Is there a standard markup on Wholesale deals?

Question

So I was offered a "deal" from a wholesaler yesterday and I know what he's making on it.  His profit is not what bothers me but it put it out of reach for us and I know a few other investors passed on it as well.  I thought (I know that is dangerous) most wholesale deals went for $5k-$10k of what they got it for, especially when talking about homes under $100k.  Do wholesalers use a percentage system or just mark it up as much as they think they can sell it for?

J Scott · Answer

$5-10K is probably pretty typical in a sub-$100K deals because there generally isn't more room than that for profit. A good wholesaler should make as much as possible, while still leaving his end-buyer a great deal. When I wholesale, my goal is for the end-buyer to get a deal that I consider to be just a little bit better than the deal I'm getting (and as an investor myself, I have a reasonable idea of what kind of deal he's getting).

So, in short, I don't believe there's a "right" or "wrong" amount of profit for a wholesaler -- he should get as much as he possibly can while still providing a great deal to the final buyer.

Just my $.02...

So, in short, I don't believe there's a "right" or "wrong" amount of profit for a wholesaler -- he should get as much as he possibly can while still providing a great deal to the final buyer.

Just my $.02...

Tim G. · Answer

Classy

Ben Hughes · Answer

Oh, I will try that too Ricky.  This property is still listed on the MLS so like I said if he won't I'll just contact the seller directly after the contract period is over.  Hopefully he will be ok making $10k instead of $15k though.

Ricky Ostrom · Answer

If he can't find a buyer soon, you can negotiate down his fee.  It's a desired profit, but flexible when there is a timeline in his purchase contract.

Ben Hughes · Answer

I totally agree with you both.  I'm a buy and hold investor so I try to make the highest bid possible to still get a little out of the deal.  This one is under contract for $60k and they are marking it up 15k.  With repairs around $15k that puts me out of this one.  I know who the seller is so when everyone passes on it for the next 20 days I'll just go directly to the source.

Sam Craven · Answer

J Scott Nailed it.

So much comes down to negotiating the original purchase.  If you can build $20k equity (for yourself) on a $100k house and still provide your end buyer with what they need to succeed, everyone wins.

Also keep in mind that buy and hold investors are willing to pay a lot more than flip investors, but the market area and price point has to support the appropriate exit strategy.  (So dont think you can sell a $500k home to a buy and hold investor)

Is there a standard markup on Wholesale deals?

Most Popular Reply