Nobody warned me the deposit goes hard on day 31

Run the actual risk number rather than the fee number. He risked 50k of principal plus 11.6k of spend to make 98k gross, call it 86k net of the diligence, on a roughly 60 day cycle.

That's a fine ratio right up until the first one dies after the deposit goes hard, and then you need a hit rate. If he loses the full 50 one time in five, his expected value per attempt is still positive but his cash requirement isn't. You need to be able to eat the loss twice in a row without stopping, which means the real capital requirement here is closer to 150 than 50.

tally, did he have that money or was it somebody else's? That's the question I'd ask before I copied any part of it.

What's a Phase 1? I've now read this post twice and I understand every number except that one and the ALTA survey.

juniper, a Phase 1 environmental site assessment is a records and site review looking for signs the property might be contaminated. Old fuel tanks, a dry cleaner two doors down, whatever used to be on the dirt before the current building. It's paperwork and a walk, no digging. If it finds something suspicious the recommendation is a Phase 2, which is sampling, and that's where the cost and the timeline jump.

On industrial it's standard and lenders usually require one. An ALTA survey is a detailed survey to a national standard that maps boundaries, easements and encroachments so the title company will insure around them.

tally, day 26 with a Phase 2 recommendation is the exact nightmare. I've seen people negotiate a deposit extension for that reason specifically, and I've seen sellers refuse.

This is the post I needed six months ago. I kept hearing commercial fees are bigger and thinking it was the same game with a bigger number on the end.

It's a different game. The seller has a lawyer. That one fact changes every clause I've gotten used to relying on.

Fifty thousand you can't touch for a month is a different kind of money than fifty thousand in an account. People who've never had money locked up underestimate what it does to your judgment in week three.

So is there a version of this at a smaller size, or is 1.35 basically the floor before the diligence costs eat you? A 400k retail building would still need the survey and probably the Phase 1, and 11.6k against a 25k fee doesn't work.

kestrel, that's the trap. The fixed costs barely scale down. Survey and environmental cost about the same on a 400k building as a 1.4 million one, so the small deals get squeezed out and you end up needing the bigger ones, which need the bigger deposit. Expertise keeps you out at the top and cost keeps you out at the bottom.

My deals are residential, fast and thin, and I've talked myself out of commercial twice now for exactly this reason.

flint's right about fixed costs, though I'd add that on smaller assets some buyers will waive the ALTA and take an existing survey with an affidavit, and some lenders will accept a transaction screen instead of a full Phase 1 depending on the property history. Those are lender and title company decisions, and they vary, so anyone counting on it should get it confirmed in writing before they sign anything with a deposit schedule.

Doesn't rescue a 400k deal. Might rescue an 800k one.

The 1,500 roof and structural walk is the line I'd have spent more on. On a 14,000 foot flex building I want the slab looked at where the forklifts run and I want somebody on the roof who'll tell me the age of the membrane rather than that it looks serviceable.

I've seen a fifteen hundred dollar report miss ninety thousand dollars of roof. The buyer's inspector found it later and the price moved.

What happened to the yard in the underwriting? Small yard on an industrial flex can be worth real money if it's fenced and usable for outdoor storage, and it can be worth nothing if the zoning doesn't allow it or the neighbors have complained before. Depends on the local code, which is genuinely different everywhere.

tally, did he even price it or was it just a bullet on the flyer?

arbor, I'd bet flyer bullet. It usually is.

The thing I keep coming back to in tally's post is the disclosure and approval clause. Seller's counsel required the end buyer named and approved before closing. That means the seller sees the assignment price, or at least can work it out, and I've watched a seller get to that page and decide to renegotiate on the spot. He didn't have that leverage legally, he just had it emotionally, and it cost the wholesaler two weeks and a chunk of the spread.

98 on that deal after all that. He earned it.