I am new to wholesaling and was wondering, when I find a deal that works and I want to wholesale it, do I need to have it inspected or can I just have my investor buyer have it inspected? There’s really no need to have it inspected twice is there? If my investor buyer has it inspected and doesn’t like it or there is too much need for repair then I would get out of the contract with my inspection clause. The reason I ask is that I am wheelchair confined but yet I see the potential to thrive with wholesaling in this economy. Basically, I would be virtually investing in my own local area. How does someone handle the inspection situation if wholesaling out-of-state properties?
Id say depends, some investors will buy houses AS IS, so with those buyers i guess all there looking for is how much below FMV are you willing to sell the house to. Dnt no tho im a new investor as well. But otherwise if hes not an AS IS buyer you might have to inspect it, to figure out what the repair is gona take, if it needs any, cause it is a crucial number in your deal.
I can’t believe ANYONE would purchase a house without either a personal inspection or an inspection report from a reliable third party (not necessarily professional) inspector. You only have to be bit once by a collapsing foundation wall, failed septic system, rotted framing, black mold, or any one of dozens of other costly MAJOR problems that will kill a budget and you’ll understand the value of an inspection.
The only possible exception is if the land value is significantly more than the the purchase price plus demolition costs…
This is actully a better question then i thought. i need help with this also. i am actually looking at a house to make my first deal on. The problem is its 30+ mins away. do i really need to go that far just to peek through the windows? (forclosed). Is the investor really gona ask if the stove is gona come with the package. Or are the numbers all that really counts?
Did you get specific parameters from the investor before hand? Do you know what he’s looking for? If the property, up to and before the necessity of you goin to look at it, is meeting up to the specifics, then heck yeah… you need to go look at it to see if you are going to contract it and present it to your buyer/investor. This is what you do for your otherwise easy $5,000 commission.
The wholesaler does not necessarily have to even see the house, but the investor who you sell it to will need to inspect the property him/herself. As a wholesaler it will be good of you to have a ball park estimate of repairs, and other things you have observed, but your primary job is to get the property at a steep discount enough to be attractive for the investors on your list.
If you are a wholesaler you don’t have a need to order a professional inspection yourself because you are not the one with the intent on keeping the property. Of course this can change if you have an intent within your exit strategy to rehab the property yourself if you don’t find a wholesale buyer.
Thanks bashir for shedding some light on that for me. I have a friend who is a realtor who can give me a pretty good idea of the cost of repairs. I just didn’t see the need for me to get an inspection ordered and find out later that there’s something major that would end up being a deal killer. I can always get out of the contract in that case, however I can’t be going around paying for $300-$500 inspections on deals that are going to fall through.
Repairs are not an exact science. It’s a ball park figure for the most part. Wholesalers shouldn’t let not knowing exact repair figures scare them. You will not be buying the house for yourself, you are trying to construct a steep lowball offer to get the house priced properly. If you miscalculate repairs and you didn’t get the house priced properly, then the worst that can happen is nobody on your buyers list will want it and you will just simply reject the property using your inspection contingency. When the contract is structured properly, you will not have to put up earnest money until after the inspection period anyway so you won’t lose any money. The worst thing that can happen if you price the deal wrong is that you will have to back out with no money lost.
Wholesalers repair estimates are just percentages based off what you see. You’re a wholesaler not a professional rehab guru. If I walk in a property and it’s just carpet and paint from what I see, then I figure in a 5k or 10k figure. If it’s uglier than this then I figure in a 15k to 20K figure. If it’s terrible then you figure in a 25k to 30K figure. I learned this from Ron Legrand using $100K houses as the model.
The formula is ARVx70percent-repairs=MAO or maximum allowable offer. The 70 percent figure includes unknown factors that you don’t know could be wrong with the home plus other costs.
In this market you are offering way below MAO
Probably about half of whatever the asking price is or lower.
Hey Brian,
I have been told to have a contractor go thru the house either with you, with your realtor or by themselves to give you a good guesstimate on repairs for the end buyer. Also, if it’s an ok fixer (paint/carpet) a good rule of thumb would be to use $8/sq.ft. If it needs some remodeling/updating, use $10-$12/sq.ft. and if it’s almost needing everything, use at least $15/sq.ft. These are what coaches have told me. All the best…joanne in san fran
You could get a contractor to go through it with you or you could in your spare time browse around home inprovement stores.You can get an idea of material and labor prices doin this.I don’t use any theory just run the comps and then start deducting.Also different agents BPO properties different so ALWAYS run your own numbers.If you’re gonna be offering half of asking just to be safe,get ready for your signing hand to be sore.Not shooting this theory down,I just recomend learning about materials/labor pricing to also help you when you have to rehab yourself.Good luck.