MLS vs off market and the appeal

15 Replies

So, I have a potential deal with the following numbers

925,000 ARV

185,000 rehab

42,000 (7%) CC/realtor

78,000 (10%) buyers profit

20,000 fee

Offer 600,000

Isn't ROI more important than whether the deal is MLS or off-market????

I am getting a lot of “let me know when you have off market deals.”

What am I doing wrong?

I never understand this argument. Who cares where the deal comes from as long as the numbers work. Concentrate on making the deal and the numbers work and nothing else matters. If anyone is arguing for or against if its listed or not, its just their preference or a sound bite that they are repeating. 

Good Luck with your Deal!

@Karina Gomes yes, ROI is the most important, and that is usually dictated by the acquisition prices. Typically, with Off Market Deals, you are able to get less eyes on it, thus a better price for the most part. Once it listed, EVERYONE sees it..investors and retail, so the demand can be higher.

At the end of the day, ROI is important, but most deals with enough margin, from my experience are off market.

All the best.

sjw

Well, first you don't include holding costs. Interest, insurance, utilities etc etc, so your math is way off.

What you presented does not appear to be a "deal" it appears to be an offer you could make in order to maybe get a deal. You could do this same math on EVERY property and come up with an offer number. But what does that get you?

If you actually have a seller willing to sell for 600 and you have your ARV and rehab numbers right (huge ifs), maybe you have a possible deal. But this does not appear to be a deal yet.

Whether the deal is off market or off the MLS is irrelevant. It's just harder to find good deals on the MLS, especially these days when the market is really tight.

Originally posted by @Eric M. :

Well, first you don't include holding costs. Interest, insurance, utilities etc etc, so your math is way off.

What you presented does not appear to be a "deal" it appears to be an offer you could make in order to maybe get a deal. You could do this same math on EVERY property and come up with an offer number. But what does that get you?

If you actually have a seller willing to sell for 600 and you have your ARV and rehab numbers right (huge ifs), maybe you have a possible deal. But this does not appear to be a deal yet.

I understand your argument. But every buyer's holding costs could be different depending on their funding over time etc. Some guys use HML and get 10% and 2-3 points. Some others have a better HML and may get 7% and 2 points. Some use Private money at less and no points, etc. Point is unless you understand how every single buyer on your list gets funding every time, you will spend more money trying to do math and lose the deal. You can assume most rehabbers hold for 3-6 months, but still, you need to know their holding costs on their money source.

Hi everyone and thank you for all responses.  Yes that was a possible deal. But wanted to see if my numbers were right. I am a newbie.  In my rehab, which I visit the house w a GC (so numbers are right, he game me 170k with padding and I added 15k for holding). So I was off on the 70 %

Again, thank you all so much, always good to tap on your experiences :)

Originally posted by @Shaun J. :
I understand your argument. But every buyer's holding costs could be different depending on their funding over time etc. Some guys use HML and get 10% and 2-3 points. Some others have a better HML and may get 7% and 2 points. Some use Private money at less and no points, etc. Point is unless you understand how every single buyer on your list gets funding every time, you will spend more money trying to do math and lose the deal. You can assume most rehabbers hold for 3-6 months, but still, you need to know their holding costs on their money source. 

 The point is not that a wholesaler doesn't know every flipper's exact holding cost. Of course, not. She also doesn't know what rehab choices the flipper will make or if the flipper is a Realtor and will save on fees or if he is a contractor or any of that. No one is expecting the wholesaler to have exact estimates when presenting their deals.

The point is that she can't ignore it completely and then wonder why people don't think her deal is good. She has to assume some number.

Originally posted by @Karina Gomes :

Hi everyone and thank you for all responses.  Yes that was a possible deal. But wanted to see if my numbers were right. I am a newbie.  In my rehab, which I visit the house w a GC (so numbers are right, he game me 170k with padding and I added 15k for holding). So I was off on the 70 %

Again, thank you all so much, always good to tap on your experiences :)

 If a flipper borrows just 500K on this deal. And pays 10% for 6 months. That is 25K in just interest. I would bet 500 a month for insurance. 200 for utilities, could be 1000 a month property tax depending on the area, permits for the rehab, staging, etc. 

15K is way too low. Just paying a couple of points on a HML loan is 10K. This is not a small house. $50K in holding costs for this project is a better estimate.

Closing costs are often closer to 10% and you calculated your 7% on the buy price of 600K. The flipper costs will be based on the sell price of 925K. In my area closing costs and commissions would be 65-75K. Title companies near you will have online calculators to estimate.