This will be my first deal and I dont want to get taken advantage of. Its a bulk deal. 5 brand new manufactured homes that are 90% complete. Asking 150k, ARV is 605k This is an exclusive deal. Not on the mls. I am the marketer for the wholesaler. I am asking 25k (5k for each home) for my assignment fee. My buyer is offering 9k (6% of 150k). He is saying that you cant go over 6% for an assignment fee. I have NEVER heard that so before I proceed with this deal I need a second opinion. What should my assignment fee be?Please help…
Hi,
Let me jump in and help you out! First if the suggested retail price of a manufactured home is $121k, the dealer is probable paying the manufacture $60k for the home (New).
A manufactured home like a car starts depreciating right off the lot (so to speak) so when this thing is picked up at the manufactures and set up, from that moment on it is losing value!
Now a manufactured home is a trailer or set of trailers as far as DMV is concerned, and there may be some regulation that prohibits a broker (Assigner) from making more than a set limit? I do not know that answer in your state! I do know that it will take another $2500 to $5000 just to move and re-set up on a lot.
Now the rule of thumb of not exceeding about 7% on an assignment is not law that I know of but because the assignment fee can not be financed into new financing, it will not be recognized as part of the original contract and there is a point where a buyer say’s “Thanks, but No Thanks” as at some point another home is better than shelling out a bunch of cash you don’t have and can not get back until some years down the road in a sale or refinance. (Probable about 3 to 7 years depending on the market to refinance and pull cash back out.)
So with that said I don’t think I would turn down $9k clear in this situation, I think if I were you I would take it and run to the next deal! You don’t have to make a killing on every deal, just try to make money on 8 out of 10 deals!
GR
Hey There keyla25,
I would secure a flex option with the seller/wholesaler for the $150K, if you can sell it for $300K than you’ll make the $150K spread, simple as that. I think the big question is, are cash buyers in your market purchasing partially fix up manufactured homes. If the answer is yes, pursure it whole heartadly, if not do waste another minute on this deal.
How do you find what cash buyers are buying? Ask you Realtor to pull all the cash transaction in our market for the last 90 days, see how many manufactured homes have sold.
Good Luck!!
Sean
Hi,
I know I am just the 200# gorrila on the wall, but let's face it, someone needs to be!
A manufactured home, be it single wide, double wide, tripple wide, quadrupple wide or a two or three story all have the manufacturing history, a distributer, a wholesaler and a retailer!
Now retail may be $605k or $6m it all depends on what someone who generally is a end user owner occupied family who buys one manufactured home from a dealer to have it set up to live in!
Now when we talk numbers the manufacture may actually build the unit for $60k, the distributer may have a $15k margin for transporting and supplying a wholesaler who may have $15k to supply and deliver to a retailer who may have upwards of $30k to allow some negotiation on ammenities, finishes, contributions to final set up cost’s, incidentals and taxes!
Now the manufactured homes I have been involved in as an investor and there have not been very many all were bought brand new through a dealer for a distributer price, all delivered for about 55% of manufactures suggested retail! Now as an investor I don’t pay retail for anything, and I am sure not going to start now!
Now I am actually talking about a brand new completely finished manufactured home that includes transportation and set up, now I have been thinking about how 5 manufactured homes get in the same location in the same city and state, and my guess was either a custom order trucked out and held in the wholesaler’s yard, or a dealer who went bankrupt who had models sitting on site that were stripped or unfinished?
So if I was paying $66k for a brand new unit and these need 10% finished which is $7k to $12k in finishing work still required, then I have to pay to have them moved, set up and trimmed and finished and I know that’s going to cost me $5k, then I could not pay more than $50k a unit.
But wait a minute, what forum is this? Oh, Yea it’s Real Estate Investor Club and what is our motto??? Come on you know it “We Don’t Pay Retail for Real Estate” and what did I learn years ago and what do I tell new investors just starting out??? Come on you know it, you really do; we don’t pay more than 70% average of FMV. (That’s where all our profit is) wheu, I am tired already!
So I could not pay more than say $35k a unit under this scenerio, and I am not even sure how old these unit’s are, Keyla did not say what year these manufactured homes were manufactured, 2009 maybe, even though they are brand new there probable not under a manufactures warranty anymore and there is always a potential for a few unknown cost’s!
Now if I were buying these I am probable moving them onto individual deeded lots as I know I can make additional equity by adding a framed front and back porch with stairs, maybe a nice gravel driveway and a free standing 2 car garage, and I still want to make 15% to 20% profit in the deal and I still have to set up site utilities and maybe a septic field!
If you have a buyer for these homes who will give you $9k, I would take it as it could be some time before someone comes along again willing to buy all 5 together!
GR
That is LUDACRIS! He obviously assumes that you are a realtor / broker. 1st of all a realtor is not locked into a certain percentage anyway because that is AGAINST the LAW!
Secondly, YOU as the wholesale / marketer is MOST certainly NOT locked into a certain percentage. It is YOUR deal. Don’t let him take advantage of you and your stage in the game…
THERE is NO set in Stone Price that you must assign a property for. The sky’s the limit as long as your leaving the end buyer / investor with the percentage of equity they are seeking to make it feasible to them.
They set the rules with how much equity they require and YOU set the rules to how much additional equity you are NICE enough to pass his / her way. YOU set the Rules to how much ASSIGNMENT FEE you REQUIRE…
SIDE BAR!!: Build your list of Buyers!! That way you can show them how fast your deals go and how much of an asset you are to them. And the next time you marketed a deal to them they would NEVER question it AGAIN! It’s your negotiation, it’s your structure, IT’s your darn ASSIGNMENT FEE!!! GET IT!