[Rent Rate] x 35: Anatomy of Wholesale Offer for Buy and Hold Investment?
Hello all,
Newbie question here. I understand that a typical wholesale deal to a fix and flip investor you're looking at % of ARV - repairs for a wholesale price to an all cash investor.
The rules seem to change a bit when you're considering rental rates. I was told by a buyer that they are looking for properties in specific areas that are 35x rental rates. So I pulled up Zillow, and checked the stats for target area:
Median Home Value: $150,000.00
Median Rental Rate: $870.00
WHAT?! So $870.00 x 35 = $30,450 wholesale price. I have to net out an assignment fee onto of that. Under a typical equation it would be more like $150,000.00 x .70 - repairs which would put us around 90k. Much more "purchasing" power when dealing with the seller.
So how exactly do these deals work?
Thanks,
Jonathan.