Should I send this deal to my buyers list?

Question

So as some of you know I'm a newer wholesaler and I've been working hard to build a buyers list. At this point I have roughly 25 names and I've worked hard to screen out tire kickers. It's also important to me that I don't harass my buyers with useless deals. I hear that complaint from them all the time and I'm looking to send them prime deals where all the numbers hit perfect every single time. With all that being said...

Today I got a call from a fellow wholesaler who sounded really motivated to unload his property. It's in Lawrence, MA, an area I'm not particularly familiar with. It's a two family, 4 bed / 2 bath, 1750 sq ft, built 1904. Apparently in need of $2.5K of repairs ("repairs not necessary" according to him) and each unit is estimated to rent at ~$900. He's pricing it at $125K with $1K gift card to home depot or lowe's. Below are some comps:

1)3/2 1,962 sqft 1925 sold07/30/09 dist.0.91 sold $238,400
2)3/2 1,802 sqft 1950 sold07/28/09 dist 0.79 sold $189,900
3)4/2 1,818 sqft 1910 sold08/31/09 dist 0.34 sold $160,000
4)4/2 1,930 sqft 1910 sold08/12/09 dist 1.72 sold $125,000
5)3/2 1,874 sqft 1915 sold10/01/09 dist 0.69 sold $85,000
6)4/2 1,866 sqft 1900 sold10/09/09 dist 0.22 sold $131,000
7)3/2 1,604 sqft 1900 sold08/12/09 dist 0.23 sold $59,900
8)4/1 1,596 sqft 1900 sold10/13/09 dist 0.42 sold $127,000

Clearly it isn't priced low enough. Do I go back to the wholesaler and give him a number I'd be willing to offer it at? If so, what number would you guys throw at him? I was thinking something around $85K. Or maybe I should just throw it away...

David Breitzmann · Answer

Sage,

I think it's awesome you are actually putting into practice what many spend a lifetime theorizing.

The initital point you made which raised flags is "I was thinking something around $85K." From what has been stated repeatedly by successful REI vets is that one sticks to a proven formula.

Know the numbers, apply a range of estimates and if it doesn't make sense get out. It will take a much greater volume of deals but make automating the business much easier down the road.

Another point is you don't know the area. Find others who do and may find this interesting. Even if you hand it off with no net gain immediately a lead in your area may be thrown right back.

Michael C. · Answer

sage im interested in properties in lawrence among other areas of ma....like lowell and dorchester pm me or give me a call thanks mike

Rob Huxman · Answer

Yet the rent is coming in at $1,800 and the mortgage would be around $1,100 It would cash flow. Some people are looking for that as well!

Chris T. · Answer

Thanks Sage. I learned what I learned from the good people on this site too!

Chris T. · Answer

If it doesn't fit your criteria then don't send it to your buyers. Reputations are formed quickly and as a new wholesaler you are going to be off on a couple of deals anyways. No sense in adding another deal to the mix that is off the mark, especially when you know up front that it isn't hitting your numbers. If you routinely talk to your buyers then you may casually tell them about this property you ran across. Maybe someone will show some interest, but don't actively market the property.

When you come across a property that you think is close but not quite there then you should be thinking about talking to about 25 more motivated sellers with equity. Then you'll be working towards getting your next deal.

The more time you spend messing around with iffy properties the less time you spend finding great deals. And the iffy properties always take 3 times the energy and time then a good one. You can sell a good one literally minutes after you have it secured.

Sage Jankowitz · Answer

Appreciate your thoughts Chris. That's exactly how I feel.

I'm heading out of the country shortly for a few weeks so I don't feel comfortable putting a property under contract right now. When I get back I'm hitting the pavement real hard and I plan to get my first deal soon thereafter! I couldn't have come this far without the help of people just like you Chris!

Thanks again!!

Scott R. · Answer

Even with owner financing i dont really think its that great of a deal, just make sure it works for you. even at 10% (which is low for owner financing i think) it doesnt meet 2% or 50% rules, you'd probablly need to drop the price 20K and get owner financing to make it a deal, espec. if you plan to make money from this as far as wholesaleing it. Are your buyers landlords? seemed to me your buyers were more the rehab type of buyers? Duplex has alot fewer exit strategys,
-Scott

Sage Jankowitz · Answer

Those are all duplexes, but yeah, this situation doesn't look good. Only positive is the wholesaler sounded ready to let go of this property.

In terms of seller financing, I'll throw it out to him, but if he resists I'm just going to let it go.

Sage Jankowitz · Answer

Yep, it isn't a good fit at all. I have a variety of buyers but the bulk are rehabbers.

I've always been the straight shooter type and I plan to be with this guy. No point in wasting his time or mine.

Scott R. · Answer

Comps dont look great,
Hes a wholesaler and hasnt been able to sell it, probablly not a good thing.
Seems way over priced to me.
Duplex's dont appeal to owner occupants very often, and most of those comps are PROBABLLY owner occ, doesnt specify if there sfh or duplex, so i assume sfh.
As Chris said if he would owner finance it you could probablly sell it to a landlord and make some money on it, with the financing set in place, or keep it yourself.
-Scott

Should I send this deal to my buyers list?

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