I have been humping like nobody’s business trying to get a deal closed. :banghead I have wholesalers in almost all the hot markets. I have Realtors in those hot markets too. I can’t seem to find a wholesaler who has the right price . Everyone is seeming to price wrong. I thought my formula was simple and since millionaires like Scott and Amie Yancey, Brock Madsen, and Jerry Norton taught it to me, I figure all the others were too. These guys can’t be millionaires if it didn’t work right? ARV*.65- repairs= buy price…this is simple right? So why can’t I find good deals between 200-600k ARV with this formula? Someone please enlighten me. No seriously. I need help! :help I want to close a deal.
That may be the formula that wholesalers are telling you to use but put yourself in the shoes of the seller. Let’s say he has an appraisal or a CMA from a realtor telling him that his house is valued at $200,000. It needs a few repairs, but “as is” it is worth $200,000.
Now you come along with your formula. You look at the property and determine that $20,000 worth of repairs will bring a resale price of $250,000.
You apply your handy little formula: $250,000 x .65 - $20,000 =$142,500.
Now ask yourself, “If that was your personal home, would you sell it for $142,000 knowing that it is worth $200,000?” No one in their right mind would throw away almost 30% of the value - that would represent their equity.
Maybe that formula worked back in 2009 when you could get foreclosures for pennies on the dollar - but it does not work in this market. You need to step back into the real world and create a formula that will earn you between $2,000 - $5,000 on the deal and then work with those numbers.
I go after distressed properties that I can get on contract for 50% of ARV or lower, doesn’t always work out that way and I have often settled for a 2K or $2,500 Assignment fee. I have got properties that wer 80-90% of ARV and sold to landlords. These properties needed very little repairs and were almost turnkey, some having tenants in them already.
Most important is to sift thru a lot of leads, thru massive marketing, stay away from the MLS, to much competition, target for sale by owners, vacant houses… Recruit bird dogs. Advertise on Craigs list, do direct mail campaigns to absentee owners. Do Bandit signs and door knob hangers.
Most important, stay focused and never give up.
Good Luck. Rando
Randoskie hit the nail on the head here. This business in not about sticking to a formula and never budging. It is about looking at each individual deal and asking ourselves where can the money be made. So you finish a deal and you walk away with $1,000 in your pocket and you do only 1 per week. Wouldn’t that be much better than doing 1 deal in 3 months and walking away with $12,000? Sure same money but you starved for 3 months for it and gained 0 closing experience. Now imagine if 1 deal out of 4 has the potential to earn your $2,000…
Baseball games aren’t won on the grand slam home run but on each base crossed.