Buying my first wholesale deal in California

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Buying my first wholesale deal in California

Jim Keller
Investor · Riverside, CA · Member since 2014 · 351 posts · 220 votes

Hi BP people,

Was offered a nice home in an upscale subherb north of down town Los Angeles Ca. Being my first wholesale buy I find it rough, the terms being dictated by the wholesaler are a $25,000 nonrefundable earnest money deposit.  I do understand this put up or shut up way of doing business is not a bad thing just hard to feel comfortable.

I'm a big believer in this discomfort is just fear and grouth.  The numbers look fantastic on the flip and when all goes as planned we will see a high 5 figure profit.  Just feeling a little vulnerable and kicked around, I have been less than impressed with any wholesaler to date.  This will be a bellwether moment for our little company.  

We get our first and only look tommarrow at 10 am and my whole team will be there.  If we like I sign and hand over my check with a 10 day escrow.  Only in America...... I love saying that, $49,000 invested, $610,000 barrowed, $95,000 potential profit.

I will upload a few pictures as well as the look on my face as I arrange the EMD wire if we buy. Good luck to all of you in this short work week.

Jim

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Tim Soto
Realtor · Ventura County, CA · Member since 2012 · 126 posts · 61 votes
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@Jim Keller, you should go back to the Wholesaler and say, "You know, after running my numbers, it doesn't work for me at this price. If you could go back to the seller(s) and get it down to this price, then I'm your buyer and they can anticipate their check in 10 days. Please let me know asap, because I've got other counters I'm waiting to hear from."

I do this all the time when I'm submitting a bunch of offers. It doesn't always work, but it has worked enough times to share and leaves a margin for error. 

I agree also that the $25K wholesale fee is excessive, especially with that tight margin. You need to add that fee to the purchase price, because you're actually paying a $25K premium over the asking price. If you were buying using an agent, and although it's negotiable, you wouldn't be paying commissions, let alone, that much in commissions. The seller would be paying those commissions. I know this is a wholesale deal and may not involve agents, but if the wholesaler feels they deserve that much of a wholesale fee, and that you should pay it, then they need to make the spread worth paying that fee. 

Good luck!!!

Tim

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  • Matthew Nixon
    Real Estate Agent · LONG BEACH, CA · Member since 2014 · 209 posts · 43 votes
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    Good luck Jim. Hope this deal works out for you.

    0Reply
  • Jim Keller
    OP
    Investor · Riverside, CA · Member since 2014 · 351 posts · 220 votes
    11y
    Originally posted by @Matthew Nixon:

    Good luck Jim. Hope this deal works out for you.

     Thanks for the good word but, you know what happen...... $40,000 in estimated repairs looked more like $65,000 and then who know what else is hiding in the corners, and there were plenty of dead end nooks and areas that lead to nowhere.  

    The record still stands no wholesale deal done yet by me.  Good luck to all

    Jim

    1Reply
  • Franklin Romine
    Visalia-Fresno, CA · Member since 2009 · 1k+ posts · 863 votes
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    Look at the return on your capital invested.  

    Example.... Invest $50K and receive $50K.... 100% return.

    Frank

    0Reply
  • Tatiana R.
    Investor · Lawndale, CA · Member since 2015 · 58 posts · 18 votes
    11y
    Originally posted by @Jim Keller:

    Hi BP people,

    Was offered a nice home in an upscale subherb north of down town Los Angeles Ca. Being my first wholesale buy I find it rough, the terms being dictated by the wholesaler are a $25,000 nonrefundable earnest money deposit.  I do understand this put up or shut up way of doing business is not a bad thing just hard to feel comfortable.

    $25,000 sounded insane. I'm glad you passed on the "deal"!

    0Reply
  • Jim Keller
    OP
    Investor · Riverside, CA · Member since 2014 · 351 posts · 220 votes
    11y
    Originally posted by @Franklin Romine:

    Look at the return on your capital invested.  

    Example.... Invest $50K and receive $50K.... 100% return.

    Frank

    That is the way I saw it, it just kept getting tighter and tighter every corner I went around. Funny how we want the deals to work so badly just kinda live by the rule of not being a euphoric buyer.  Taking my time and getting the buy right has gotten me out of many trubles when I own the home that just never stops suprising me.

    It was a bummer I like the house, looked like the previous owner used it as a triplex and did just enough to make a bad floor plan and is now selling it to some unsuspecting "investor" ,  Thank god it won't be me.

    Jim

    1Reply
  • Tim Soto
    Realtor · Ventura County, CA · Member since 2012 · 126 posts · 61 votes
    11y

    @Jim Keller, you should go back to the Wholesaler and say, "You know, after running my numbers, it doesn't work for me at this price. If you could go back to the seller(s) and get it down to this price, then I'm your buyer and they can anticipate their check in 10 days. Please let me know asap, because I've got other counters I'm waiting to hear from."

    I do this all the time when I'm submitting a bunch of offers. It doesn't always work, but it has worked enough times to share and leaves a margin for error. 

    I agree also that the $25K wholesale fee is excessive, especially with that tight margin. You need to add that fee to the purchase price, because you're actually paying a $25K premium over the asking price. If you were buying using an agent, and although it's negotiable, you wouldn't be paying commissions, let alone, that much in commissions. The seller would be paying those commissions. I know this is a wholesale deal and may not involve agents, but if the wholesaler feels they deserve that much of a wholesale fee, and that you should pay it, then they need to make the spread worth paying that fee. 

    Good luck!!!

    Tim

    1Reply
  • Jim Keller
    OP
    Investor · Riverside, CA · Member since 2014 · 351 posts · 220 votes
    11y
    Originally posted by @Tim Soto:

    @Jim Keller, you should go back to the Wholesaler and say, "You know, after running my numbers, it doesn't work for me at this price. If you could go back to the seller(s) and get it down to this price, then I'm your buyer and they can anticipate their check in 10 days. Please let me know asap, because I've got other counters I'm waiting to hear from."

    I do this all the time when I'm submitting a bunch of offers. It doesn't always work, but it has worked enough times to share and leaves a margin for error. 

    I agree also that the $25K wholesale fee is excessive, especially with that tight margin. You need to add that fee to the purchase price, because you're actually paying a $25K premium over the asking price. If you were buying using an agent, and although it's negotiable, you wouldn't be paying commissions, let alone, that much in commissions. The seller would be paying those commissions. I know this is a wholesale deal and may not involve agents, but if the wholesaler feels they deserve that much of a wholesale fee, and that you should pay it, then they need to make the spread worth paying that fee. 

    Good luck!!!

    Tim

    Thanks for your input Tim,

    We did counter and haven't heard anything from them yet.  It's a very active area as far as anyavailable margin goes, we really want in but will have to find our deal.  Seems like we look at 12 to 15 per week and we have 3 going right now so it's not like I haven't been disappointed before.  

    Los Angeles is new for us we have deals in Orange County and Riverside County  going right now just waiting for a good entry point. Thanks for the encouragement, 

    Jim

    0Reply
  • Joe HomsBusiness Member
    Flipper · Mission Viejo, CA · Member since 2014 · 2k+ posts · 1k+ votes
    11y

    @Jim Keller  Were you dealing with New Western?  Just curious as what they send me is also not very good. 

    [email protected]949-625-4533
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  • Jim Keller
    OP
    Investor · Riverside, CA · Member since 2014 · 351 posts · 220 votes
    11y
    Originally posted by @Joe Homs:

    @Jim Keller  Were you dealing with New Western?  Just curious as what they send me is also not very good. 

    Not on this one.... but I was on my email with them when you sent this, don't have anything bad to say about them.  I just have not been able to see any wholesale deal that made since to me.  I'm only 2 years and just under 20 deals completed but they have to make some kind of since.  

    When we showed up this home looked great from the street, but just fell way short of a cosmetic 40k flip in La Crisenta.  It sounds like you have been on the same marry go round.  I know more than ever it's my responcability to locate and put our homes under contract.  We have heard no one watches your money like you do.... it true, there is no easy way to a million.

    Any and all wholesalers are welcome to send any home they have to me I have been wrong before and will be wrong later tonight I'm sure.  Have at me!!

    0Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    11y

    I wholesale a LOT in socal, I don't take checks from buyers they go straight to escrow. I do like higher non refundable EMD's too. Keeps the tire kickers out.

    Also, since it came up here. Watch out for New Western, they are unethical and are currently being sued by a friend who is out her $20k non refundable EMD when New Western didn't close the deal in time and lost it. They used it as their non refundable EMD, got sloppy and didn't communicate well with the end buyer. Total mess.

    Oh, and they also ask all fees get paid to a shell company so you cannot report them to the BRE if you have issues as you didn't hand a check over to New Western. 

    Steer clear of New Western, bad news all around. 

    0Reply
  • Tim Soto
    Realtor · Ventura County, CA · Member since 2012 · 126 posts · 61 votes
    11y

    @Jim Keller, if you want to get the real ARV out of a property in LA county, I'll guarantee that you'll need to spend at least $80K, including the high-end finishes. What's going on, is with all the fix & flip frenzy, these wholesalers are looking for a bigger fool than themselves. They're trying to sell a property with little equity and market with minimal rehab, which used to work in the past. Thinking that you can rehab a property for 40K to cover that ARV is grossly naive. Dude, you need to open walls, and sometimes gut the whole thing if you want to position that property to catch that ARV. If you can close in 10 days, I'll find you one. Let me know.

    Tim

    1Reply
  • Jim Keller
    OP
    Investor · Riverside, CA · Member since 2014 · 351 posts · 220 votes
    11y
    Originally posted by @Tim Soto:

    @Jim Keller, if you want to get the real ARV out of a property in LA county, I'll guarantee that you'll need to spend at least $80K, including the high-end finishes. What's going on, is with all the fix & flip frenzy, these wholesalers are looking for a bigger fool than themselves. They're trying to sell a property with little equity and market with minimal rehab, which used to work in the past. Thinking that you can rehab a property for 40K to cover that ARV is grossly naive. Dude, you need to open walls, and sometimes gut the whole thing if you want to position that property to catch that ARV. If you can close in 10 days, I'll find you one. Let me know.

    Tim

     [email protected] is my email I'm always looking for the right deal taking a home apart and putting it togather works for me, one of the last home we worked on in LA County had a 150k budget.  Realisticly I will need 15 days but excited to see what you send me.

    Jim

    0Reply
  • Jim Keller
    OP
    Investor · Riverside, CA · Member since 2014 · 351 posts · 220 votes
    11y
    Originally posted by @Tim G.:

    I wholesale a LOT in socal, I don't take checks from buyers they go straight to escrow. I do like higher non refundable EMD's too. Keeps the tire kickers out.

    Also, since it came up here. Watch out for New Western, they are unethical and are currently being sued by a friend who is out her $20k non refundable EMD when New Western didn't close the deal in time and lost it. They used it as their non refundable EMD, got sloppy and didn't communicate well with the end buyer. Total mess.

    Oh, and they also ask all fees get paid to a shell company so you cannot report them to the BRE if you have issues as you didn't hand a check over to New Western. 

    Steer clear of New Western, bad news all around. 

    Thanks Tim

    Things are never what they seem, I don't have a huge problem with the big EMD just was a shock. I'm a big fan of eliminating tire kickers, please feel free to send me anything you have in Southern California.

    Have a great week

    Jim

    0Reply
  • Tim Soto
    Realtor · Ventura County, CA · Member since 2012 · 126 posts · 61 votes
    11y

    That number actually looks reasonable.  Cool, I'll contact you off line.

    Tim

    0Reply
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