I’m also new to wholesaling. I’ve put two homes thus far under contract and was unable to get a buyer for either one (thank god for exit strategies). I’m about to put another home under contract, and I was hoping to get some feedback from an investor why this may be a good or bad deal. I’m thinking I may be doing something wrong in an evaluating a deal. Here are the specifics (BTW: This is in Los Angeles, CA)
Expenses: $35,500 (estimated costs of closing costs, holding costs, selling costs)- Basically, I just took 10% of the ARV
Repairs: $20,000 (estimate)
Estimated Profit: $53,750
Again, I do realize all deals have the potential of being a good deal if you have an investor to buy it, I just want to make sure I’m evaluating a deal correctly.
Assuming your numbers are correct, a true investor would not pay more than $225,000 for this property. Add in the fact that most of CA is declining in value and I doubt that they’ll pay that.
Most investors will buy at 65% MINUS carrying and repair costs and your fee. Some investors might have gone 70% a year ago, but with the current market, not many. You are doing it 65% PLUS $15k PLUS your fee PLUS repair and carrying costs. So actually you are signing it up at an 86% of FMV.
You have it at 86% FMV
Investors want 70% or LOWER, preferably 65%
For a good deal you should structure at:
$350k ARV
$227k 65% of ARV
-$55.5k rehab and carrying cost
$171.5 Target purchase price
THEN MINUS YOUR ASSIGNMENT FEE
So your target price (if you want an $15k assignment fee) will be:
Generally speaking if you have a “deal” you will have a buyer. You can save yourself time/energy if you know exactly what your investor/buyers are looking for and willing to pay for his/her deals.
I want to thank all of you for responding. This really helps me in determining what is a good deal and what is not.
Salverston- Thanks for the breaking the deal down so I can see how what a good deal looks like.
REIforNewbies- You are right. I need to know what my buyers want. However I only have two buyers. I definitely need more buyers. I’ve read the numerous posts on how to contact buyers, but what do I say? How do I get them to believe that I can get the job done?
I’m not giving up on wholesaling. This is my opportunity to get on the road to financial freedom. Thanks for your help.
when you are putting all of these homes under contract do you have investors lined up already?
Wholesaling becomes a heck of alot easier if you find homes that you have buyers for rather than finding buyers that you have homes for.
Homes are for sale everywhere, and investors are getting more difficult to find.
If you haven’t already developed a strong buyers list, focus your energy on that. Decent deals are a dime a dozen in most markets, but good buyers will make you rich.
Thanks for the response. I know I need to have a strong buyer’s list. The problem I’m running into is finding buyers. I have two right now. I’ve been to REI meeting and but it didn’t seem like investors wanted to deal with my partner and I because we are new to wholesaling. So I kind of feel like if we find a good wholesale deal and assign it, then we could prove to investors that we know what we are doing.
It doesn’t matter if you have one buyer or one hundred buyers. What you need is enough buyer(s) to buy whatever you find (as long as it’s a good deal for them). That could be one or twenty. Finding the RIGHT buyers’ is as important as finding the right deals.