Hey Andrew, congrats on getting started! With that said, take the relationship and friendship out of the equation first so you can simply vet the deal and do your due diligence as this is business and about money. In my experience, many wholesalers have a bad rap as they often underestimate rehab costs and overestimate value. Your friend is new too, so he is really not that familiar with the process either and I don't think he is taking advantage of you asking for a $5-10k premium for finding a good property, provided he has left some room for you to make more than that. There are some good wholesalers out there, offering good deals with realistic numbers, though they tend to be fewer and harder to find. You also mentioned it as a either a rental or a resale, so which way are you going to go?? That will impact how you do this deal and whether or not it is a good one as well. Have you signed the contract or are you doing your due diligence first? If you signed it and it is not as he said, do you have an exit clause?
He thinks the value is $140k, and you think it is around $160k, that is a big difference and can at times be the difference between a good deal and a not so good deal. You should confirm this right away with a realtor in my opinion. At the same time, as @Daniel Brown said, you need to check the property out up front, and with someone that knows what they are looking at and how to estimate rehab costs. HVAC if none was there, means adding; Ductwork throughout the house, Framing to box it in, drywall, and finishing. It also means new equipment and whether you do electric heat pump or gas furnace, there will be electrical or gas requirements. You may also need to vent the property into the chimney if an 80+ unit or to the exterior if a 90+ unit. Even if you get a great deal on the HVAC, that could easily be $5500-8500 depending on system, types, size, etc. Now you add all the other stuff I mentioned, and you could end up at $10k just for the HVAC.
In Baltimore, on rentals, we have lead paint, so that is a consideration, you need hardwired smoke and CO2 detectors, among other code requirements. If you are selling it, some of these become moot, yet in order to get the highest value, you need to provide a fully renovated property with new kitchens, baths, paint, carpet, updated electric, plumbing, HVAC, windows, roof, etc. the list goes on. As Danial said, there is no cosmetic fluff job on a resale, rental maybe.
As for the process, you guys will need to be in touch with a title company and provide them with the contract which should stipulate the conditions for the sale and time frame. Did you already sign a contract and if so, are you aware of what you committed to? Who pays the transfer taxes? Are they split or does buyer pay? The title company will then do the title search to check if any issues and if any liens. I assume your friend, the wholesaler, checked title to make sure his buyer has provided correct info on any mortgage balances or liens?? If there are liens, who is responsible? Seller or Buyer? Typically, you will have 30 days or so to settle, and I assume you will want to finance the property, so you will need to find financing as well and get that in place. Everything depends upon the contract. The wholesaler is to provide you with a free and clear of any liens or title obstructions property at whatever price is agreed upon and be able to close within time. Your responsibility is to simply perform at settlement with the funds to close the deal. I hope this helps a little.
