How much profit should you leave your cash buyer?

How much profit should a cash buyer make?

A cash buyer should make enough profit that the deal is worth their money, time and risk — and on a wholesale deal, the right amount is whatever real buyers near you actually accept, which you can measure. There's no single dollar amount or percentage that fits every buyer or every house.

That matters to you because the buyer's profit and your assignment fee come out of the same room. Every dollar you add to your fee is a dollar less for the buyer. Know what the buyer needs, and you know how much room is left for you. New to assignment fees? Start with the complete guide to wholesale assignment fees.

If you're new, picture the buyer's side of the deal. They're about to tie up a large amount of money — often borrowed — for months, manage contractors, and take the risk that repairs run over or the house sells for less than expected. The profit is their pay for all of that. Leave too little and a sensible buyer won't take the risk. Leave far more than they need and you've paid them with money that was yours to charge.

What is a good profit margin on a house flip?

A good profit margin on a house flip is one that pays the buyer fairly for the money they put in, how long it's tied up and the risk they take. Many flippers aim for roughly 15% to 20% on everything they put in after all costs — but that's a target people talk about, not a rule, and buyers in your area show their real line in what they actually buy.

Two things change what's "good": how much money is at stake and how long the project runs. A quick cosmetic flip can be worth doing at a lower margin than a slow, structural one with more that can go wrong.

What is a good fix and flip profit margin?

A good fix and flip profit margin is one that pays the buyer fairly for the money, time and risk of that particular project. Many flippers aim for roughly 15% to 20% on everything they put in, after all costs — but the right number goes up for slow, risky projects and down for quick, simple ones. The house flipping profit margin you'll hear quoted is a starting point, not a rule.

For you as a wholesaler, the useful version of this question is narrower: what margin do buyers near you actually accept on houses like this one? Their recorded purchases and buy boxes answer that far better than any general rule. See the table in how to price a wholesale deal for cash buyers for how the buyer's margin changes with your price.

Profit vs. ROI: why aren’t they the same?

Profit is a dollar amount; return on investment (ROI) is that profit compared with the money it took to earn it. The same profit can be a great return or a poor one:

That's why "leave the buyer $30,000" can't price every deal: on a small deal it's generous, on a large one it's not enough.

What is a good house flipping ROI?

House flipping ROI is the buyer's profit divided by everything they put in — price, repairs, and buying, holding and selling costs. On the sample deal, the buyer puts in $239,956 and keeps $36,044: an ROI of 15.0%. Many investors aim for 15% to 20% on a typical flip, and more when the project is riskier or slower.

Be careful with "cash on cash" figures you'll see quoted: if the buyer borrows most of the money, their return on their own cash can look much higher than the return on the whole project. For pricing a wholesale deal, use the return on everything the buyer puts in — it's the number that tells you whether the deal works.

How much profit should a house flipper make per deal?

A house flipper should make enough per deal to justify the money, the months and the risk — which is why the dollar figure changes with the deal. Time is the part wholesalers forget. On the sample deal below, the buyer keeps $36,044 after a 6-month flip. If the same flip takes 12 months, holding costs double to $37,200 and the buyer keeps $17,244 — less than half, on the same house.

Risk works the same way. A house needing paint and floors is a safer bet than one with a foundation problem and few good comps, even at the same ARV, so buyers want more upside on the second.

What costs should you include in buyer profit?

Include everything the buyer spends to buy, fix, hold and resell the house — not just the price and repairs. On the sample deal at a $47,800 fee:

For a beginner, the three cost groups are worth memorizing. Buying costs are what the buyer pays to close their purchase — title, recording, lender fees. Holding costs are the monthly cost of owning the house while it's fixed and sold — loan interest, taxes, insurance, utilities. Selling costs are what it costs to sell once it's done — agent commissions and the seller's closing costs. On the sample deal they add up to $46,156, more than the repairs.

Look at the gap between the quick math and the real math. ARV minus price minus repairs says the buyer makes $82,200. After buying, holding and selling costs, it's $36,044. If you price from the quick number, you'll think buyers can pay far more than they can — and blame your fee when they don't.

Does a cash buyer still have financing costs?

Often, yes. In wholesaling, a "cash buyer" means someone who can close without a regular mortgage — not necessarily someone paying from their own bank account. Many use hard money, private lenders, lines of credit or partners, and that money costs interest and points while they own the house.

Even a buyer using their own cash has a cost: that money could be earning somewhere else. Either way, financing is part of what the buyer puts in, and it changes what they can pay.

Here's what that looks like in numbers. A buyer who borrows $200,000 at 12% interest pays about $2,000 a month in interest alone, plus points when the loan is made. Over a six-month project, that's $12,000 or more before taxes, insurance and utilities. That money comes out of their profit, so it comes out of what they can pay for your contract.

Why can one cash buyer pay more than another?

One cash buyer can pay more than another because their costs and plans are different. Take one house under contract for $140,000:

• A buyer on hard money who hires out every repair might top out at $179,400.
• A buyer with their own cash and their own crew might pay $187,800.
• A landlord buying for rent judges it by cash flow and might go to $194,650.

Same house, same contract — and the room for your fee is $39,400, $47,800 or $54,650 depending on which buyers you actually reach. (An illustration.) That's why what buyers say they want — their buy box — helps, and what they've actually bought helps even more: a buyer who keeps buying three-bedroom houses in one area at a certain share of value is showing you their line.

Why does what buyers actually bought matter more than what they say?

What buyers actually bought matters more because it shows the price they really pay, not the price they hope to pay. Buyers ask for bargains — that's their job. Their recorded purchases show what they end up paying for houses like yours, in your area, relative to what those houses are worth.

In the sample area, investors typically paid about 64% of a house's value. A buyer who says "I only pay 60%" but has bought three houses at 66% is telling you two different things; the purchases are the one to trust. Buy boxes still help — they show budgets, areas and repair limits — but put the two together and you know who will actually buy your deal at your price.

For how to read what investors near you actually accept from their recorded purchases, see how to determine your assignment fee from real buyer data.

How do you calculate a cash buyer's maximum purchase price?

You calculate a cash buyer's maximum purchase price by working backward from what they'll get when they resell. The sample deal: ARV $300,000, repairs $30,000, your contract $140,000.

1. Work out what the buyer gets back.
   ARV minus 8% selling costs.

   $300,000−$24,000=$276,000
2. Take out the buyer’s profit.
   Divide by 1 plus the return buyers near you accept (15% if you don’t know yet).

   $276,000÷1.15=$240,000
3. Take out repairs and holding.
   Holding is the monthly cost (loan interest, taxes, insurance, utilities, upkeep) times the months, about 6 for a medium rehab.

   $240,000−$30,000−$18,400=$191,600
4. Take out buying costs.
   They run about 2% of the price, so divide by 1.02 and round down to the nearest $100.

   $191,600÷1.02=$187,800
5. Check it against what investors here actually paid.
   ($187,800 + $30,000) ÷ $300,000 = 72.6%. If at least half of recent investor purchases nearby paid that share or more, it holds. Here 5 of 8 did. How to find them: how to determine your assignment fee from real buyer data.
6. Subtract your contract to see your fee.
   $187,800−$140,000=$47,800

For the full calculation from your side, see how to calculate your assignment fee and, for the seller side, MAO vs. assignment fee.

How does your assignment fee affect buyer profit?

Your assignment fee lowers the buyer's profit dollar for dollar, because it's part of what they pay. On the sample deal, here's what happens to the buyer — and to how many buyers still buy — as your fee rises:

At $30,000 almost every buyer says yes — but you're leaving them 24%, far more than they need. At $62,500 most say no. The highlighted row is the highest fee where the buyer still keeps 15% and about half still buy.

How much room should you leave your cash buyer?

Leave your cash buyer enough room that real buyers near you still buy — no more, no less. "Leave meat on the bone" is right in spirit, but it isn't a measurement. Measured, it means: enough profit to justify their money, time and risk on this house.

• Leave too much and almost every buyer says yes — but you've handed over money they'd have let you keep. Sometimes that's a choice worth making: a fast close, a trusted buyer, an uncertain rehab. Make it on purpose, not because a rule told you to.
• Leave too little and buyers counter, stall or walk, and you end up cutting anyway.

And the most a buyer can pay isn't always the best price to send. At the very top, only a buyer or two are left, with no cushion if repairs run over. See what a good assignment fee is.

If you're unsure how much room to leave on your first few deals, it's sensible to leave a little more than the minimum: price where plenty of buyers are still interested, so a buyer who finds a surprise at inspection still has a deal. As you learn what buyers near you actually accept, you can price closer to the line with confidence.

What if your cash buyer counters with a lower price?

If your cash buyer counters lower, find out why before you give in. A counter can be ordinary negotiating, or it can mean the buyer sees higher repairs, a lower ARV, longer holding or more risk than you priced in.

One counter is one buyer's opinion. Several experienced buyers coming back at about the same number is information. If they're right about the house, fix your numbers. If the numbers hold and other buyers still pay your price, you don't have to take the lowest offer. See can an assignment fee be too high?.

Why don't fixed buyer-profit rules work?

Fixed rules like "always leave $30,000" or "the buyer needs 30%" don't work because they ignore the size of the deal, the time, the risk and the buyer. $30,000 is too much on a small, quick flip and too little on a large, slow one. The 70% rule is the same idea in percentage form — it tries to build the buyer's costs and profit into one number. See why the 70% rule doesn't set your fee.

What is a normal cash buyer profit margin?

A normal cash buyer profit margin — the share of everything they put in that a buyer keeps — is often quoted around 15% to 20% for flips, and it varies with the buyer, the house and the market. Landlords think differently: they judge a deal by rent and cash flow, so their "margin" is spread over years rather than earned at resale.

The practical answer for a wholesaler is to stop asking what's normal in general and look at what buyers near you actually accept, which shows in what they buy. At a 15% margin on the sample deal, just over half the buyers in that price range still buy; at 12%, fewer than half do.

Buyer profit vs. buyer demand: which limits your fee?

Buyer profit is one limit on your fee; how many buyers still buy is the other. Whichever runs out first sets your maximum:

That's why buyer profit alone can't tell you your fee. A deal can leave a buyer plenty of profit at a price few buyers near you ever pay. See what the maximum assignment fee is.

Should you work out buyer profit before you set your fee?

Yes — work out what the buyer needs first, then let your fee be what's left. Deciding "I want $25,000" and checking whether the buyer can live with it is backward. The right order:

1. Get the deal right — a defensible ARV, real repairs, the buyer's buying, holding and selling costs.
2. Work out what the buyer can pay at the profit buyers near you accept.
3. Compare it with your contract price — the difference is the room for your fee.
4. Count who's still buying at that price, and stop where too few are.

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