wholesale or rent to own? 1st Deal

1 Reply

Just talked to my first potential seller. He has a 3 family for sale. FSBO.

Gave me his asking price. I don't have the cash to buy it out right. I'd like to wholesale straight; however, as seen in the photos, it isn't in bad shape. It might very well be near ARV. Two of the units are currently rented with one tenant being there for 3 + years. I'm not sure if I can wholesale that to another buy and hold investor.

Seller would entertain seller financing. Maybe I could whole sale the seller finance package to another investor. or take the property myself under seller financing and become the landlord.

Price is $174,000 … Monthly income about $2450 per month. $28,000 per yr

Taxes $3500.

Thanks for your help! Trying to see if I can structure a win-win here.

Matt

It is difficult to be a wholesaler because you have to know what other investors will buy. The better approach is to find the investors and find out what they want and then go and find the property. Don't say that you are a wholesaler just because you don't have the cash to buy the property.

If I take your projected monthly rent and use a 50% expense ratio it calculates to an 8.4% Cap rate. That seems pretty good and I wish I could get that in my area. I don't know about your area but you should.

Also, the property should be near its highest ARV if the property looks good and rents are at market. You can tell what the property looks like but you must know what market rates are.

If you are going to be a wholesaler, please learn what investors want, what is market cap rates, and what are going rental rates.

I think owner financing sweetens the deal if it is under market rates. I prefer to pay 3+ percentage points below my return on the deal. For instance, if the cap rate is 8.4% I would want my cost of money to be 5.4% or less.

I hope this helps. Good luck.

Bill