Posted by David MacGown-MI on December 04, 2007 at 14:04:08:
Shawn,
I like to target at least 5% of the ARV for my wholesale profit, if you know you can get more but feel your buyer won’t feel comfortable with what your making… then do a simultaneous closing.
The Assignment Fee - Posted by Shawn
Posted by Shawn on December 04, 2007 at 11:23:39:
When you wholesale a property and assign the contract to a rehabber - How do you determine your profit from the assignment?
As much as you can get… - Posted by PJ
Posted by PJ on December 06, 2007 at 12:24:53:
I never do a flat 5% or etc. I choose a assignment fee that is reasonable given the profit in the deal.
i.e. if rehab buyer will make 50k on deal, I’d ask for 10k… if he will make 25k, I’d ask for 5k.
You decide your profit…obv based on how much demand you have for your product.
Re: The Assignment Fee - Posted by Ron
Posted by Ron on December 04, 2007 at 20:19:55:
I hope you know the formula for determing the MAO.(Maximum Allowable Offer)— ARV x 70% - repairs cost= MAO.
Now remember, YOU NEVER PAY MAO! MAO is at or about what you’re gonna be selling the house at to someone who plans on doing the rehab and retailing it.The difference between what you pay for the house and the MAO(assuming you sell it at MAO) is your profit.Make sense?
So lets say you have a house with an ARV of 125K and it needs 15k in repairs. 125x70%=87,500, then subtract 15k from that and that gives you 72,500. That’s your MAO. So if you have it under contract for 65k and you selling to a retailer for 71k lets say, you’re accepting 6k for a wholesale profit.
This formula will be very important to you if and when you decide to start retailing houses. This tells you what you can expect to make once you’ve comleted the job.As a wholesaler it gives you a very good idea of what a retailer would pay. For this formula to work you must have the ARV and repair cost.
Hope this helps!
Re: The Assignment Fee - Posted by William Bronchick
Posted by William Bronchick on December 04, 2007 at 14:48:51:
I like David’s 5% answer below, but also I think it depends a lot on what you can get the property for. If you know what your rehabber wants to pay (e.g. 70% of ARV), then your profit will be determined by what price you negotiate for the property below that number. Sometimes its a few grand, sometimes it is 10k or more.