Additional Profit Centers in Your Wholesale Business

There are several additional profit centers inherent in your wholesale business and you should be aware of them and take advantage of them if at all possible. First of all there is the Hard Money Angle. You can lend hard money to the people that buy houses from you. They are going to borrow the money anyway so why not from you? I don’t know about your market but in my market I get 3 points origination and 14% in interest on every deal that I loan money on. This adds sizably to the deal. Usually I can count on that part of the business adding about 3-4k minimum to each deal. Sometimes that is on a deal that I am only making 5 or 6k on! So that is almost doubling my money on every deal that I loan on! Another advantage to being on this side of the game is that when people know that you can get them money, they bring you deals that you would not have normally had access to. A lot of times this even gives you the ability to insert yourself in to the deal where you were not even in to start. You can even make money off of other peoples deals that you have no work in at all. You should also note that a healthy wholesale business will bring you leads that you cannot do nothing with. I hate to even admit that I cannot do anything with a particular deal because in a lot of ways that is like admitting defeat, but occasionally there are houses without equity and sellers without motivation. These are realtor referrals. Now, in most states realtors cannot pay a fee to people that are not realtors (that is the machine trying to put its grubby little paw into your deal). However there are a lot of realtors that will give you gift cards to restaurants, hotel stays, and a variety of other things in exchange. In fact there are even some that will take a discounted listing on the next house that they sell for you. Either way that you look at it equals more profit centers. The same is true of mortgage brokers as well, I have been offered as much as $500 per deal in fees from a broker on loans that I refer to him! This policy works with insurance agents and a variety of other people in our industry. The next profit center is a little more difficult, but I have mentioned it before, in the last blog in fact, and that is offering contractor services. Most investors just starting out are terrified of the contracting part of this business. They don’t understand it and really don’t know where to start. That being said offering contracting services can be as easy as an override on a contractor that you have been using for your own rehabs. If you have spent time with him and trained him and can point and shoot with him, you could then use him as a sub and make yourself the GC and make a little money that way. Most GC’s will make 10-20% on their contracting efforts. If you are in the deal up front and know what needs to be done and can farm that out, there are a lot of ways to capitalize. You can even get enterprising and offer other related services such as landscaping etc. We usually make sure that we keep a database of “approved vendors” that we refer all of our clients to when they buy from us. What do you think it is worth to be on that list? If you wholesale 50-60 houses a year it should at least get you a discount on services that they give and that you use. A lot of companies have this formalized like the mortgage guys and will pay a certain referral per client you refer etc. If you really want to crazy you can offer management services to your clients for management of their rental property as well. Oftentimes this is not that fun sounding, but it is a verifiable profit center. Do the math on 60 or so dollars per unit and do that at 100 units, or try 200 units. A lot of times this is a net net type of a profit center, there is very little costs associated with running this type of a business. You can also get the heads up on deals when your investors that you are managing for are wanting to sell their houses. Sorry it is such a short one tonight, but it is Mardi Gras season down here, and we had two parades tonight!