I am just now starting to look at properties from wholesalers and am wondering if you can or should negotiate asking price. The ones I am seeing are way off the mark for the BRRRR process but could be an option if I could negotiate the price down. Thanks
Hi @Richard DiGirolamo and welcome to BiggerPockets!
When I'm wholesaling a contract, I price it such that an investor-buyer will make a certain return. For a buy-and-hold deal, that usually means a cash-on-cash return (CoCR) of at least 10%.
Now, any calculation of CoCR, by necessity, makes certain assumptions about things like vacancy and repairs and maintenance. So, if someone has a different set of assumptions, they might very well get a different number. I will gladly engage with a serious investor about their assumptions and see if we can come to a consensus. Sometimes (fortunately not often), I've missed something important and my numbers do need adjusting to better reflect reality.
If your own CoCR calculations indicate you'll make 11.5% CoCR on my deal, and you've previously told me you'd be happy with 10%, then you're just haggling for the sport of it and therefore wasting my time!
For the record, serious investor-buyers almost never do this; It's always the newbies, who are scared of their own shadow and unable to be satisfied with a great deal!
Thanks Mitch! I figured that might be the case.