You are now figuring this correctly.
The key problem here is the fact that it is on MLS. Read this thread to understand where the real deals are and why they aren’t on MLS. Especially for a wholesaler.
http://www.reiclub.com/forums/index.php/topic,43179.0.html
That’s OK though because you need practice working up the numbers on deals. You need to run the numbers on many properties so you learn to do this quickly and accurately. I learned on MLS and then jumped in the game where the deals really are for my first property. After a while you will get a good feel for it and will know by instinct about how much a house is worth in various areas that you concentrate on.
When I make an offer to someone I justify the cost by overestimated repairs needed. As if you would be using a licensed contractor to do the work where most investors would use a couple of jacklegs that would charge 1/3rd of the price.
I go through the house with the homeowner and write down every single little thing I find making sure that they realize that I noticed it. They often need to be knocked off their high horse and nicely smacked back into reality.
I use various techniques depending on the house. Lets say that it is a vacant house that has broken windows, and extensive water damage from the holes in the roof, peeling paint inside etc. What’s a sheet of drywall cost? Not much. Cheap and easy repairs. So I act like a bomb must have gone off in that house and that this house is a little over my head and I look for these types of properties. My plans are to sink 20K into it on a rehab, in reality it is exactly what I look for. I tell them that the house likely needs to be torn down and ask them what the land is worth. Ok, so the land is worth 15K and it is going to cost me 10K to knock it down and prepare it so another house can be built. So it’s value is 5K. I then give them the 5K offer.
There is uncomfortable silence and they say that they bought the house to rehab it 10 years ago and paid 15K and think it is worth 20. I ask them what they have done to it to increase the value. Well, they respond that they cut a few trees down and gutted a couple of rooms. I explain to them that gutting a room makes it less valuable. Now whoever buys it will have to pay all of that money to fix it. Most investors just cut out the damaged area only and repair it. And the house has been deteriorating since. I counter offer 10K and tell them that’s all I can do. I tell them I am now 5K in the hole and I am in this business to make money, not loose it. I will now have to come down hard on my guys that help me rehab and make them charge me less if I can to recoup this lost money. I basically act like a real tight a** with my money and that they are the ones pushing me into the corner. All I’m trying to do is buy the house at a fair price.
Maybe you are talking to the executor or executee of an estate. The relative died and all of the family members live out of state. They don’t have any emotional ties to the house and don’t know it’s value. You tell them how the house has deteriorated (they usually are as the elderly are unable to take care of them). Go through a little story. Possibly find some houses on GIS around it that could have sold years ago for a low price and tell them that one a couple of houses down last sold for 25K. The one up the road sold for $28K (in 1998). Yes, they could have been bombed out when they sold for that price but that doesn’t matter. Who cares what the year was. That’s not the point in this particular situation. Maybe you think the ARV is 75K and you want to pay 50% of that and you have $2,500 in repairs and $5,000 for your pocket. So you tell them 25K and you have a little breathing room to work up to the 30K you will pay.
First things first though. You need to build your list of investors that are presently buying property. You will get this list from emailing those who advertise apartments for rent on Craigslist, going to your local REIA meeting, meeting them on the courthouse steps when they are trying to buy a foreclosure, etc. Talk to each one of them, get the name, email address and phone. And ask them what they want. What are their buying criteria. Then you go and find houses for them. Amateurs find a house first and then a buyer. If you buy at 50% of ARV you will likely be able to find an investor to buy it but it may take a little time. Or you could buy property that you already know they want, perfectly fitting their buying criteria, put your contract on it and close on it right away.