First wholesale purchase

2 Replies

Hello BP,

I am considering my first wholesale purchase of a very nice off market property about 18-20% below market value. Since this would be my first all cash purchase I am treading very carefully...

Aside from the condition of the house - which is great and currently tenant occupied, what other red flags? The deposit is only contingent if the seller cannot get a clear title, otherwise it's nonrefundable. 2 weeks to close

I plan to refi via a delayed financing cash out immediately after closing.

Thanks for your input.

Tom 

I'm trying to understand where the opportunity is. 

Since you are either trying to buy equity or cash flow at a discount, after holding cost, perhaps refi expenses and cost of resale, where is the profit point?

Is this buy and hold?

Whenever I started, I was so fixated on trying to get a deal that I sometimes missed this (important) element. That was during the post-Carter stagflation era and is eerily similar to current market except for the interest rate disparity?

You hoping for appreciation, adding a room, other added value play, or subdivide, zoning change, etc.?

HI Rick,

Thanks for your feedback.

This would be for a buy and hold. Here are the numbers:

Purchase price 103K. Estimated market value -125K based on realtor comps.

Tenants in place are currently paying $1400/ mo.

If I bought it cash and refi'd out immediately with a delayed refinance Fanny Mae product for 75% (of 125k) that would be a 93,750.00 cash back. So ultimately a 10K downpayment. Not bad but wondering if I could do better by increasing the value of the house while tenants are in place and possibly recoup ALL of my cash back.

Make sense?

Tom

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.