Reselling a Wholesale Property After Rehab

3 Replies

I'm interested to hear some opinions on this, as I have browsed the forum and couldn't find a specifically related past discussion. I recently purchased a property wholesale which I am rehabbing. The seller did a double close rather than assigning his contract. My purchase was one month after that sale to the wholesaler. At the time I was uninformed on wholesaling strategy, but in retrospect I am realizing that now my property records show quite a large sale price differential over the span of a month which concerns me regarding my options for the property in the future. Note also, the sale price included escrow to cover improvements noted by the seller (obviously this is not transparent from the property record alone).

Has anyone else experienced purchasing and eventually reselling a wholesale property after rehabbing? I am curious as to if you were met with any heavy suspicion by buying prospects particularly as these prospects would be looking at what is now a turnkey improved property.

Michael,

The double closing demonstrates that the wholesaler made more than $15,000 on the deal. If your numbers are good on your end of the deal ( ARV - Rehab - holding/closing costs = profit), then you're still okay (assuming your ARV is accurate). This is why they say to do your due diligence. If you're comfortable with the profit, then it's all good. I target for at least a $15K profit in a rehab project, depending on how long the project takes.

@Greg Steinbrecher I think that my numbers are still good on the deal after rehab. My question is more related to if you may have issues in the future in which interested buyers become less interested and suspicious a property is overvalued when they see a significant spike in the sale price over short period of time (the wholesaler's transaction). Particularly a buyer that may not be all too familiar with wholesaling.

@Michael Kennedy What type of buyer will you be marketing to? If its investors - they may be more savvy and catch the sales history. They could use that as a point to negotiate; if they can calculate roughly what your rehab cost was, they'll know more or less how much you are making.

If you are marketing to owner-occupants, I wouldn't worry. Most of them won't inquire deep into the sales history (especially off-mls), and even if they do they usually don't know rehab costs. If there was a sale price pre-rehab of 50k and its listed for 250k, and the comparables are listed at 250k, most who aren't educated in rehab/flips will think that means you put around 200k into it. 

For your owner-occupants, the comparables will rule. For investors, comparables still rule, but taking note of the sales history can allow them to get an even better deal.

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