The Assignment Fee Trick That Juices Yield on Your Own Wholesale Deals
Episode 501 of Collecting Keys is mostly about math investors get wrong. Mike DeHaan and Dylan Koch walk through the mechanics of lending on a deal you're also wholesaling, the COVID-era forbearance balances now showing up on seller payoffs, and why most investors' cash-on-cash and return-on-equity numbers are fiction. Mike also explains how one honest recalculation knocked 35% off his own net worth. Here's what they covered.
How does lending on your own wholesale deal increase your yield?
Mike explained how his lending started at the end of 2021 as a pure side gig. He and his partner had slowed down on holding properties in Spokane because values looked topped out, had piled up cash, and wanted yield on it. The first loans they wrote were on deals they were already wholesaling.
The mechanic he described: say the purchase is $100,000 and you fund a $100,000 loan at 12% interest. The monthly interest payment is the same either way. But if you're also collecting a $30,000 assignment fee on that same deal, that $30,000 comes right back to your pocket at closing. So you're earning that full monthly interest payment on $70,000 of your own money instead of on $100,000. "When we started doing that, we're like, we're the smartest people in this industry," Mike said. His theory on why more people don't do it is simple: most wholesalers are broke or are putting their capital into flips.
He was blunt about the early years, too. For several years they were doing max-leverage loans for friends, sometimes not collecting interest, and generally "all the dumb shit that you do when you don't know what you're doing." One deal went sideways and left them owning a duplex in Baton Rouge. A few friends paid them back after losing money because the relationship mattered more than the loss. Mike's point: that's luck, not a system, and it won't be true for everybody.
Why do lenders flag deals where the buyer has no money in?
Dylan asked about wholesalers who assign a deal to their own second entity so they can play with the purchase and rehab numbers and get more financing. Mike's answer was that it almost always gets caught. Years ago you could pitch it as needing operating capital; now lenders are onto it.
Mike said the same goes for structures where a seller carries a second position recorded after closing so the buyer has nothing of their own in the deal. From a lender's seat, the whole purpose of a down payment is skin in the game, so the borrower doesn't just walk. If they do walk, the lender is left dealing with a seller who thought they were done with the property. As Mike put it, if you're working with a real lender instead of "Rich Guy Joe," creative structures that de-lever the borrower aren't getting approved.
What are COVID forbearance balances doing on seller payoffs?
Dylan said he keeps seeing payoffs come back higher than expected because of COVID-era relief added to the back of the seller's mortgage. One seller, he said, had taken five separate ones totaling $46,000 over four years. When Dylan brings it up, sellers often claim they had no idea it was there.
Mike said he's only seen a couple of these in his market and wondered whether it's regionally concentrated. Either way, the practical lesson for acquisitions is that the balance a seller quotes you may not be the balance on the payoff statement. On a thin deal, a five-figure surprise is the whole spread.
- Verify payoff amounts rather than relying on what the seller believes they owe
- Ask directly about forbearance or relief added to the loan balance
- Build the possibility into your underwriting on low-equity deals
How should you actually calculate cash-on-cash and return on equity?
Dylan said cash-on-cash is his primary metric for buying rentals, with return on equity feeding into it. He just sold a six-unit in a C neighborhood, on a boiler he had to pay heat for, with a loan in the sevens. He listed it at a price he thought was stupid and someone paid it. Return on equity was low, so he's redeploying the capital into higher-yielding assets.
Both hosts agreed most investors keep a static, flattering number. They only count the down payment, ignore points, fees and closing costs, never update the denominator when they drop $5,000 on a furnace, and never refresh the market value they put on a spreadsheet three years ago. Dylan's rule: total money invested in the deal should be the denominator.
Mike went further on the equity side. Selling costs money. Dylan estimated closing costs around 8% plus capital gains at a minimum of 20%, more once depreciation recapture is in the mix, so roughly 30% before you see a dollar. Mike ran that exercise on his own balance sheet a few months ago and his net worth dropped 35%. He called it extremely humbling, and worth doing anyway: "otherwise, it doesn't matter. I might as well just take my bank statement and write a different thing on there with a marker."
Why do "overnight" businesses take four or five years?
Mike pointed out that people tell him his lending business grew fast, but the first loan closed in November 2021 under their wholesale entity and the lending company was formed in early 2022. That's more than four years, most of it as a side gig, with real traction only showing up recently.
He also gave the honest math on lending margins: between two and a half and four percent per loan including yield spread and points, net of overhead and commissions. Dylan, who issued over $3 million in loans with co-lenders, said that's the scary part. You make a few thousand per loan, and one deal going bad can wipe out all of it or cut into principal.
Dylan has since put lending on the back burner, after spending five figures on software and legal setup, because it was more work than he wanted. When he turned his attention back to off-market acquisitions, he got to eight deals in escrow in a couple of weeks. His takeaway was double-edged: focus works, and his business wasn't as solid as he thought, because his team wasn't producing deals when he wasn't in it.
The through-line of the episode is that the numbers you tell yourself matter more than the numbers you tell other people. Listen to episode 501 for the full conversation, including Mike and Dylan on HELOCs against free-and-clear rentals and what a frothy private credit market looks like from the lending side.
Frequently asked questions
Can you lend on a deal you're also wholesaling?
Mike described doing exactly that starting in late 2021, using his own cash to fund loans on deals his company was assigning. He framed it as a yield play, since the assignment fee reduces the net capital he actually has out.
Should the cash-on-cash denominator change over time?
Dylan says yes, total money invested in the deal should be the denominator, including capital expenditures like a furnace. Mike notes most investors never update it past the original down payment.
Why did Mike's net worth drop 35%?
He recalculated his balance sheet using current market values and subtracted estimated selling costs and taxes, including depreciation recapture, instead of using purchase-date figures.
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Educational content from the Collecting Keys podcast. Not financial, legal or tax advice.