BiggerPockets

Hi guys and girls,

So I have a pretty great deal. It's in a very desirable town and neighborhood. It's a 3 Br 2 ba and the lowest comp in the area is $335K and everything is averaging about 350ish. It needs new plumbing throughout, a new roof, kitchen update, 2 baths updated, floors and paint. The floor in one of the rooms is also slightly slanted. I don't know repairs but I estimated and hope 80K would cover that work and anything else necessary. It doesn't need to be gutted to the studs. I just want to know what I should sell this deal for. I could go with the 70% minus repairs formula and sell it for about $150K (that's also using the lowest comp and not considering that everything in this house will be brand new, a rehabber could probably pull the higher 350K) but at that number I'm making an insane amount of money for a wholesale, although I've heard of people making these profits on wholesale deals before. I just would like to know because even at the 150K mark, the rehabber is still going to have about a $105K spread before he pays everyone, I would think on a worst case he would pocket $60K after the transaction is done. Any advice is appreciated everyone. Thanks.

Sell it for as much as you can get.

But seriously, I would take 15% of the ARV and use that number as my end buyer's profit. From there you can reverse calculate what you could be selling it for.

How much do you have it under contract for?

Wow, that sounds like a steal of a deal if your ARV numbers are correct.

I would get some GC's out there to put bids on the rehab. Pay them a little for their time since you won't be hiring them yourself. Get the bids in writing and present them to the investors. From your description I think $80k is more than enough, although I don't know the sq ft nor have I seen the house myself. If the bids are substantially lower than $80k you could support a higher sales price from your end buyer.

I am going to make a large assumption that the ARV is real, correct, and obtainable within a 30 day listing period.
With that in mind, I am thinking this home will also need some electrical work, windows, and exterior finish like siding or stucco. If the foundation repairs are minor, your $80k sounds ok unless this home is larger than 2000 sq. ft.
So, if $350k exit, and a rehabber will want it for around 70-75% all in, then they would be offering $165k - $182k. Since you have it at $100k, you stand to make a very hefty profit.

Now, with that said, I will state that I have a very large doubt these figures are correct since you would have been able to lock this up at a 51% deal which is practically unheard of in today's market. In fact, the largest spread I have heard of is one I have been doing which is a 53% all in deal, but the investment capital is $1.3M and not $180k!

Actually Keith, this deal is in Westfield. Union County

I never said it was impossible, but do let us know how it goes. If you off this deal at the $160k range and nobody bites, you will know that the exit value and or the repair numbers are off as I suspect. I hope I am wrong for your sake. A $60k wholesale fee is killer on a $100k locked contract!

I'll keep you guys posted. Thanks for all the input.

If the homeowner isn't interested in getting his attorney involved, no reason to encourage it. If he wants to, let him.

As for having a buyer try to renegotiate, make sure you get enough non-refundable deposit that, if the buyer chooses to walk away for whatever reason, you won't mind. I would expect a buyer to put down at least 10% on a cash deal, and I don't imagine a typical buyer is going to walk away from $15K just because they're not happy about how much you're making.

I noticed you didn't answer how you found the deal. I'm with the others who say it doesn't sound very realistic. I hope you'll take steps to make sure the person selling to you actually owns the property in question!

I do a lot of marketing, thats how i found this deal. I'm not too big on sharing my exact marketing strategies, not yet at least. I'm not trying to be selfish but I'm building right now and going after market share in the north jersey area. I know this is a business of friendly competition but I don't know any other business where people come into an environment and talk about the details of their marketing strategy in the presence of their direct competition IN THEIR AREA. As far as the person really owning the home and all that, not the case here. I have tried a lot of things that don't work for wholesalers in Nj and learned some expensive lessons. I've also been blessed to find out what is currently working.

I would also disagree with anyone who says it doesn't sound realistic, I think a more suitable word would be "typical". I know wholesalers who have made more on deals. I don't think $45,000 is too far fetched if you find a great deal. Is this an everyday or every month deal, maybe not, but will deals like this pass my way occasionally in a $350k market, i have to believe they will and if i dont believe they will I'll never see it and wont have the guts to even make the offer. I made my mind up when I started that if people in AZ and FL are making 5-10k per deal on 100k houses, then My minimum profit on ANY wholesale deal should be 10k in my area where the average home is $250k-$400k. If I can't find deals at 50-65% of ARV then I'm not a wholesaler, I'm a wannabe.