How To Determine Wholesale Profits?

Bird Dogs, Wholesaling
1

When any of you do a wholesale deal, how do you determine your profit from the deal? Do you figure in a fixed amount for your profit(ie $5000), a fixed percentage for your profit(ie 5% of $80k ARV is $4000), or do you not give an asking price and have the buyers make you offers and just keep whatever the difference is for profit? Thanks for any info and experiences.

2

I’d like to hear what some more experienced folks have to say about this subject as well.

Thanks in advance.

3

This is the same question I posted on a previous topic. I am interested in knowing how much to charge as well and what is considered unreasonable.

4

Originally, I was thinking of figuring in either $5k or 5% of ARV as my profit, but I posted this question on another RE board, and was suggested to use 3-4% of ARV. That seems a little low to me. It might depend on the area and local RE market. The person who suggested 3-4% is from Arizona where property values can be much higher than some areas of the country. I’m from Ohio, where we have some of the lower property values in the country. So, I might stick with the 5% of ARV.

5

5% seems a bit low to me. I’ve read of people making between $3k and $10k flipping properties. It just seems to be based on how much profit is in the deal. I hope someone here will confirm this.

Thanks

6

bump

7

Hi, I think I remember you from the other board.
For AZ a BIRD DOG usually will get 3-4% for complete details of a property, owners situation, mortgage balance, seeing the property, very rough estimate of repairs etc. BUT this does not include getting it under contract.

If you are wholesaling it (Actually getting it under contract and assigning it) then you charge the 5% or however much you want to make. I have heard if it’s a good deal for an investor they will pay whatever you want (within reason) to purchase the contract from you.

Around here (AZ) they say up to 10k is not unheard of, but it all depends on how much they will profit also.

Experienced investors please correct me if I am wrong-this is what I have seen others say when I ask similar questions.

8

Let me throw in numbers and see if this will make sense.
Purchase price - 220K
Possible sale price - 240K

Home is 2001 built detached SFH in very good
school district and good neighbourhood.
This is to be picked up in the auction ,of course
interior condition sight unseen.

There will be holding costs on the cash purchase.
Exit might involve realtor fees to buyer broker.

Will you do this deal? And why?

Thanks
Krish

9

Where is the profit if the house “could” sell for 240 and is for sale for 220?

If anything I see this as a loss, after costs no doubt.

10

I agree with rbw. To me this seems like a very marginal deal. Since you said “could” sell for 240 leads me to belive that you have no real comps on the home. Without seeing the inside there could be a lot of repairs needed. Once you figure in closing costs and possible holding costs, it prolly wont be worth your while.

You need more details and real comps.

If it were me, I would pass on this deal.

Just my opinion

Alien

11

i would have to say this a pass at max because you dont know interior if it does comp out at 240 max offer i would be willing to do would be 185,000 but thats just me and my market

12

Hello, I am new to this forum but my spouse and I wholesale properties as well. We don’t usually set any type of standard percentage that we will make off a deal. Generally, the amount that we will make off of a wholesale deal depends on the property and how much an investor is willing to pay. There are some deals that we make $5000 from and other deals that we make $10,000 and up on. I hope this helps.

13

Thanks to all for the inputs.
The 240K is the comps.
The house does need landscaping around.
Interiors, the lower level looks ok, but the upper level
condition is unknown.

The current bid is at 210K. If i need to get in, the
next bid is 220K. Hence was trying to rationalize if
it made sense.

If someone has $$ that is interest free, then perhaps
it will work. Other wise the holding costs will eat up
the profits.

The bid started at 180 and went to 190. I took it to
200 and stopped. I know my competition will do owner
financing for this property and plug in a buyer. Hence
a premium involved in their selling price.

-Krish

14

$240K sales price usually means that you’ll pay at least $12,000 (5% which is on the low end) just to close the deal when you sell it. Even I paid cash for the deal at $220,000 + your cut, there would be no profit in it.