Don't Get Greedy! Or Else! By Matt Larson

Economic at it's best; playing hard ball with the hard ball players. Matt I guest you sent them back to school for a refresher course. I really appreciated that bit of education/information. Thanks for sharing.

Sandra

good ole' American capitalism working at its best. And there's plenty for EVERYONE to go around...as should be!! Really! Come on people...leave a little meat on the bone!

Now your "newly" acquired wholesalers are doing it "your" way. Well done Matt!!

so true- it also applies to contractors doing work for you-
the 1st time is good,

2nd time price goes up quality goes down

3rd time is greed and nasty...they dont realize or appreciate a good thing and will take advantage of you...YOU'RE FIRED!!!!

Great post and so true,it seems like every corner you turn , someone is trying to screw you.
Thanks for keep us all informed, its very much apprecisted .

Curtis Fillers
(Charlotte,NC)

And they didn't even know what they had or if they did - well.... Matt, come to NC, we will treat you right!!!

Great post as always,

Lori

What % do you like to pay, for properties someone else is bring to you? I am wanting to do the Wholesale & Assignment Contract deals for now. Like you said, I don't want to be greedy but of course want to make what I can on a wholesale deal. I do understand the whole "price yourself out of business", thing; which is why I am asking since you do so many. Look forward to your answer.

Have a good day
Pattison

Just treat people how you want to be treated. That's how you should live your life. Great post Matt.

A good way to measure you assignment fee is this:

Your buyer should be able to make 3-4 times more profit than your fee.

example--if you assign a property for a $5000 fee, the buyer should be able to make $20,000 profit after all expenses.

Great rule to do business by, Remember the old saying " You never know what you have until you loose it"...Jan

that'll teach'em.

So you dont do wholesaling yourself anymore? You holding/renting or fix/flipping?

This is great stuff, so what do you typically pay for a fee?

Nothing good ever comes from greed. Sounds like some greedy wholesalers tried to hold your feet to the fire and they were the ones who got burnt. What goes around comes around. Outstanding post, Matt!

Would a cash buyer, like yourself, even bother with a property purchased off the mls? I only ask because there are a lot of properties in my area that are REOs and the prices keep dropping but not many are being bought. I scooped one up for $40K and after maybe a $15K rehab cost, should be able to sell it for $100K. I was going to rent it, but I'm not sure which direction to go. I'm a newbie, and am looking for advice from the veterans. Thanks for reading...

Gina

great info matt!....and its nice to see a "supposed tv student" actually "acting!"...keep it up matt!....

QUESTION...How do you feel like being a private lender?

I don't do private lending.

I can make a lot more money by investing it into my own projects.

Matt,

good rei ethics go a long way!

thanks for posting and sharing this info with us...

Val

Get your deals at 65%, minus repairs and your fee. Cash buyers want great deals, not just good deals.

Matt, you're right about greedy wholesalers. Not a lot of 'em know how to be DIFFERENT, or how to evaluate a deal right, so they can get repeat business.

Very good advice and points to staying on top!

There are way too many deals out there to be charging high assignment fees for them. You can make way more money on your volume of deals at a low price than one deal for $10k

You want your buyer to keep coming back for more.

Trust me, I started out trying to make $10k per deal and it got me nowhere.

I dropped my fee to $3k-$5k and now the buyers are happy.

Also, do most of the work for them.

I take pictures, I put the lock box on, I schedule inspections, I renegotiate with sellers for them etc.

All the buyer should have to do is buy the property and start his rehab on it.

Be full service like walmart, provide more than your buyer is expecting and do it for a low price.

Just wanted to wish everyone a Happy And Safe New Year!!! Party on...

Thank you for the post and sharing. That is awsome that you take time to post here Matt. Thank you very much!

In my entire working life I have worked to have repeat customers over 1 big sale. I knew that I would make more from my repeaters in the long run than what I would get hustling the 1 time customer. I've proved it time and time again.

Make your customers want to do business with you and it will all work out for the best. You do that by being fair.

Happy new year everybody!!!

Andy Sager
DG's AndyS

It just like I always said. LEAVE ALITTLE MEAT ON THE BONE!!!!!!!!!!!!!!!!!!!!

Like Greg Murphy says "You have to leave a little meat on the bone" (that still cracks me up). However, I sometimes wonder what is an appropriate fee to charge. This info clears that up for me.

Thanks
Joe

The KING of making it happen ... and keeping it real.

Thanks Matt.

drats ..oh well matt..do you know anyone that could be a private lender?...in in southeast ohio....if not dont worry about it...im still looking for one...

HAPPY NEW YEAR TO EVERYONE!

Excellent post! That additude gives us a bad name. I always say, "hogs get slaughtered and pigs get fed......I'd rather be a pig

Here is what I think to be a good question. With all that comes into the rehabing, holding/carrying costs etc...How do newbie wholesalers like myself find out how much profit after all expenses the investor is going to make to predetermine our fee to keep everyone happy?

Ex.

ARV 100,000 house, (use ARV*.65) so 65,000 less the repairs lets say 15,000 so we are selling the property to the investor for 50,000. How much profit are they really getting if this deal is accepted? I realize there is 35% left in that ARV but not all of it will go towards profit so that isn't a very accurate number to judge it or is that the number your talking about?

Thanks!

Hey Matt & DG Members,

I have to respond to Matt's post here, because I am doing a fair amount of wholesale deals in my area, and I can't completely agree with this analysis:

And here is why I disagree with this..

Let's say for instance I have a property with an ARV of $150k and it needs a $30k rehab for resale. The formula I would use to determine the sale price in my area would be:

ARV x .65 - repairs = price

If I sent this property out to my buyer's list for $65k, and my buyer's agree to pay this price... should it matter what I make? Let's say I got this property under contract for $45k. If I were to use Matt's formula, I technically should only wholesale this property for a $7-10k fee, even though my buyer's are agreeing to a price that would give me a $20k fee.

I don't feel I should be giving away the extra equity I created in the deal to a buyer simply because he doesn't want to pay me a higher assignment fee. The fact is if I close on the property and then market it out, they would never know what I paid for it (property records take about 6 weeks to update). I could also close on it then put it on the MLS where there is tons of competition for really good deals right now and get even more for it.

I just wanted to throw that out there, but I do agree with Matt that wholesalers need to do things correctly when dealing with their buyers. They have to stick to the numbers and never give out false expectations on rehab or ARV estimates. Bottom line is if you are a wholesaler and don't want your buyers taking advantage of you, make sure you have a lot of buyers! Everything I am saying is for more advanced wholesalers and not for beginners, but it's just another point of view I had to mention, because I can't stand buyers who tell me they don't want to pay me a $20k fee or more even though they already agreed the price was right. If a buyer does this then they will only be contacted when I have a marginal deal where I know my assignment fee will be small.

Matt's formula is definitely recommended for all wholesalers who are just starting out, but don't sell yourself short if you are able to get a price accepted that you can make a life changing amount of money on! I did a deal in August where our assignment fee was $43,000, and the buyer was perfectly fine paying it, because he made a 35% ROI when he sold the property. He bought it from us for $85k (our contract price was $42k), put about $60k into it and sold it for $230k. This buyer is always coming back to me for more properties and I will continue giving him the properties first since he doesn't mind paying me a high assignment fee as long as the numbers work for him.

This is just another view from a wholesaler's perspective, but I know some Cash buyers will probably disagree with me. =)

To Our Success in 2012!!!

Larry F
TheFlipKid.com

If you look at the context of the post, the example was given of wholesalers in HIS AREA. I am a wholesaler in the same area and he is right about keeping the fees low. You see, our average ARV is anywhere from $50k-$150k and most of the properties here are over 100 years old and they need a lot of rehab. A $10,000 fee in our market is really tough to get unless you can get a $150k property for $50k and it needs minimal rehab.

Its all in the numbers, your buyer should be able to make $20k-$40k when they sell or refinance the property.

Bottom line is this

I agree with Matt and I agree with Larry on this one.

You have to know your market and what kind of prices you need to be at.

You have to know your buyers and know what they want.

You have to keep your buyers happy, if your buyer will pay you a higher fee then great.

Just make sure you leave enough profit in the deal that they come back begging for another one.

You can make more money on volume than on price per deal.

If you want more price per deal then your going to have to negotiate harder with your seller, not your buyer.

Remember, your buyer is in controll, the seller is at the mercy of a buyers market right now and they will be for a long time to come.

Bottom line is...

Buy Cheap, Sell Cheap, Sell Often!
Earn repeat business!