Ontario · Member since 2016 · 564 posts · 425 votes
    8y
    Originally posted by @Calvin Thomas:

    OP, ever hear of buyer beware?

     Yes, I have! If I bought this from a wholesaler for $600k or directly from the seller for $600k, should I not be careful in the same way? It's probably even less risky with the wholesaler involved as I will look at it even more carefully.

    0Reply
  • Claude Boiron
    Real Estate Educator, Mentor, Investor · Toronto, Ontario · Member since 2015 · 206 posts · 86 votes
    8y

    @Doug P. how badly were you hurt by a Realtor in the past (or was it more than one Realtor)? I can only assume you were hurt, considering how often you speak out against Realtors. Are there awful Realtors out there? Yes! The same can be said for lawyers, accountants, and police officers. As with those examples I just gave, there are also  Realtors who are absolute gems, and I hope you'll get to experience one, one day. And if you do, you'll bless him/her because he/she will make or save you an enormous amount of money and protect you from liability. Another analogy (this one is just for fun...): Do all private school kids grow up to be entitled brats who don't know when to keep their opinion to themselves? No, of course not! Many may go that route, but many turn out to be well-adjusted, secure, adults, who know the value of hiring quality service providers who make them more money and keep them safer than if they were to go it on their own.

    0Reply
  • Doug P.
    Investor · Kitchener-Waterloo, Ontario · Member since 2008 · 1k+ posts · 1k+ votes
    8y

    @Claude Boiron I was going to go into a lengthy explanation, breaking down all the efforts I've made over the last 18 years to try to work with realtors. But it boils down to this: Realtors won't present offers that make sense for an investor. They won't present offers substantially below market value, they won't present sub2, they won't present lease options. The only non-traditional offer they might present is seller financing on some idiotic terms like 15% interest with 50% down and a 2 year balloon.

    Hiring a realtor makes sense if you are not an active investor. Realtors are perfect for people looking for their primary residence since they don't care about getting a great deal and they're buying conventionally. Realtors can also make sense if you just want to buy a few rentals for long-term holds and don't mind not getting a good deal.

    If you are an active investor who's comfortable negotiating directly with sellers, actively engaged in generating leads through marketing or prospecting, and pursuing non-traditional deals. Then having an agent in the mix isn't necessary or even desirable. The only thing you might be able to do is trade referrals and the occasional lead.

    0Reply
  • Claude Boiron
    Real Estate Educator, Mentor, Investor · Toronto, Ontario · Member since 2015 · 206 posts · 86 votes
    8y
    Originally posted by @Doug P.:

    @Claude Boiron I was going to go into a lengthy explanation, breaking down all the efforts I've made over the last 18 years to try to work with realtors. But it boils down to this: Realtors won't present offers that make sense for an investor. They won't present offers substantially below market value, they won't present sub2, they won't present lease options. The only non-traditional offer they might present is seller financing on some idiotic terms like 15% interest with 50% down and a 2 year balloon.

    Hiring a realtor makes sense if you are not an active investor. Realtors are perfect for people looking for their primary residence since they don't care about getting a great deal and they're buying conventionally. Realtors can also make sense if you just want to buy a few rentals for long-term holds and don't mind not getting a good deal.

    If you are an active investor who's comfortable negotiating directly with sellers, actively engaged in generating leads through marketing or prospecting, and pursuing non-traditional deals. Then having an agent in the mix isn't necessary or even desirable. The only thing you might be able to do is trade referrals and the occasional lead.

     As I wrote previously, I hope you get to experience a quality Broker one day. Funny thing is, I have done, and continue to do, everything you say Realtors won't do (I agree that many won't, but not all).

    0Reply
  • Doug P.
    Investor · Kitchener-Waterloo, Ontario · Member since 2008 · 1k+ posts · 1k+ votes
    8y

    @Claude Boiron Alright I'll bite. I'm down with doing some LOs in Toronto. You want to make some offers?

    1Reply
  • Claude Boiron
    Real Estate Educator, Mentor, Investor · Toronto, Ontario · Member since 2015 · 206 posts · 86 votes
    8y
    Originally posted by @Doug P.:

    @Claude Boiron Alright I'll bite. I'm down with doing some LOs in Toronto. You want to make some offers?

     While this was not my intent, yes, I'm happy to make some offers which others might shy away from making.

    1Reply
  • Troy Sheets
    Developer · Philadelphia, PA · Member since 2013 · 1k+ posts · 902 votes
    7y

    Any update on this deal? Love to hear the final numbers! 

    0Reply
  • Joel Arndt
    Hamilton, On · Member since 2018 · 75 posts · 36 votes
    7y

    @Luc Boiron

    I second @Troy Sheets, how'd this pan out? Has it completed yet?

    0Reply
  • Luc Boiron
    OP
    Specialist · Toronto, Ontario · Member since 2016 · 564 posts · 425 votes
    7y

    UPDATE: The house is finally done and listed.

    I had numerous permit delays, and I wasn't focused on this house. I actually spent most of the time growing my wholesaling business. When I made this post last year, I had 1 employee in my wholesaling business and now have 12. Basically, between permit issues and me taking my eye off the ball, and over renovating, this house has taken a long time to finish. It's now listed, asking $1.2m. 

    The reno went over budget as I added a lot to it, but that was partially because comps in the area supported a higher finish. So I ended up spending $190-$200k. I should still be able to make a profit of $150k-200k, depending on what it sells for.

    Here are pics and the 3D tour! 

    http://gallery.vrlisting.com/3d-model/81-saskatoon-drive/skinned/

    And I don't regret paying the big assignment fee!

    2Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y
    Originally posted by @Luc Boiron:

    UPDATE: The house is finally done and listed.

    I had numerous permit delays, and I wasn't focused on this house. I actually spent most of the time growing my wholesaling business. When I made this post last year, I had 1 employee in my wholesaling business and now have 12. Basically, between permit issues and me taking my eye off the ball, and over renovating, this house has taken a long time to finish. It's now listed, asking $1.2m. 

    The reno went over budget as I added a lot to it, but that was partially because comps in the area supported a higher finish. So I ended up spending $190-$200k. I should still be able to make a profit of $150k-200k, depending on what it sells for.

    Here are pics and the 3D tour! 

    http://gallery.vrlisting.com/3d-model/81-saskatoon-drive/skinned/

    And I don't regret paying the big assignment fee!

    It looks great. Still can't believe how much houses sell for in TO. 

    1Reply
  • Luc Boiron
    OP
    Specialist · Toronto, Ontario · Member since 2016 · 564 posts · 425 votes
    7y

    @Theresa Harris they're expensive! It means a large potential profit but also a lot of risk.

    0Reply
  • Luc Boiron
    OP
    Specialist · Toronto, Ontario · Member since 2016 · 564 posts · 425 votes
    6y
    Originally posted by @Troy Sheets:

    Any update on this deal? Love to hear the final numbers! 

    Final update! Sold for $1.15m. Closing was in October. I made just under $200k on this flip.
    It was definitely worth it!
    I still prefer wholesaling myself though, reno's aren't my favourite thing to do. It took way longer than it should have for the renovations to be finished as I wasn't focusing on it enough.

    2Reply
  • Troy Sheets
    Developer · Philadelphia, PA · Member since 2013 · 1k+ posts · 902 votes
    6y
    Originally posted by @Luc Boiron:
    Originally posted by @Troy Sheets:

    Any update on this deal? Love to hear the final numbers! 

    Final update! Sold for $1.15m. Closing was in October. I made just under $200k on this flip.
    It was definitely worth it!
    I still prefer wholesaling myself though, reno's aren't my favourite thing to do. It took way longer than it should have for the renovations to be finished as I wasn't focusing on it enough.

    Congrats, well done, especially for not paying attention to it! 

    1Reply
  • Luc Boiron
    OP
    Specialist · Toronto, Ontario · Member since 2016 · 564 posts · 425 votes
    6y

    @Troy Sheets thanks! It was a good buy. I shouldn't say that I didn't pay attention to it, just that I didn't have the time to keep on the contractors enough to keep the project running on time.

    0Reply
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