No, that is NOT a great deal!

[Robert Freeborn]

Am I the only one who is tired of seeing these "deals" in the market place, or from other sources, advertising "amazing deals" that have barely any meat on the bone?

I suppose this is mainly an issue with wholesellers, but let me provide an example from a marketplace notification I just received:

Home is a 3/1 in the Arizona.  

Price $115,000

ARV $150,000

Buyer to pay closing costs and escrow fees.  

So, lets break the math down.  assuming 1.75% for closing costs and escrow fees, total purchase price is $117,012

Lets assume this is a cosmetic flip, very light rehab, and it comes out to $15,000.  

Then you have realtor commissions from 5-7%.  I'll cut the middle and say 6%.  If you sell at 150k that comes out to 9k in commissions.  

So, to recap you have:

Purchase $115,000

Closing Costs: $2,012

Rehab: $15,000

Total all in: $132,012.  

Commissions: $9,000

With an ARV of $150,000 total profit from this deal is $8988. Lets call it 9k for easy math.

So, 9k. profit. If I'm doing my math right, that makes a 6.8% COC ROI.

Am I missing something here?  Can someone explain to me how this qualifies as an "unbelievable deal!"?

Maybe I'm overgeneralizing, but I sincerely think it is crap like this that makes people not trust whole sellers and the industry as a whole. 

[Randy E.]

@Robert Freeborn, you know how every RE investor respeats "you make your money when you buy (low)"?  Well this is the other side of the same coin as it pertains to wholesalers: They make their money when they sell, high.

To flip another REI maxim that I've seen in a few recent forum threads: "If you haven't insulted a seller with a lowball offer, you aren't a serious RE investor." Or something similar. For wholesalers that might read, "If you haven't offended a RE Investor with an "unbelievable deal" that is so much NOT a deal, then you aren't a serious wholesaler."

Often, I want to ignore and trash those emails.  OTOH, there's nothing wrong with responding with an unbelievablely low offer.  You never know.  I recently came across a couple of wholesale offers that ended up being reduced by over 50% once I started an actual conversation with the two wholesalers.  They had simply put the highest price on the properties they thought might have a snowball's chance in hades of being nibbled at by one stupid investor.  But once I gave them my honest bid and opinion, they lowered the asking price dramatically.  

You never know till you try.

But yeah, some of those offers make me shake my head.