Where does this cost per contract math for a single out of state market fall apart?

Question

Here is a set of planned numbers for virtual wholesaling in a single out of state market, the kind a newcomer to the strategy would rather have corrected early. Ten thousand text messages at about $0.02 each, so $200. Data and list pull, $200 a month. Skip tracing 10,000 records at $0.10, so $1,000. Call it $1,400 for the month. Assume a 1% reply rate, so 100 conversations. Assume 5% of those become real leads, so 5. Assume 1 in 5 leads signs, so 1 contract. One contract for $1,400, and a typical assignment fee people quote is around $10,000. That looks too good, which is exactly why it deserves scrutiny. Where does this fall apart?

priya_n21 · Answer

The $10,000 figure is the part to question first. It gets repeated everywhere as the typical assignment fee, and the sources are recruiting and industry sites rather than anything official. A median is not a promise, and yours depends on the price band you are working in.

chriswalton8 · Answer

Your 1% reply rate assumes the messages arrive. Carrier filtering decides everything in texting, and unregistered or poorly warmed numbers get blocked in bulk, so an operator can pay for 10,000 sends and have a fraction delivered. Whether those numbers can be texted at all depends on consent rules and on state level restrictions, which is a question for a lawyer before pressing send rather than after.

karen_whitfield · Answer

One contract is not one closing. Sellers back out, title comes back with a probate issue, an heir in another state won't sign. I'd assume a meaningful share of signed contracts never make it to closing and rerun your number with that haircut.

mikeoconnell7 · Answer

Nothing in your budget pays anyone to look at the house. Add $100 to $150 per walkthrough and assume you walk three houses for every one you put under contract.

megan_doyle15 · Answer

Also nothing in there for earnest money? I thought that came out of pocket when the seller signs.

omar_haddad · Answer

Rigging, it does, and it usually comes back if you exit inside the inspection window, which is why people don't budget it. It's still cash sitting somewhere for a few weeks. Ledger, the line I'd add is repair estimate error. Remote estimates run light almost every time, and a $15k miss on a $10k spread is a dead deal, not a smaller one.

laurenkim53 · Answer

Your skip tracing at $0.10 also assumes good hit rates. On rural absentee owners a meaningful share of records comes back with no usable phone, so the true cost per contactable person runs well above the $0.10 your spreadsheet shows.

gregpowell66 · Answer

Your funnel has five stages and each one is a guess. Multiply five optimistic guesses together and you get a number that is off by a lot in one direction. If each stage is only 30% worse than you assumed, one contract becomes roughly one every four months, and your $1,400 becomes $5,600.

jordan_ellis2 · Answer

Girder's point is basically where I've ended up after six months of building models like yours. I stopped trying to predict the funnel and started tracking what it actually costs to get one seller on the phone, because that's the only number in the chain I can measure in week one instead of month four.

Where does this cost per contract math for a single out of state market fall apart?

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