The house next door; is it identical? Has the subject property had an ARV appraisal done on it or at least a thorough CMA? I would recommend you get one of these two completed, by a totally independent third party, not you.
Once you have an ARV that you can hang your hat on, multiply by 98% – this is your targeted sale price – say, $117,600. Subtract your selling expenses and carrying costs. That’s about 15% (1-2% buyer’s closing costs, 6-7% RE commish, 4% carrying costs, 2% closing costs, including taxes – you are taking the HIGH END on these costs, right?). This leaves 99,960, call it $100,000.
Multiply this by 70% for a slow market, and you’re at your targeted TOTAL investment, including SOW costs.
If you want to market to a investor/contractor, and YOU want to make 5-10% you have to set it up for 70% LTV. If you plan to retail it, i.e. finish it yourself, you can set it up for 80% LTV. Because your WHOLESALE buyer needs to find a RETAIL buyer who will pay 98 cents on a dollar for the product, you need to make sure your contractor has at least 20-30% equity in the deal because they are the ones taking all the risk.
Your profit, should you have any, comes from being able to, 1) buy BELOW the MAO, which I suggest is max of 50K in this case, not 60K, AND 2) find ways to cut that SOW down from 30-40K to 20-30K.
Your FINISHED PRODUCT COST should be a MAXIMUM of 80% of the ARV if you’re the retailer and 70% if you’re the wholesaler.
I would suggest that this is a daunting challenge, but at the right PP, it can be done.
IMO, wholesaling is an advanced RE investment strategy, not something for the beginner :banghead. I’ll hang up now and take my lumps off the air.
(BTW, this assumes you’re a CASH buyer and it’s YOUR cash. If you use hard or private money, you’ll need to subtract those associated costs from your MAO).