Real Estate Broker · Tampa, FL · Member since 2016 · 84 posts · 24 votes
Good morning BP community,
I have a really quick question regarding making offers to sellers in a wholesaling transaction.
How should we calculate the offer that we make to a motivated seller?
Typically I've been told that we should offer 70% of the home value minus any repairs and marketing fees. Is this a good approach or is there a more simple method of calculating an offer??
There is no set percentage for a wholesale deal. It all depends on neighborhood and demand. But I will give a hypothetical situation below.
'IF' you need to sell a deal at 75%, this is a quick, condensed way to look at it:
1. I need to sell to investor at 75% of ARV (Purchase price+rehab) in this particular area.
2. Hypothetical ARV= 200K. So 200 x 75%= 150k. So I need to sell to investor at 150k (Purchase price+rehab)
3. Determine rehab (Hypothetical)= 40k.
4. If purchase price + rehab= 150, to determine investors purchase price, Subtract 40k(rehab) = 110k
5. You now know you must sell to investor for 110k to achieve a 75% deal.
6. But you need to make money, so subtract what your fee is, and that is your offer price to seller. If I want to make 5k as my fee: 110k Purchase - minus - 5k wholesale fee = 105k offer to seller.
You also need to account for what you want to make on the deal...
After Repair Value * (1 - ROI) - your markup - repairs
ROI is what you want the investor to make (really, what they expect to make). That may be 30%, 25%, etc. It's not city-wide here in Cincinnati. Other factors include the age of the house, the specific suburb, the amount and type of repairs needed, etc.
There is no set percentage for a wholesale deal. It all depends on neighborhood and demand. But I will give a hypothetical situation below.
'IF' you need to sell a deal at 75%, this is a quick, condensed way to look at it:
1. I need to sell to investor at 75% of ARV (Purchase price+rehab) in this particular area.
2. Hypothetical ARV= 200K. So 200 x 75%= 150k. So I need to sell to investor at 150k (Purchase price+rehab)
3. Determine rehab (Hypothetical)= 40k.
4. If purchase price + rehab= 150, to determine investors purchase price, Subtract 40k(rehab) = 110k
5. You now know you must sell to investor for 110k to achieve a 75% deal.
6. But you need to make money, so subtract what your fee is, and that is your offer price to seller. If I want to make 5k as my fee: 110k Purchase - minus - 5k wholesale fee = 105k offer to seller.
its still seems confusing to me. Ok,say I have a cash deal as a real estate wholesaler. The comps come I'm between 252,000 and 262,000. The Motivated seller house is valued at 254,000 I offer to am offering to purchase the house at 75% of the appraised value which is $190, 500 and pay closing cost of $ 7620 which is 3%. That's a total of 197,500. I then sell to the investor at 207,500. My fee is $10,000. Is all of that make since and is it considered a good deal for all parties?
@Debi Givens you're a little off debi you're forgetting the repairs on the property so if the ARV is 245k then 245k x .70 =171k minus repairs let's say there 20k so then 171- 20 = 151k. But then you also need to make money as well so subtract your fee of 10k so your offer to the seller will be 141k and you will sell to an end buyer for 151k! But don't offer the seller the 141k start at like 120k so you have room to negotiate but just know the most you can offer her also know as MAO ( max allowable offer) will be 141k