BiggerPockets

I haven't found a lot of accuracy with online value sites. Check the sold comps in the last 3-6 months to get a real idea of what it will sell for. If that's somewhat accurate it doesn't seem too bad except maybe the area if they're taking the plumbing and copper. There's buyers out there that have their own crazy version of what a deal is, so the question becomes can you sell it.

Let's start at the top:

- First, $99-122K for ARV is a HUGE range. You need to narrow it down.

- You can't use online sites to generate ARVs. For accurate ARVs, you need access to the MLS or to someone who has access to the MLS (an agent, an appraiser, etc).

- I'd be willing to bet that your rehab estimate is way off. While the stuff you mentioned could by $15-20K, if that stuff is needed, you can be sure that more work will be needed to get the property to ARV. For example, you mention replacing sheetrock, but you don't mention painting. And if you're replacing sheetrock on the ceiling, my guess is that it's due to a leaking roof, which means you could have mold or roof framing damage as well. If plumbing and electrical needs to be replaced, you'll have more sheetrock work (and more painting). What about new carpet? Cabinets? Exterior work? Light fixtures? Plumbing fixtures?

- If you know there is a tax lien, how do you know there aren't other encumbrances on the property? Have you done a title search?

- While the potential profit at $48K is reasonable given your numbers and estimates, if your estimates of ARV and rehab are off, so will your profit assumptions.

Thanks a lot for the info, guys...I really appreciate it.

- If you know there is a tax lien, how do you know there aren't other encumbrances on the property? Have you done a title search?

Yes, I did...and that's the only lien on the property. It's owned free and clear otherwise.

As a wholesaler, it is crucial that you are accurate with your ARV value and your rehab estimate. As Jason mentioned, you have left out many necessary expenses for the rehab. The work mentioned is not everything that will need to be done. Next, if this will be sold to a buy and holder, then the rehab will be at a certain quality, if to a flipper who intends to retail it to an owner occupant, then a higher standard rehab is necessary. Take either exit into consideration.

Get that ARV range narrowed and pegged to a medium number (not best case scenario for your wholesale buyer). Then peg your rehab within a few thousand dollars. There is nothing more frustrating than a wholesaler stating a rehab is $15k, then you get there and realize the rehab is $30k! There is also nothing more frustrating than receiving an ARV of $120k when in fact, it is only $100k!

Do your homework first. Then, when you have the actual spread (equity), you can base your wholesale profit fee off of that, not just some random number of cash you "want" to make. The deal must be good enough to attract your buyer. Your expected profit of $10k for a home at under $50k is quite optomistic at best. If the market will bear such a high price, then great for you, but my guess is that the deal will not work for a buyer with such high mark-up.

I get $10k fees on homes with profit margins of $80k-$100k where the ARV values are in excess of $300k. This example is only to allow you to be more realistic in your expectations, however, I do not know your market or its conditions, so I could be off some.

Shunda - good luck I hope it works out for you.

If I'm not too late - $2k is not enough for you in my opinion - so what if the seller wants $38.5 - did you offer anything less? Too many things can go wrong to just make $2k on a deal. At least plan for $4 or $5k or move on to the next one...

good luck

Hi Shunda,

Did you find out the true ARV??? You should make clearly over the 2k!!

Shunda - just as you shouldn't care what the seller wants (your offer should be what you can sell it for minus how much you want to make) your buyer doesn't care that you are only making a certain amount. People buy things for what they are worth to them.

You say the the seller lowered their price. What is your lowest offer to them? I'm not convinced you've hit the floor of this deal yet. If this were me, I'd offer $20k and with a closing in 30 days and see what they say.

Remember, if this one doesn't work, there are plenty more out there. It sounds like you have a motivated seller, but if you aren't happy with the offers you are getting from potential buyers, you need to get the price down more.

Never forget - you are the buyer (to your seller) - you set the price based upon what you can pay - if they say no (most will say no), move on to the next one.

Glad I could help Shunda - one last thing - I'd follow up with this guy in a month - time is a great motivator - some of our best deals came from people that said no no no, but a few months of having the market work on them and they couldn't wait to sign a contract at OUR price...

Take care