Wholesale to retail assignment confusion / success!

[Account Closed]

So, I first joined and posted...it will be a year ago tomorrow, wow! I had already spent a lot of time following my mentors around, researching online, joining REI groups and just getting comfortable with the business. Now, I'm happy to say me and my partners have completed 2 "sort-of" wholesale deals in the fall and are halfway through a third!

What does sort of mean? Well that's where I wouldn't mind some input. Our area has unique retail flip opportunities and I am wondering if there are any thoughts, warnings or other tips out there for me. Here's the scoop...

I'm working with a rehab investor of 20+ years and a realtor friend to start making wholesale assignment deals in our area. We each work part of the puzzle. From the start our goal was to flip to other investors using the typical formulas yadda yadda. Here's the kicker. There are so many retail cash buyers coming into the realtor's office, daily, that we've not even had time to approach actual investor buyers before the home would be shown and retail offers in. Although more complicated, these leads are buying higher so seem like a win-win. But are they?

To be honest, the first property was a poor deal we only offered because we knew we could flip at retail using above scenario. I got an Option signed, we then found a buyer within 2 weeks, followed up with a Sales Agreement and Assigned that to end buyer with 30 day closing. The end-buyers did  not speak good English so an interpreter was needed throughout, which complicated things. The buyers originating through a broker added even more complication and reduced our profit. In the end we  had $750 USleadlist mailing expense and had to split the $3k profit 3 ways, but still, it was a step forward.

The second deal was much better, again our realtor partner had a retail buyer ready, but with much higher margin this time. We closed on it with seller using standard Sales Agreement, did some requested repairs after our buyer's inspection, then had second closing. Again it was complicated through a broker's buyer, this time required an inspection/fixes, needed the double close/fees, we even stored some furniture for sellers so we could avoid closing delays. We did maybe $3k in repairs and then capital gains taxes (ugh!), closing, etc... I don't have all the numbers handy but we split about $10,500 profit. A better, bigger step!

So in retrospect these at-hand retail cash buyers are great in a way because they are ready and waiting to buy quickly at market value. However in most cases although they don't require major retail negotiating from inspections, they still sometimes require them and some basic repairs. Coming as leads from a broker, there is a commission on their end which considering their max budget, cuts into our profit. The translating is pretty common so that ambiguity may increase our risk, as it certainly adds confusion to the communication process.

I am wondering if anyone else does this kind of assigning to retail buyers and if so, their stories? Is there are any reasons other than those I've mentioned to avoid these types of buyers?

Our third deal is a totally gutted double and we are trying to find a contractor buyer outside of our broker connection. There's not enough margin in it for most investors but I will post on what happens because it's always a weird situation here!

On a side note, I started using Podio.com to track our contacts, leads, listings, deals etc. Saw it in an article here on BP when I was researching free CRM for REI, and so far so good!