What makes a good rehab deal

For those of you that are looking for rehab deals.

When a wholesaler brings you a deal…what things are you looking before you will agree to take the deal in terms of numbers and the house itself?

I can tell you from my current experience and my previous post, you want to really make sure you are not too deep into the property and your final equity position is about 65% of total after repair value. That way if you need to “fire sale” it, you can dump it quickly and still make some money.

Exit strategy is everything.

A good rehab deal is made and not found. The property has to have a few qualities.

#1 low repair cost, nothing major like complete gut and update.

2 low purchase price compared to value for me 50% or less

3 good location so that I can sell it at retail value

4 as many attractive qualities as possible. ( Central air ,Garage , Basement)

5 curb appeal ( something that can be made that way cheaply)

When I find these I buy them and sell them rent to own within a few days of completion,some take longer but that is my fault for not advertising enough.

70% of the conservative ARV less repairs.
Also, in this market, you want solid comps for your ARV.
I try not to go back more than 3 months.
I want to know for sure what I can sell the property for.

I agree with the previous formulas bc they’re pretty universal. It does vary from different parts of town (at least here in San Antonio) but overall you want to be in it for no more than 70% ARV.

Example with a $100K ARV property:

ARV $100K

  • 30%
  • $10k repairs
    $60K max offer
    (if you are wholesaling you need to subtract your desired profit from this figure and that’s your max offer)

I go a little further with my calculations because I want to know my final $ amount based on holding time frames and taxes I pay on profits. But if you stick to a formula you’ll buy up properties at the right price and avoid paying more just to get the deal.

Also, when looking at comps, try to stay in the specific neighborhood instead of doing a radius search bc you’ll eliminate a lot of problems that way.

Hope that helps a little.