I was wondering if someone might could give an example using numbers of exactly how a wholesale deal would go down…I get all the basics of a deal. Or I think I do.
My BASIC understanding of how it works: Example:
-Find motivated seller
-Seller assigns contract to me for 50,000 (lets say 50% of ARV - 100,000)
-I find a buyer
-Tell him I have a house that is worth 100,000 ARV that he can get for 60,000 and all he has to do is put 15,000 into for repairs and upgrades
-I assign him a contract for 60,000
-I take the 50k to the seller and I keep the 10k difference.
Ok so that is my basic understanding…This is just an example i made up as I wrote this. I was wondering what other costs and fees go into these deals that I missed and if theres anything else i did wrong.
An example kind of like i did with numbers would be greatly appreciated…if not any info at all would be greatly appreciated.
PS…If anyone would rather give a Lease Option deal with numbers…please feel free
thats kinda good but always do your wholesale deals 70% of ARV minus repairs so in your example the deal would look like ARV-$100k your maxium alowable offer would be $50 so that you could make $5k on the deal so you would offer the deal to the investor/Buyer for $55k cause the $15k repair would bring him up to $70k in the deal and thats the deepest a rehaber would want to be to make a profit… Depending on the area sometimes your percentage would be lower than 70% because of the area good or bad or ok and the days on market for sells… Like if its a kinda ok area or a slow market than i’d do 50%-60% of ARV minus repairs need… Now go make some deals!!! :beer
Now when someone ask's me for an example using numbers, it usually contains 1, 2, 3, 4, 5, 6, 7, 8, 9, 0, and the good old $!
$100,000 FMV
$ 75,000 Pristine home purchase in a growing market with appreciation gaining yearly! (25% discount)
$ 70,000 Pristine home purchase in a stagnant market where statistics are flat! (30% discount)
$ 65,000 Pristine home purchase in a falling, unstable market where foreclosures are high! (35% discount)
$ 10,000 Example / - Minus all Construction cost’s for Rehab / Remodel (xxxx.xx dollars as estimated)
$50,000 Purchase price
$ 1,000 Earnest Money
$ 3,000 Assignment Fee (Assignment Fee’s have been statistically studied and should not exceed 6% of contract.)
$ 10,000 Double closing using transactional funding - Used for transactions where wholesaler is looking for more
than a reasonable assignment fee and buyer is using financing where ownership and HUD 1 is required!
$1,250 Closing cost for an A - B closing!
$1,200 - $1,800 Transactional Funding Company Cost!
$1,500 Closing cost for a B - C closing!
$5450 - $6,050 Wholesaler Net on Financed deal!
$1000 Earnest Money Returned!
All of these examples are at 75%, 70%, & 65% ARV., which is great. I think what he wants to know and what I’ld like to know, is how to do you figure in closing costs (what an example like this with closing costs would be), and, are the closing costs factors into the 35%, 30%, or 35% discount? I’ve seen it done like that before.
And, what’s the best way to present an example like this in an email or on a newsletter / postlets to your buyers list, so you get more responses and you become that “goto person” for a full-service, one stop shop investor? Thank you for all your input, guys.