Wholesaling Formula for offer price

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Wholesaling Formula for offer price

Lily Rodriguez
Real Estate Broker · Charlotte · Member since 2024 · 29 posts · 20 votes

I'm sure that this has been posted here already. I just want to share the formula to new wholesalers because I have been getting deals that don't make sense for myself or my investor clients and in order for you to get a good wholesale deal to your Cash Buyers you need to know this formula. It does varies depending on your market.  For this example we will use 70% 

For this formula you will need to know the following:

ARV=After Repair Value ( How much will the house will sell for after making all the repairs needed)

Repair Estimate - (Send me a message and I can send you a list I got from my mentorship class for ball park estimates based on square footage and depending if you need cosmetic repairs, avarage repairs or Extreme repairs)

Your Assigment Fee

ARVx.70 - Repairs - Your Assignment FEE = Max Offer

Example

$200,000 x .70 = $140,000 - $30,000 (repairs) - $10,000 (your profit) = $100,000 (offer)

Your potential profit is $10,000 

I hope this formula helps you make offers that will make sense for all involved in the transaction.

Happy Wholesaling,

Lily Rodriguez - Investor friendly Broker

    6Reply
    217 views

    Most Popular Reply

    David Ramirez
    Investor · Tampa, FL · Member since 2019 · 1k+ posts · 1k+ votes
    2y
    Quote from @Rafael Mercedes:

    Hi Lily!

    Thanks for posting this.

    My one question is this:

    Do we minus repairs, liens, judgements, etc BEFORE the discount that's applied for the cash buyer? In my head I see that the property value must come down to it's actual value (minus all liens/rehab) before discounting it for the cash buyer and then taking your assignment cut. Any clarification would be appreciated! Thank you.


     Sellers are responsible for any liens that the property has, and those are taken off the proceeds of the seller at closing.

    3Reply
    See this reply in the discussion

    8 Replies

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    • Rafael Mercedes
      Real Estate Agent · Denver, CO · Member since 2023 · 39 posts · 21 votes
      2y

      Hi Lily!

      Thanks for posting this.

      My one question is this:

      Do we minus repairs, liens, judgements, etc BEFORE the discount that's applied for the cash buyer? In my head I see that the property value must come down to it's actual value (minus all liens/rehab) before discounting it for the cash buyer and then taking your assignment cut. Any clarification would be appreciated! Thank you.

      0Reply
    • David Ramirez
      Investor · Tampa, FL · Member since 2019 · 1k+ posts · 1k+ votes
      2y
      Quote from @Rafael Mercedes:

      Hi Lily!

      Thanks for posting this.

      My one question is this:

      Do we minus repairs, liens, judgements, etc BEFORE the discount that's applied for the cash buyer? In my head I see that the property value must come down to it's actual value (minus all liens/rehab) before discounting it for the cash buyer and then taking your assignment cut. Any clarification would be appreciated! Thank you.


       Sellers are responsible for any liens that the property has, and those are taken off the proceeds of the seller at closing.

      3Reply
    • Lily Rodriguez
      OP
      Real Estate Broker · Charlotte · Member since 2024 · 29 posts · 20 votes
      2y
      Quote from @Rafael Mercedes:

      Hi Lily!

      Thanks for posting this.

      My one question is this:

      Do we minus repairs, liens, judgements, etc BEFORE the discount that's applied for the cash buyer? In my head I see that the property value must come down to it's actual value (minus all liens/rehab) before discounting it for the cash buyer and then taking your assignment cut. Any clarification would be appreciated! Thank you.

       @Rafael Mercedes, depending on what your agreement is with the sellers. Otherwise the seller will be responsible for liens and judgements in the property. 

      0Reply
    • Errington Truesdell
      Member since 2024 · 1 post · 0 votes
      2y

      Good afternoon! Do you mind sending me that repair list you mentioned in your comment? 

      0Reply
    • Rafael Mercedes
      Real Estate Agent · Denver, CO · Member since 2023 · 39 posts · 21 votes
      2y
      Quote from @Errington Truesdell:

      Good afternoon! Do you mind sending me that repair list you mentioned in your comment? 


       Wrong person

      0Reply
    • Ronnie C.
      Real Estate Investor · Middle TN and Southern KY · Member since 2014 · 72 posts · 26 votes
      2y
      Quote from @Lily Rodriguez:

      I'm sure that this has been posted here already. I just want to share the formula to new wholesalers because I have been getting deals that don't make sense for myself or my investor clients and in order for you to get a good wholesale deal to your Cash Buyers you need to know this formula. It does varies depending on your market.  For this example we will use 70% 

      For this formula you will need to know the following:

      ARV=After Repair Value ( How much will the house will sell for after making all the repairs needed)

      Repair Estimate - (Send me a message and I can send you a list I got from my mentorship class for ball park estimates based on square footage and depending if you need cosmetic repairs, avarage repairs or Extreme repairs)

      Your Assigment Fee

      ARVx.70 - Repairs - Your Assignment FEE = Max Offer

      Example

      $200,000 x .70 = $140,000 - $30,000 (repairs) - $10,000 (your profit) = $100,000 (offer)

      Your potential profit is $10,000 

      I hope this formula helps you make offers that will make sense for all involved in the transaction.

      Happy Wholesaling,

      Lily Rodriguez - Investor friendly Broker

        18 years in the business, and I understand it perfectly. I just want to thank you for setting it straight! Too many have gotten away from this formula and I can't understand why? 

        If you are trying to scale as a flipper (nothing to do with rentals) then that is the ONLY formula you can use. Hard money lenders and private lending institutions/businesses will loan up to 70% of arv including rehab cost. 

        If you dont have a true "private lender" meaning an individual loaning their cash and or 401 secured by the deed then there is no way you can ever scale! 

        Thank you again for posting this! 

        0Reply
      • Ronnie C.
        Real Estate Investor · Middle TN and Southern KY · Member since 2014 · 72 posts · 26 votes
        2y
        Quote from @David Ramirez:
        Quote from @Rafael Mercedes:

        Hi Lily!

        Thanks for posting this.

        My one question is this:

        Do we minus repairs, liens, judgements, etc BEFORE the discount that's applied for the cash buyer? In my head I see that the property value must come down to it's actual value (minus all liens/rehab) before discounting it for the cash buyer and then taking your assignment cut. Any clarification would be appreciated! Thank you.


         Sellers are responsible for any liens that the property has, and those are taken off the proceeds of the seller at closing.

        Check your inbox/connection-request please. Need to meet wholesalers down there. 

        0Reply
      • Hector Perez
        Flipper/Rehabber · Houston, TX · Member since 2012 · 176 posts · 75 votes
        2y

        As a wholesaler, this is a good formula to get started, but you need to always ask your cash buyers what is their criteria. They are your buyers so they can tell you exactly what their formula is, so you can find deals they want

        The ARV*70%-repairs-fee = wholesale price works great mainly for houses under $250K, for houses above that this formula does not work very well in my experience

        0Reply
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