New To Wholesaling
Hello, I'm completly new to wholesaling. Can somone tell me what a good profit margin would be. For example, what would be a good margin for a home valued a 100k. Would 60k be a good margin or is that too much. Also, once you find a property and put under contract how do you avoid a double closing. As I understand there a lots of problems with the double closing these days. Any help would be greatly appreciated. thanks
Rns
It sounds as if you don't have a good understanding of the wholesaling concept. Educate yourself and you will be able to understand your own question.
[addsig]
Patrece, there is no reason to be rude.....Hey man, you avoid double closings by assigning the contract, and yea, 60 is O.k.
Murphy
Generally I have seen that the wholesellers want the house at 25% below FMV (Fair Market Value) as a minimum.
My 2 cents
actually pat is not being rude. just ststing fact. if some one can not determine a good profit margin in a deal they should continue their ed. before attemping to do a deal........km
Correct me if I'm wrong, but I find that many times when a question is asked a comment is given about not being educated, well isn't that what the message board is all about? Getting different opinions, etc, etc. I know I don't know all there is to know about REI and I am always researching and studying but that is also the reason I joined this site, can a question be answered if you know the answer, plain and simple.
Thanks for the replies. ABW I totally agree with you. I think that some of these more seasoned investors forget that they too at one point was just starting out. I'm sure they asked the same "uneducated" questions of those who might help them along the way be it in seminars, web site, or mentor. People sometimes simply forget where they came from. You are absolutely correct this site was created to foster new ideas, and to share knowledge. Again thanks for all the replies and I'm going to buy the course that was suggested.
rns
"Rns" Let me say that I was not trying to be rude and that I am not a seasoned investor, however, I have seen many newbie investors try to do deals that are beyond their understanding. There is a lot of great advice on this forum but to truly understand what you are doing, I believe everyone has to have some form of root in this type of business, remember we all have different markets and goals which will lead to different approaches. We are all here to help each other but at the same time to be truly honest and realistic. Thanks kenmax for interpreting correctly what I was trying to get accross. God Bless you all and good day.
[addsig]
What form do you use to assign a contract to a wholesaler and do you use an option to purchase agreement to get the deal to begin with or do you use a regular purchase agreement.
Regular purchase agreement with the assignment clause.
[addsig]
As far as profit margins go, Scott Rister recommends 3-5% of ARV. On the other hand, Ron LeGrand advises 10% of ARV.
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Question regarding Purchase Agreement and an Option to Purchase then. Why do you suggest a purchase agreement rather than an option? I've been reading around and talking to a few people and it seems that a option might be the easier way for someone starting because it is just that, an option to purchase, you don't have to. A Purchase agreement just seems more of a hasle because you are pressed to find an investor to assign the agreement to, or you face 1 of 2 things 1.you either close the property or 2. with "weezle" clause get out of the deal but look bad in the process. I might be completely wrong but that is what I was lead to believe from the info I've gathered. Just seems an option with assignment clause and letting the seller know what it means seems less of a pain to deal with in the long wrong in case things don't go your way. Correct me if I'm wrong please, I'm all about learning. :-D
Hi RNS,
It definitely depends on your market, but in general, the wholesalers will probably want 25-30% below market value so they can leave their customers a decent margin. If the house is going to sit longer on the market and need more in repairs, it needs more margin. If you are in a hot market and it is like new, maybe less will be okay.
A deal might breakdown like this all along the way.
100k market sale price
13k rehabber expenses
7k rehabber profit
80k rehabber purchase price
2k wholesale expenses
3k wholesaler profit
75k wholesaler purchase price
3k finders fee
72k finders contract price
Everybody serves their purpose, and they get paid based on the value they bring and the risk they take. There are some companies that incorporate all of these roles and pick up all of the margin and reduce the expenses, but that takes cash and lots of it!