Newbie needing help regarding first property numbers

16 Replies

Hello BP Community!

I would appreciate any input out there regarding whether or not I should try to get a property under contract.  This would be my first attempt at doing so as a Wholesaler.

PROPERTY: 4/3, 3,621sf, $431k ARV (asking price $330k), light rehab (if any at all) $20k

MY CALCULATIONS:

$431,000 - $129,300 (30%) - $20,000 (Rehab) = $281,700 (investor price)

$281,700 - $5,000 (assignment fee) = $276,700 (MAO)

I plan on making my first offer $270,000 to give me some negotiating room.

Please let me know if my train of though and my numbers are what they should, or shouldn't, be.

Many thanks!

@Lari A.

Using your numbers my calculations are exactly the same as yours. I was taught to start my offers about 5% below my calculated MAO

BEST OF LUCK 

STEVE

Originally posted by @Steve Smith :

@Lari A.

Using your numbers my calculations are exactly the same as yours. I was taught to start my offers about 5% below my calculated MAO

BEST OF LUCK 

STEVE

 Thank you, Steve!  Actually, I was also taught what you were, so why I deviated from that is lost on even me!  I will make my first offer at $262,865.

Originally posted by @Steve Smith :

@Lari A.  Be aware that this is the formula for rehab 

 Yikes! Is there another formula that I should be using if minimal to no rehab will be required?

Originally posted by @Lari A.:
Originally posted by @Steve Smith:

@Lari A.  Be aware that this is the formula for rehab 

 Yikes! Is there another formula that I should be using if minimal to no rehab will be required?

I figured that if $20k wasn't needed for rehab that I would pass most of that amount over to my buyer, and of course I would also make a higher assignment fee.

@Lari A.

 Most rehabbers are looking for a15to 25% profit from their rehabs

the formula I use is ARV- repairs-Holding cost 10% of ARV -desired profit15% of ARV -Cushion 5% of ARV, gives you your MAO. I would think you need to go lower if you are going to wholesale

But I am a rehabber not a wholesaler

best of luck

Steve

Although I have not completed any deals so far and have no experience, based on the plenty of reading I've dond, your numbers look fairly good. I hope you successfully complete the deal! Keep us updated.

Originally posted by @Kevin Rodriues :

Although I have not completed any deals so far and have no experience, based on the plenty of reading I've dond, your numbers look fairly good. I hope you successfully complete the deal! Keep us updated.

Thank you Kevin!  If this pans out, I will definitely update the fam!
Originally posted by @Steve Smith :

@Lari A.

 Most rehabbers are looking for a15to 25% profit from their rehabs

the formula I use is ARV- repairs-Holding cost 10% of ARV -desired profit15% of ARV -Cushion 5% of ARV, gives you your MAO. I would think you need to go lower if you are going to wholesale

But I am a rehabber not a wholesaler

best of luck

Steve

Thanks again for your insight, Steve.  I was instructed that the buyer's 15% profit ($64,650) lies in the 30% that was deducted (the $129,300), and that the remaining 15% goes to holding (6%), realtor commission (6%), and closing (3%).  I would think that if there is little to no rehab costs that the buyer could then flip the property at, or close to, the FMV and that he/she would be happy that I brought him/her this deal.  Let's say I miraculously got the property for $262,865 and took a $10,000 assignment instead.  Wouldn't the buyer price then be $272,865?  And then, if the rehab came to only $10,000, isn't the buyer really making a profit of $74,650?  Wouldn't a rehabber be happy with this deal?  Seems like a win-win, but this is where my confusion lies -- in running the numbers!  


@Lari A.

Do you have a buyer lined up? Why is the property marked so low? Have you done any remodeling before, to give you a trained eye for repairs?  

Originally posted by @James Clark :

@Lari A.

Do you have a buyer lined up? Why is the property marked so low? Have you done any remodeling before, to give you a trained eye for repairs?  

Yes James -- I have buyerS lined up, and I don't know why the property was marked so low.  The Seller seems to be in her right mind, and even though I don't have any official remodeling experience, I feel comfortable with the walk-through (the roof and HVAC are fairly new, and outside of the kitchen cabinets and lighting being outdated, the property doesn't have any issues).  The property is in a highly-desirable neighborhood, the rents average around $2,300, and the home has been well maintained.  I'm seeing no red flags, and thinking that maybe this is just my (first) deal to have.

@Lari A.

Sounds like a home run :), have you checked to see if there is any liens on the home?

Originally posted by @James Clark :

@Lari A.

Sounds like a home run :), have you checked to see if there is any liens on the home?

No, which is another area of confusion for me. Is that a part of my responsibility as a Wholesaler? Since this is my first attempt at evaluating a deal, and since I don't have a mentor, I'm not exactly sure of the steps that I'm responsible for. I feel comfortable determining interior rehab costs, and pretty comfortable with running numbers (ARV, MAO and CAP Rate %). But, doesn't the end buyer do the diligence regarding liens, mortgage balance, etc., within the inspection period designated in the Purchase Contract? I've read so much on wholesaling, and don't recall reading that I should check for liens on a property that I'm hoping to wholesale. If that's part of my "job", I certainly need to be doing that!

@Lari A.

Yes I would check everything!

Your job is to be the best, the best wholesaler knows everything about the property.    

Originally posted by @James Clark :

@Lari A.

Yes I would check everything!

Your job is to be the best, the best wholesaler knows everything about the property.    

To be the best in my chosen profession is certainly something that I'm striving for, and I will also strive to know as much as I possibly can about a property that I'm wholesaling. Thanks for your input!

If anyone can give me some insight on my numbers (where I miraculously got the property for $262,865), I'd appreciate knowing if my thinking is correct or not.  Thanks!

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