I have a potential deal in Southfield, MI that i would like to wholesale and i am a bit unsure on how i should structure my contract for purchasing this property.
Seller Wants: $5k
Taxes Owed: $16K
How would you guys structure this deal as a wholesaler????
Please lend me some advice.
All Feedback is appreciated.
This is a marginal wholesale deal. Counting taxes, Seller, Rehab, you are already at 50%.
I try to structure my deals where I can SELL for 50%, including my profit.
And ARV is often questionable. If you erred in ARV, that could make it even worse.
The industry norm would be to use the formula: (ARVx.7)-rehab-wholesale fee=Max Offer
Since this is a thinner deal you need to take into account what your buyers absolute profit needs to be and what you need to make. Chances are your buyer needs to make X dollars.
Wholesaling cheaper valued properties does not leave much room for error.
Might be a better property to sell to a buy and hold investor or keep for yourself.
http://detroitpropertybrothers.com | MI Agent # 6501395686
I'm not a wholesaler, but I have wholesaled before. I am a rehabber though and property with this sort of distress (read taxes) typically needs more than $5k of work. I'd double check that figure if I were you. $5k doesn't go very far.
As one who flips property who flips property I see a value of $29,000. This is based strictly on your numbers.
Several concerns I would have. First, the ARV is the largest number and an error can become a big problem. I would also calculate the ARV as a rental. Be careful with expenses. On low priced rentals they usually run above 50% I would want a value of at least the $53,000.
Secondly, I find that most properties I see need more than $5,000 in rehab.
I love wholesalers it always just seems to need 5k in rehab
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