Posted by Joe Kaiser on December 29, 2006 at 18:46:34:
Mike,
I agree with what you’re saying, but just want to reiterate that human
nature is as human nature does. Not allowing for it or deciding it
doesn’t apply because they’re just stupid isn’t good enough.
I remember buying a tennis racket as a kid from some guy who’d
bought it at a garage sale. I paid him $5 for it, a bargain (worth $30,
easy). When my dad found out the guy had only paid $1 for it earlier
that day, he told me I’d been cheated.
It was a weird conversation, as I recall, but there was no changing his
mind.
Posted by Mike Miller on December 28, 2006 at 15:18:55:
I am looking for some general information regarding a property we recently purchased. We bought the house for $99K and wholesaled the propertty for $129K. The area comps are between $200-$220K. The sales price was 58% to 65% ARV. After discovering that we are going to make as much (or possibly more) on the deal as the rehabbers have accused us of dealing with them in an unethical manner. Do these numbers seem to be out of line for typical rehab projects? Also, what percentage of ARV is typically used for an assignment fee? We have heard that 10-15% is standard. Our market is (WA) is still moving forward.
For what it’s worth I have to agree w/ GL… - Posted by Gary-Oregon
Posted by Gary-Oregon on January 02, 2007 at 02:18:36:
on this one. Tell the rehabber to pound sand and go find another rehabber. If he was happy w/ the deal when he agreed to it, that is all that should be important. What you happen to make is totally inmaterial. This is what gripes me w/ professional athletes. They agree to a long-term multi-gazillion $$ contract, then 12 months into the deal they want to renegotiate. POUND SAND!!!
Posted by Brian_wa on December 29, 2006 at 14:26:05:
Tell them this:
Listen here man, I’m giving you a deal that will make you at least 40k in a few short months. If you don’t like it, then please cancel the purchase and sale agreement because I have about 3 other investors who can’t wait to give me the $129k within a couple of weeks.
Here is what you should tell them next:
This is a business that I’m operating and I have and will be running into more deals like this. It looks as though you’re not comfortable with people making money so let me know and I’ll cross you off my investor list. That way you won’t be bothered the next time I have a similar or better deal.
Just say “If you’re handed a deal on a silver platter that meets your criteria and you’re going to make money on it, do you really care whether I make 3K or 300K?”
Posted by Drew(VA) on December 28, 2006 at 19:29:25:
They were obviously comfortable buying it at the price you set. What you make shouldn’t matter as long as they are happy with the purchase price. I suggest next time you find someone else to wholesale the property to, investors understand everyone has to make a profit, if they want to complain about how much you make, let them find their own deal. Otherwise pay up and shut up.
Posted by Joe Kaiser on December 28, 2006 at 18:42:28:
It’s important everyone understands their roles and that no one is
surprised when the money shows up.
You do that by laying it out to them ahead of time, what you do, what
you make, and everything else.
They need to be happy to pay you for that property, or they can just go
buy from someone else.
Ditto for sellers.
It get’s dicey when it’s not clear what you do, what you intend to make,
and how it all plays out. Anything more than tip money looks to the
uninformed that something fishy is going on. You can’t allow that to
happen.
Forget percentages . . . you didn’t get an assignment fee, you put them
into a property at a price they felt was right. What you made or didn’t
make is immaterial.
But if you don’t have it set up properly, it becomes extremely material.
The point is not whether you make 3K or 300k. The point is whether or not you are ethecial in you dealings. Most by far of the wholesale retail flip deals on SFH are based on a very slim margin of purchase vs flip vs rehab price. Set the $300k deals aside, if you as a flipper are trying to make more than the rehabber you are not being realistic and you are usually taking unfair advantage of a nubie rehabber. If you, as the flipper are buying a property needing quite a bit of rehab at 60% of the FMV, you probably can and should only expect a 10% or so mark up to allow the rehabber to do all the work he has to do and still make a fair profit. As a wholesaler you have little or no cost involved and the rehabber has a considerable amount. It is a matter of perspective on what the costs to the flipper and the rehabber really are. Ethically, it is not a matter of how much you can squeeze out of a unspecting rehabber, it is a matter of your own conscience as to how you can at least be fair to your fellow man.
Posted by Joe Kaiser on December 29, 2006 at 02:39:16:
Well, apparently, it did matter. And that’s my point.
You have to position yourself as an investor who makes money, real
money, and that has to be known up front so none of the nonsense can
rear its ugly head.
It seems to me that if they make money, they’ll be back. Why should they fault you for finding a great wholesale deal? I’d ask them again if they have a problem with the deal and let them know that if they’re not happy, you’ll understand and you’ll take them off your list of buyers for your future deals.
Then you’ll know if they’re just stupid or trying to position themselves for a better deal with you next time. If they argue, they’re stupid. If they apologize, then you’ll know they’re just negotiating a better deal for next time.
Kind of a manager that argues a call in a sporting event. He knows he’s not getting the call reversed. He’s just hoping to get a make up call on the next close one.