I’m brand new, just getting into wholesaling. First caller has the following situation:
She owes 124K to private lender. She is in pre-foreclosure. There is about 50K equity (that is a low estimate based on comps) When I ran the numbers to see about making an offer and assigning to a rehabber, I don’t see enough equty to do that.
My understanding is that rehabbers buy houses at about 65% of the ARV. After factoring that in as well as my fee, closing costs, and their repair costs I don’t think it computes.
You need to talk with some local investors and find out what kind of discount they are looking for, it isn’t a set 65% in all areas, in a hot markey they may buy at 80% ARV because appreciation is so high. Here in SC, the investors I deal with all like to buy around 70% ARV.
I use the following formula to determine what I can offer on a house.
ARV X 70% - HML Fees - Insurance,Attorney,holding - Repairs - My Profit = MAX Offer.
As a wholesaler shoot to make 3k-5k on each deal, leaving the most profit to your end investor since he puts up the most risk. Good Luck.
I heard from another investor that a good formula to use is
10% repairs, 10% profit, 10% all other expenses. Of course these are based on the ARV so basically if you can get a property for 30% below ARV, you should have enough to cover for everything. I’m in california so I don’t know if such a formula is practical anywhere else.