I have someone with a house for sale at a big discount of $20,000 compared to what it is worth. Normally the investor would contruct a deal to buy the house at discount price. The thing is if the house is already being sold at low price, do I still to use the wholesale formula to do the deals? And how do I make a profit like this when assigning the low price home to the end buyer? If I was using the formula that would mean I would have to make the offer lower than what it already is to collect the difference? I believe that 20,000 is low enough for me.
This person has a house for sale for $20,000 with a contractors estimate for repairs of $9,500. The seller says the house is worth $30,000 in ARV.
Your offer should be an average of 30% off of FMV / ARV ($9k) minus the construction cost's ($9.5k), so your offer in this case should be for less than $11,500 and to be sure there is a little money for you, you probable would want to offer $10k and try to get $2k to flip it to an end buyer!
If your flipping to an investor I expect a property to be offered to me pristine with an average 30% discount and the construction discount, either I get these discounts or I don’t buy the property because this is my margin to resell!
If your flipping to a owner occupied buyer I would still want to offer it to that buyer at a 5 to 15% discount as that’s reasonable considering it needs some work, but you would probable have to buy it cash or use transitional funding to close to you, then close to your end buyer, in this case you might net $3k to $4k in the deal.
However I am not even sure you can get transactional funding for as little as $10k or $11k, or whether the end buyer can get financing in this little amount or a 203k loan? So I am not sure because I don’t know where you live whether the financing is even available to do this deal!
What kind of room is there in this deal?
Someone has a house for 20k. Repairs are 9.5k. House is worth 30k when repaired.
Their asking price is apparently not a huge discount.
Yea, like I say your offer has to be around $10k just so you can make a couple thousand to wholesale it over to another investor to remodel and re-sell!
GR
I would take what the seller has to say with a grain of salt. Do the research, find out true FMV / ARV, and go from there. It doesn’t look like there is much room to play with this house.
I tried to ignore this post but I can’t help it, I gotta ask since nobody else will…
So basically what you are telling us is you’re just gonna pick and choose which rules you’re going to follow??? Seriously???
And did it ever occur to you that you are not the one raising the money to buy the house so no one really cares if YOU think it’s a good deal or not. They’re going to buy it if it’s a good deal to THEM. Hence, the wholesale formula.
Serious question: tell me why you think this is a good deal? Tell me why you think you can pay 20,000 4 a house worth 30,000 and it needs 10,000 in work. Lay out your proposed exit strategy.
Just saw this today…I agree with NSU(sup man) This is in no way, shape, or form a deal. I thought you were joking at first but if you are serious you really need to look at what a wholesale deal actually is. Like NSU said 20k, 10k in repairs, worth 30k? How much will the end buyer make? How much would you walk away with?
Advice: Dont try to reinvent the wheel. Use the formula. Dont be the wholesaler who offers up bad deals…word gets around.
If you have not already, find a REI club in your area and start attending and asking questions.
Just as an example with your deal, you would need to be around the 6500 range for it to be a deal and make any sense.
Oh NEVER just take the sellers word for the ARV of a property lol get a CMA, and let them know what the real ARV is.
One last piece of advice. A property is only worth what someone is willing to pay for it. no more and no less