Flipping A Purchase Contract
When I get a property under contract to puchase with a distressed Home Owner/ in DEFAULT @ <70% FMV.
1. What is a fair assigment fee (wholsale deal) for me if I assign the contract to another Investor? I was thinking $20k - $40k. If the Investor stands to make over $60k - $200k after my assignment fee.
2. Should I pay for a drive-by appraisal and title report before I look for Investors or is that their responsibility?
3. Are there any clauses I need to add or delete to a standard Purchase contract or Assignment contract?
4. Is it customary for me to be paid at closing (when Investor closes) or at assigment? Should escrow be involved if it is customary to be paid at assignment?
5. How much ernest money (if any) should be given to the Home Owners once they sign the Purchase agreement? I was thinking $50.00.
6. How much "walking money" is fair. I was thinking $1000 - $8000, whatever I negotiate.
Thank a Million
Nicholas
Dicarospeed
I'm sorry to say that your numbers just do not add up.
You will be hard pressed to get $20k - $40k assignment fees from a single residential home.
This may not be what you want to receive in reply to your post, but your just not being realistic in your thoughts.
I would suggest a course by John Locke on bird-dogging.
[addsig]
Mr. Michael,
I have since learned the answers to questions #4 and #6 above from reading the many posts in the wholesaling forum (where I should have posted my questions originally). Although you stated your opinion, you didn't donate any insight to my questions above.
Coincidentally, I have already purchased and read John Locke's book on BirdDogging. It gave a lot of useful info, but did not address any of my specific questions above.
Would you recommend 1 of the 2 wholesaling courses available here on TCI?
I don't know if you follow CA real estate, but I don't think it would be unreasonable to make 20k-40k on an assignment.
Many properties in SOCAL that were bought 2 - 3 years ago are now worth DOUBLE or MORE. Hence, a mortgage that was originated 2 years ago at $170k (100% LTV) is NOW 12/2004 on a property worth $350-400k+ in many areas! I think that there is room for my 20k-40k. Don't You?
And, please....feel free to give your thoughts to my other questions.....it is the season off giving after all
dicarospeed
While I appreciate what you have to say you are not at all being reasonable with you fee structure. The average locator fee runs from $500 to $1,500. The most I have ever paid a locator for a residential home is $5,000 and I buy and sell a lot of property in several states and have been doing so for some time now.
The reason I did not answer your questions was the simple fact you started out wanting to make big money as a finder, real estate locator, bird dog or what have you.
I help a lot of investors on this forum, but your first step in becoming a professional is a reasonable thought process then you can learn by those have more experience. There is just no get rich overnight in real estate, it's a wealth building game that plays out over time.
Question 1. What is a fair assigment fee (wholsale deal) for me if I assign the contract to another Investor? I was thinking $20k - $40k. If the Investor stands to make over $60k - $200k after my assignment fee.
Answer: Let's take your numbers and take a look-see:
Let's say you have a property at a market value of $400,000 and you get it at 70% of market value this is what your investor will pay out to get the deal from you and to sell for a profit.
Let's be save and say it takes 6months to resale at market.
Market Value of $400,000
Your investor gets it for $280,000
Your fee of $20,000
Repair cost (Just carpet and paint) $3,800
Loan payments of $11,046
Based on a 30-year fixed rate of 5.621533% with 20% down
Real Estate Tax $1,750
Insurance "Builders Risk" $2,160
Utilities $2,400
Realtor commission $24,000
Closing cost $6,000
Your investor has a total invested $351,156
With a possible profit of $48,844
If all goes well. But who is taking the risk?
I could get the same deal from a realtor for $16,800 who do you think I would go with.
Yes I do know California, as it is one of my market states.
Median home-resale price:
U.S. average: $163,600
Riverside/San Bernardino, Calif.: $194,800
Los Angeles area: $307,900
Orange County, Calif. (including Anaheim/Santa Ana metropolitan statistical area): $448,400
Real estate locators are a dime a dozen, good ones are not. No matter how good they may be paying 10's of thousands of dollars for pushing paperwork will never happen in my realm.
Question: 2. Should I pay for a drive-by appraisal and title report before I look for Investors or is that their responsibility?
Answer: This is where you lack of experience really displays it self. Thank about this just one moment, you are thinking of paying for a drive by appraisal for a pie in the sky deal. NO! Vary unwise.
Finding investors to purchase your deals is not that easy, it's the same with getting property at 70% of market value it's not that easy.
Question: 3. Are there any clauses I need to add or delete to a standard Purchase contract or Assignment contract?
Answer: Yes there is, I would suggest re-reading John's ebook - you overlooked a few things.
Question 4. Is it customary for me to be paid at closing (when Investor closes) or at assigment? Should escrow be involved if it is customary to be paid at assignment?
Answer: All investors do it differently, normally your fee is not a part of the escrow process, I do not know any investor in his right mind that would pay such a large fee out, but if they did it would be on the back end when they sell the property.
Question: 5. How much ernest money (if any) should be given to the Home Owners once they sign the Purchase agreement? I was thinking $50.00
Answer: This all depends on the listing agent if listed, if it is government or lender owned, and the list goes on. It just all depends!
Question: 6. How much "walking money" is fair. I was thinking $1000 - $8000, whatever I negotiate.
Answer: As a real estate finder I would not advise this unless you have a buyer lined up.
This may seem to be a little harsh, but I can tell by your post you are vary green behind the ears when it comes to real estate investing and that you need to seek out much more knowledge in the industry. Go to the public library and used bookstores and lean all you can about the industry before you jump.
[addsig]
Thank You radio52-com for directing me to the specific information and specific people I need to talk to! Bruce is actually putting on a RE seminar here in the inland empire at the end of Jan. I now know I need to go. Also, thank you, John.
dicaro, make sure it's Bruce's Foreclosure talk and not the California Comeback one. Both are good but you'll only get foreclosure statistics and reasons why foreclosures will increase at the Ca. Comeback talk. I'd recommend getting his Foreclosure course if you can afford it. He's speaking at the NSDREI on 1/11/05 (http://www.nsdrei.com/mambo/index.php?option=com_content&task=view&id=44&Itemid=65) which is the foreclosure talk. It's probably quite a drive but might be worth it.