West Philly Wholesale Numbers
Hi! I've recently started marketing for leads to increase my rental property portfolio....and I have my first lead in west philly on a 2 story 3/1 that according to the seller "needs a full rehab".....I put my general number for a "full rehab" of that size at about 100K ....I'm putting the ARV at 130K....if i'm not interested in keeping and need to wholesale these numbers already look grim....ARV * 70% - rehab = -$9,000.....soooo what am I doing wrong ?? I can probably get away with less than 100K rehab but I'm not sure how much less...can anyone weigh in on my numbers? thanks!
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I would never use the 70% rule to figure out your numbers. I know that this is what everyone will tell you to do but it is bogus.
But that aside...
if the rehab is 100K and the ARV is 130K, it is not that you are doing something wrong. The rehab is just more than what the house is worth. Will be a hard wholesale sell, in my opinion.
Not sure that a $130K house justifies a $100K rehab cost.
To give you some idea of what sort of deals we are getting..
We make offers based on the numbers, NOT based on our exit strategy.
That is the mistake here. My offer is completely irrelevant to whether I will hold it or flip it or wholesale it.
You simply can't offer anything for a house that is $130K with a rehab cost of $100K, unless by doing the rehab putting in an addition, or something the ARV will increase significantly.
Not all opportunities "work". Sometimes you just need to walk away sadly.
Thank you @Jerryll Noorden. This is sage advice. Thank you for sharing those deals.
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Quote from @Marisa Amirian:
Thank you @Jerryll Noorden. This is sage advice. Thank you for sharing those deals.
But of course.
BTW, the trick to getting those deals we are getting is completely changing your perspective of motivated sellers. Once you understand that motivated sellers are not "gods" to be chased and worshipped, and bend over backward for, and instead realize that they need YOU, your entire demeanor changes and they obsessively start to chase you.
Way too many people think that it is some sort of mission impossible to reach motivated sellers... and they are correct... IF they do cold calling d4$ texting etc. etc.
Again, understand motivation and you will be set. Ask me anything if you need to.
Good luck!
@Jerryll Noorden...thank you for the reminder! And I can read between the lines of what you are saying as well :) We should be dialing in our marketing so that leads are coming to us...I got a lead last night and the woman just wants to get rid of her property and she put a lot of money into this property with hopes of renting I out and her husband got sick and they can't finish reno so they are in over their heads....anyway - she legitimately needs help and If I cannot help her i'm going to find someone who can. But I think yes if you are chasing leads in the beginning you are really trying to make ends meet, recoup costs and its hard and you end up treating the leads like gods but need to reset!
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Quote from @Marisa Amirian:
@Jerryll Noorden...thank you for the reminder! And I can read between the lines of what you are saying as well :) We should be dialing in our marketing so that leads are coming to us...I got a lead last night and the woman just wants to get rid of her property and she put a lot of money into this property with hopes of renting I out and her husband got sick and they can't finish reno so they are in over their heads....anyway - she legitimately needs help and If I cannot help her i'm going to find someone who can. But I think yes if you are chasing leads in the beginning you are really trying to make ends meet, recoup costs and its hard and you end up treating the leads like gods but need to reset!
You get it!!!
And awesome on your part trying to help her out even if you don'y get paid from it. That is just awesome!!
You rock gurlfriend!
Quote from @Jerryll Noorden:
I would never use the 70% rule to figure out your numbers. I know that this is what everyone will tell you to do but it is bogus.
But that aside...
if the rehab is 100K and the ARV is 130K, it is not that you are doing something wrong. The rehab is just more than what the house is worth. Will be a hard wholesale sell, in my opinion.
Not sure that a $130K house justifies a $100K rehab cost.
To give you some idea of what sort of deals we are getting..
We make offers based on the numbers, NOT based on our exit strategy.
That is the mistake here. My offer is completely irrelevant to whether I will hold it or flip it or wholesale it.
You simply can't offer anything for a house that is $130K with a rehab cost of $100K, unless by doing the rehab putting in an addition, or something the ARV will increase significantly.
Not all opportunities "work". Sometimes you just need to walk away sadly.
Jerryl can you break down how you get to those numbers if you aren't basing them on exit strategy? thank you kindly sir!
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Quote from @Marisa Amirian:
Quote from @Jerryll Noorden:
I would never use the 70% rule to figure out your numbers. I know that this is what everyone will tell you to do but it is bogus.
But that aside...
if the rehab is 100K and the ARV is 130K, it is not that you are doing something wrong. The rehab is just more than what the house is worth. Will be a hard wholesale sell, in my opinion.
Not sure that a $130K house justifies a $100K rehab cost.
To give you some idea of what sort of deals we are getting..
We make offers based on the numbers, NOT based on our exit strategy.
That is the mistake here. My offer is completely irrelevant to whether I will hold it or flip it or wholesale it.
You simply can't offer anything for a house that is $130K with a rehab cost of $100K, unless by doing the rehab putting in an addition, or something the ARV will increase significantly.
Not all opportunities "work". Sometimes you just need to walk away sadly.
Jerryl can you break down how you get to those numbers if you aren't basing them on exit strategy? thank you kindly sir!
Sure Madam,
We take into account what we will do to the house.
On one hand, the offer needs to be fair to the seller, and on the other hand, regardless of what is fair or not, we have plans for the house and we need to be able to accomplish those plans no matter what the actual value of the house is or what is a fair offer. Sadly it is never so binary, yes or no, black or white.
You need to be able to juggle these 2 scenarios and compromise between them.
So that said, the $40K house would need about $50K - $60K to fix it up for a normal nice looking rental/flip. But the house is close to the casinos here in CT ( Casinos are a big deal here), and if we made this house ridiculously lux, we could get $10K/month as an AirBnB. We are putting in a lot of custom finishes, which works out perfectly because we are filming our HGTV-like house-flipping episodes for our Youtube channel (we ... Jess and I do a lot of the work ourselves, and our time is not free and that goes into the offer as well).
So we offered the $40K, as this makes it work for us. If they don't want this offer, they can find someone else to sell to. This is what a lot of people don't get. Do you know how often OUR lower offer was accepted despite other competitors making much higher offers? This happens often often often.
But this is how we get to our offers. There is a higher risk of course your offer won't get accepted, but again, when you are credible honest transparent, you'd be surprised what can happen.
As for the $100K house we got for $5K...
The house is in the ghetto and needs a ton of work.
It will be section-8 housing and that is what I was willing to pay for it. Fair or not, that was my number, due to the high risk of that property and I honestly didn't really want it. The way it went, I was doing them the favor of taking it off their hands.
So we always make our offers based on OUR numbers, which include risk, our desires, AND of course trying hard to keep the offer fair.
But at the end of the day, you are a business, and you need to remain in business.
As you can see, our offers are not made by blindly plugging in an equation like the 70% rule. Not even close!
Yes yes yes...I see....You are truly very kind with your time @Jerryll Noorden thank you for taking the time to explain all of that....very helpful...can't wait to see what you do with the airbnb!
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Quote from @Marisa Amirian:
Yes yes yes...I see....You are truly very kind with your time @Jerryll Noorden thank you for taking the time to explain all of that....very helpful...can't wait to see what you do with the airbnb!
Anytime :D
Feel free to continue to ask questions. Happy to answer!