All Forum Posts by: Alex Klimenko

I am a rehabber and have sold several wholesale deals in my day so my comments here come from looking at both sides of the fence. You stated this was an awesome deal but running your numbers, it us a very tight deal, especially if you think you can add $10k to the price for your profit!

What I have always done (which is fair for both parties in a wholesale deal, is to take the gross margin (exit value less purchase price plus rehab) and take a 10% fee from that number. So if the exit is $230k and the rehab is $12k and the current contracted purchase price I was say $170k, then you would have a gross margin of $48,000. That would typically allow for a $4k-$5k wholesale fee. However, one must have numbers that make an actualbdealbfor the buyer and based on your initial numbers (not including any wholesale fee at all, your purchase plus rehab is at 78% of the ARV. That is a tight deal for exit values in that price range and adding $5k or $10k to that deal takes it over 80%.

I'd say you should be happy with $2k on those numbers you currently have. Then of course the whole legal side needs to be looked at. Are you licensed? If not, wholesaling in such me formats can be illegal (for non licensed individuals) in some states. 

Alex
You came across as pretty arrogant in your previous reply to a user contributing to your post by using words like "stupid" etc.
That's no way to get input on BP.
Users will just start ignoring your post.

Personally,
Like others have previously pointed out regarding closing cost,holding cost,HML interest etc,I think you may be pretty ignorant as well.

I bet you do not know the difference between ARV and FARV.
Pulling random recent comps from across the street means little to an investor looking for guaranteed return on their investment.

You may benefit from a little more humility.

Please don't take this the wrong way.
But it needed to be said.

Alex if you're not licensed then be careful saying "my commission" as a non licensed wholesaler that's a quick way to get in trouble. You get paid an assignment fee or a finders fee. Also, if I'm not mistaken you're not realizing what these other guys are saying when they're talking about commissions and closing cost. They're talking about when the investor resales the property. Keyword "resale". That's 6% commission on a 230k sale + closing cost comes out to around 210k. Not including other miscellaneous cost like holding cost, something coming up on the rehab that wasn't expected, or financing cost, etc. Is your investor getting his cash from a private or hard money lender? That's more expenses... But let's say best case scenario for you he doesn't need financing & your rehab numbers are on point he's still all in at 210k (195k purchase & rehab + resale commission + resale closing cost) leaving 20k profit. Is that really worth a 200k investment? 200k to make 20k. Think about it. That's only a 10% ROI for a lot of cash to fork up. If he's not a millionaire he'd likely take his cash elsewhere for a better ROI.

A wholesaler who regularly brings me properties made $30k off a deal on me last year. Due to circumstances I reluctantly sold it to another investor for $67k, making $15kish in about 30 days. He should make $80-$100k on the house if he does the rehab right (house is in a historic area). I didn't mind she made $30k because she left $115k of meat on the bone for me. The investor I sold it to knows what she and I paid for it and doesn't mind because we left $100k of meat on the bone for him. It was a win-win-win-win, from the seller down to the end investor. Just be conscious of the scale of the rehab, it's budget, and other risk factors and take your cut accordingly. If the investor is reasonable then having an open conversation about this isn't a big deal. Until you build that relationship I'd just give him your price and see what he says though. After trust is formed things will get easier. My wholesaler now calls me before she even formally has houses under contract and shares the address, her price, and her desired mark-up because she knows that she can trust me.

@Alex Klimenko I reserve about 10% for seller closing, thats fairly standard. A "cosmetic" rehab can easily become a "s**t, the 20 year old HVAC unit dumped on me" costing an additional $5000. 20 year old mechanicals are at the end, or past, their usable life. A 20 year old roof could need to be replaced. You may find an investor willing to buy that deal, I'm just telling you that, as an investor looking to buy deals, I don't buy that deal. I wasn't trying to offend you, I just hate seeing guys lose money and get stuck with bad deals, so I'm giving you my opinion that you may not have the deal you think and I'd hate to see you stuck with it. 

Dude. 230 can be 210 real easy. Rounded up but not way out of line closing costs est to be 10% for most traditional sellers.

Commissions are 6%. Title insurance which seller pays. Plus other mis costs.

10% off 230 is $207. So don't come off as this guys assumption that 230 becomes 210 is crazy.

You can ask the seller for whatever you want. If you feel strongly that he can make money if you charge $10k, and he feels the same, cool. But if this was me, I'd say the deal was just "okay" at the actual price you have it for. I'd only add $5k on top of that if I was really hungry for a deal.