As A Wholesaler, What Am I Looking For?

I guess the easiest way to answer this question is to ask what is a flipper looking for. After all, the flipper is your end client and who you'll be assigning the contract to or selling the house to, depending on what strategy you plan on using.

So what is a flipper looking for? House flippers look for houses that are about 70 ARV (after repair value) minus repair costs and minus holding costs. So we will use a house that has an ARV of 100K just to make the math easy.

100K ARV
10K in repairs
5K holding costs
equals 55K

So if a flipper finds a house for 55K with an ARV of 100K with the above estimates for repairs and holding costs, then the flipper has found a deal that's worth their while. But since you as a wholesaler wants to make money, you'll need to find a deal that's even better than the 55K. You're fee comes from getting the house under contract for under 55K. Whatever you can get the house under that value is your fee (kinda).

There are three things that a good wholesaler needs to know and be good at.
1) What is the house ARV?
2) What are the repairs and costs associated with those repairs?
3) What fee can I charge?

If you are off on any of these calculations, it could make what you think is a really good deal, a really bad deal. It could have you holding a house that no flipper wants.

1) What is the house ARV - ARV is the after repair value or the retail value of the house. The most accurate way to get this is to use comps. So either you need access to the MLS or you need to know someone who does and is willing to pull comps for you. If the house doesn't or can't sell for what you estimate, then the house flipper will lose money or profit. And you want to make sure your client is happy so you can get repeat business.

2) What are the repair and costs associated with this - There is some debate on BP on whether this is important, but in my mind, it is. Yes, the end flipper will estimate his own costs, but look at it this way. If you don't have any idea of what the repair costs are, how can you tell is it is a good deal or a bad deal? If you want to make 10K on a wholesale deal and you are off on repairs by 10K, then you no longer have a deal. You have a house you are either stuck holding or giving away without your fee.

3) What fee can I charge - This is the area where I think a lot of new wholesalers end up shooting themselves in the foot. I'm seeing a lot of bad press on BP on wholesalers. Wholesalers are either bringing flippers bad deals or they are bringing them deals with very little margins. Your client is the flipper so you need to makes sure they are happy. You should have a set fee you make on a deal and stick to that fee amount. Give your client as much margin as you can so they can make their money, they are happy and they come back for more. You really think making 20K on a wholesale deal is fair to the flipper? They also need a buffer in case costs run high. They are the ones taking the majority of the risk. Be fair with them and you'll have a customer for life.

Buy your houses right and make your clients happy.