Are you wholesalers asking too much?

Phoenix, Arizona
Rehabbing & House Flipping
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Are you wholesalers asking too much?

Michelle MastersPro Member
Investor · Mesa, AZ · Member since 2013 · 25 posts · 6 votes

I'm seeing wholesalers here in AZ asking 80% ARV flat (no reduction for repairs). Even a light cleaning would take at least 1 month of holding + closing costs on both sides. Almost every "deal" that's hit my Inbox needed $45K to $60K in repairs. I've started asking myself, "Who's training these folks?!?!".

Anyone in the Phoenix area have similar experiences? What is everyone else seeing in your markets?

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Andrew Rodgers
Real Estate Agent · Phoenix, AZ · Member since 2023 · 14 posts · 9 votes
3y

LIke @Will Barnard mentioned, a lot of wholesalers don't know how to property evaluate a rehab and are getting properties under contract way too high.

As a wholesaler myself, I really appreciate when a flipper spends the extra 5 minutes to build a relationship and educate me on why a deal does or doesn't work. It ends up being a win-win for both of us because now I can more accurately find deals that fit their buy box and for me I know I'll have a reliable buyer on my hands in the future to send deals to.

[Solicitation Removed by Moderators]

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  • Jeremy Horton
    Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
    2y

    I'm on a few wholesaler lists in my area - most of them have been pushing out straight crap honestly 

    2 of them always send houses in flood zones, crime ridden "affordable" areas - basically nothing with an exit strategy 

    1 of them is pretty good - I've bought a couple houses from him. Thing is - he always wants to start too high. It would be nice for a wholesaler to come up with an accurate ARV but they ALWAYS inflate it. This guy will send comps too, but it's not comped correctly - the size/location/rehab etc - something is always off. I'll usually let him sit on it for a minute until he's willing to come down on the price

    I also don't have a problem coming in at 80-85% ARV after everything is said in done. This still gives me 15-20% equity capture at the buy, small cashflow, and I have the option to refi and leave less money in the house if I want to. Here lately though, I've just been doing a conventional loan out of the gate and leaving the rehab cost in the property. No sense in refinancing with these 9% DSCR rates right now. I'll take minimal cashflow for a year or 2 then hopefully refi into the 6% range.

    I rarely get rehab costs - when I do they are generally underestimated. I do an inspection on the houses as well simply because I think the extra $400 is worth finding something that may need fixing and it helps me to come up with an accurate scope of work for the rehab. 

    Typical wholesaler though trying to maximize their profit - overestimate ARV, underestimate rehab. I just don't understand how they get a contract on the property for 3-6 months - the main guy I'm dealing with will get 6 month contracts on some of these. It's crazy

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  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
    2y
    Quote from @Michelle Masters:

    I'm seeing wholesalers here in AZ asking 80% ARV flat (no reduction for repairs). Even a light cleaning would take at least 1 month of holding + closing costs on both sides. Almost every "deal" that's hit my Inbox needed $45K to $60K in repairs. I've started asking myself, "Who's training these folks?!?!".

    Anyone in the Phoenix area have similar experiences? What is everyone else seeing in your markets?


    G'Day Michelle,

    Never liked wholesalers much lol

    Always full of $@#% and don't know their numbers.

    They lie to the sellers and the buyers.

    Well, most of them do.

    Many aren't even direct to the seller 

    Ok, enough of smack talk on wholesalers hehe

    Granted, been buying quite a few lately in my market Toledo, OH from wholesalers.

    They seem to be sourcing better deals than we can.

    And I never care how much someone makes, as long as the numbers work for my company and our investors.

    It's the wholesalers talent to find deals and negotiate them well.

    The more they make, I'm happy for them.

    As long as it's a win/win/win for all.

    That's good business IMO

    Thanks 🙏👍 

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