Investor · La Marque, TX · Member since 2014 · 73 posts · 30 votes
Almost every deal I'm offered from wholesalers has about 30K in profit after the purchase price and their estimate of rehab. After paying closing cost when buying and then selling, holding cost, then commission when I sell it how do they expect buyers to make a profit? I have about seven sending me deals and there all about the same, 30K max. I use hard money so I have to pay 2.5points,12% while holding, appraisal, builders risk ect. Am I missing something?
No you're not, if anything you are being generous. Most of the wholesale deals are not deals and I would caution you to take the wholesaler's numbers with a grain of salt. I have seen comps that are from a totally different neighborhood, when the house two doors down sold two weeks ago but it wasn't included because it brought down the ARV. I have seen ridiculous construction bids, or my favorite, needs no repairs to rent but $50k to flip, how does that make sense? Anyway, the bottom line is that the wholesaler is a middleman and mark up is involved that way so the profit potential will be thinner.
Keep doing what you're doing, watch the MLS, vet the wholesale deals and more than that make offers. You can make offers that make sense to you on any property, even if it is below asking price. As long as you are truly offering your best price and not just trying to take advantage of someone below market offers are not offensive, just make sure you can back it up with the reason for the offer.
No you're not, if anything you are being generous. Most of the wholesale deals are not deals and I would caution you to take the wholesaler's numbers with a grain of salt. I have seen comps that are from a totally different neighborhood, when the house two doors down sold two weeks ago but it wasn't included because it brought down the ARV. I have seen ridiculous construction bids, or my favorite, needs no repairs to rent but $50k to flip, how does that make sense? Anyway, the bottom line is that the wholesaler is a middleman and mark up is involved that way so the profit potential will be thinner.
Keep doing what you're doing, watch the MLS, vet the wholesale deals and more than that make offers. You can make offers that make sense to you on any property, even if it is below asking price. As long as you are truly offering your best price and not just trying to take advantage of someone below market offers are not offensive, just make sure you can back it up with the reason for the offer.
As others said wholesaler usually get carpet paint HVAC right. But gut jobs are just a blind guess, and your level of finish may not be what they were thinking. I’ve seen 40k need in rehab when it clearly needs 150k. Grain of salt unless your standard stuff. And even then get second opinions if you don’t know the wholesaler.
You have just found what most of us have found and been dealing with for years, a bunch of wholesaler “deals” that just are not deals, either because they are greedy, didn’t lock up a good deal to begin with, or could not properly calculate Reagan and exit value numbers, This is par for the course with many wholesalers. Do your own marketing and sourcing for deals, open up that net a bit larger and look for off market deals direct with motivated home sellers.