What Are Buyers Looking For In A Deal?

Question

Hello, fellow REI's of Nashville. I am a new investor looking to start out in wholesaling and I'm just looking for some direction. I want to know what are some of you local buyers looking for in a potential deal? Specifically what you are looking for as far as specific area, acquisition price, rehab budget, desired rate of return, tolerance for risk, etc? Any info you can provide on this matter will be helpful. Thanks!

Luka Milicevic · Answer

On new construction deals you want to buy the lot or existing home for no more than 20% of the sales price of the new construction.

So if both structures sell for a total of $700k you will want the lot for $140k(700k*20%)

Flips-70% of ARV less repairs, holding costs and closing costs. If your ARV is $300k, and costs are 50k, then you would want the property for $160k. [(300*0.7)-50]

These are just general guidelines. Some buyers might want something else, but this is at least a good starting point.

Josh Braun · Answer

Agree with @Luka Milicevic on the 20% for lot price on new construction. For rehabs, I look for 65% ARV or 70% MAO (Market value - repairs)*.70% = maximum acceptable offer.  For buy and holds, I look for 1+%  rule in class A/B areas, 2+% for C/D.

JD Martin · Answer

I'm not in Nashville but I am in East Tennessee. No comments on areas, but what I look for:

1. Neighborhood, first and foremost. Doesn't matter how nice the house is if the neighborhood is rough.

2. Rate of return: If I can't make at least 12% annual I wouldn't be interested. I aim for 15-18% annual.

3. Acquisition price: related to rehab costs. I won't go all in for more than 80% of a low/reasonable ARV, so depending on the cost of rehab I'm probably looking at purchase prices of 40-50% of ARV.

4. Tolerance for risk: High, but if you buy right you have very little risk, and I don't let emotions trump numbers. Houses are worth what they are worth, and costs are what they cost.

What Are Buyers Looking For In A Deal?

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