Dallas, TX · Member since 2018 · 25 posts · 7 votes
Hi everyone,
I’m in the education part of learning about wholesaling.
My question is this:
If I find a distressed seller that is willing to sell, how do I know what the property is actually worth? How do I know what price I should try to get the property for?
I’m assuming that I would have to find comps and compare the seller’s house to those comps? And if that’s the answer, how do I go about finding comps?
1. Redfin, Zillow, Realtor.com - the filters will allow you to find properties that are available in the market that meet your criteria (beds/baths/square footage & age), if you scroll to the bottom you will typically see sold comparable properties. You will need to piece together the information and drop it on a spreadsheet, but this is the simplest, free way to do it.
2. Comps: 3 sold properties is your best bet
3. Discounting renovations: read up on costs for things like roof, HVAC, plumbing, electric etc.
3a. The entire strategy is to get the Seller to give you a discount below the 'as is' value of the property, in order to get to the 'as is' value use this formula: after renovation value (ARV) - renovation costs - transaction costs (purchase & resale - roughly 5% of purchase price & 4.5 of resale price) - wholesale fee - 15% of ARV (this represents the rough profit that the end Buyer would be looking for)
1. Redfin, Zillow, Realtor.com - the filters will allow you to find properties that are available in the market that meet your criteria (beds/baths/square footage & age), if you scroll to the bottom you will typically see sold comparable properties. You will need to piece together the information and drop it on a spreadsheet, but this is the simplest, free way to do it.
2. Comps: 3 sold properties is your best bet
3. Discounting renovations: read up on costs for things like roof, HVAC, plumbing, electric etc.
3a. The entire strategy is to get the Seller to give you a discount below the 'as is' value of the property, in order to get to the 'as is' value use this formula: after renovation value (ARV) - renovation costs - transaction costs (purchase & resale - roughly 5% of purchase price & 4.5 of resale price) - wholesale fee - 15% of ARV (this represents the rough profit that the end Buyer would be looking for)
1. We do wholesale, but our approach is a little different; we will buy it, take possession & re sell at a mark up. Wholesaling as a strategy is really just about understanding the discrepancies in market values. Think of it this way, if I could buy an apple at the local fruit stand for 25 cents a piece and was fairly certain that I would drive it out to the city and sell them for 75 cents a piece I'd be in the apple selling business!!!
1a. We approach real estate the same way... There are times that properties are unnecessarily discounted in the market, we try to identify those discrepancies, investigate them and if the opportunity is right purchase the house.
2. We do not think of wholesaling as a stand alone strategy, instead we apply the concept of a wholesale as the core measure of any out of market transaction we do. In short, we will NOT buy a property unless we are reasonably confident that we can buy it, do NOTHING and sell it for a profit.
I disagree with @Steve Morris, Zillow/Redfin are great tools; their automatic pricing tools are NOT great, but they do offer a simple metric by which to evaluate properties. Additionally, Zillow and like sites place a lot of emphasis on pictures, which will allow you to compare similar properties to try discern why one property sold for more than another if all other things are equal.