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.
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
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing