Investor · San Antonio, TX · Member since 2013 · 14 posts · 3 votes
So we closed on selling our second flip today and both deals were with a hard money lender and a wholesaler, at the end of the day we lost money. We thought we had made a small profit on the first and had rolled in to the second and today doing a final accounting of the numbers the loss was clear. I went back to the HUD's for both properties and realized that we did not account for the large fees for closing and that affected our profit from the start. If you have dealt with a wholesaler before to get the house you have to give a $5,000.00 non-refundable deposit and then go get the loan.
We are just starting and have a small amount of capital to work from, we are considering a shift in strategy but my question is has anyone made money working with a hard money lender and a wholesaler? I would be interested in learning what made you successful.
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
10y
PS I would NOT recommend certain Large wholesale companies in San Antonio. Ask other investors. Everybody that I know has come out pretty close to break even with the "we sell 20-30 deals per month" companies.
San Antonio, TX · Member since 2016 · 47 posts · 22 votes
10y
Lol. I started reading all those numbers and wondered what would be left for me. I can see where it would be possible for the costs to kill your profit margin very quickly.
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
10y
Continuing with my above post, if you get to the bottom line number and you end up with 5k or 7k after all contingencies, DONT DO THE DEAL. Just tell the wholesaler, I am going to have to pass on this one, but keep me in mind on the next one. You will have to look at sometimes 20 or 30 deals before one makes sense to you because of the price, costs and ARV.
Interior Designer and Home stager · Austin, TX · Member since 2016 · 40 posts · 14 votes
10y
@Chris White I'm sorry to hear that. I always make sure to run an ROI analysis to ensure that after fees (listing, realtor, etc) that the property is still profitable before moving forward. The next property you look at send me over the numbers and I can run them for you to see if it's a good deal or not.
Investor · San Antonio, TX · Member since 2013 · 14 posts · 3 votes
10y
@Rick Pozos thanks for the posts and I spent time this weekend going over my numbers from the last deal and saw that the price for the loan was too expensive plus the additional rehab put us in the position to not make anything on this flip. Other items we did not have our eye on were true holding costs. I appreciate the comments from everyone that reached out i have some new contacts for future deals.
You have received much good discussion and advice on this. I think this points out how thin the margins are when you both don't have your own funds and don't find your own deals. This leaves you with having to be the best at watching every expense and know how to keep every dollar in your pocket. I think you need to make sure you are looking for great deals and not just a deal as you aren't directly adding margin to the deal.
Investor · San Antonio, TX · Member since 2013 · 213 posts · 182 votes
10y
Hello Chris White
It sucks that this happened to you. I know exactly who you're talking about. They're always marketing for new buyers because they take advantage of every single one they get. They fudge their numbers so much it's ridiculous.
I would never put down a non-refundable deposit nor ask any of my investors too.
San Antonio is not a good flip market. The margins are way too tight.
I recommend either rentals or what we call the 2yr flip.
A 2 yr flip is buying a house that needs very little work to get rented. Then after 2yra of appreciation and paying down the principle you minimize your risk and can greatly increase your profits.
Let me know if you have any questions.
Investor · San Antonio, TX · Member since 2013 · 153 posts · 36 votes
10y
I wouldn't count this experience as a loss.. If anything, it was a heck of a learning experience.. i'd rather have this experience than pay $30k to have someone teach me how to do it.. This is the only way to learn.. lick your wounds and keep going...
Wholesaler · San Antonio, TX · Member since 2016 · 49 posts · 6 votes
10y
Originally posted by @Account Closed:
Wholesalers always jack their prices and don't leave any meat on the bone for the buyer.
You are generalizing all wholesalers and it sounds like Donald Trump ! Wholesaler might give you their numbers to the best of their ability, its your responsibility to do the due diligence and get the numbers right !
I agree some are too pushy but its not good to generalize !
PS I would NOT recommend certain Large wholesale companies in San Antonio. Ask other investors. Everybody that I know has come out pretty close to break even with the "we sell 20-30 deals per month" companies.
Hey Rick,
Can you PM me the name of the "large wholesalers" you don't recommend? We were toying with the idea of going through a wholesaler.