how do I know if the deal is good or worth it?

4 Replies

I just started with wholesaling and have learned alot from the forums here. I was doing some searching online trying to get my first lead and I found a few possible properties where the owner "must sell." When you did your first deal, did you jump on the first prop that was a good lead in any condition or what things did you look for to justify putting it under contract or does none of that matter as long as the price is good and leaves you room.to make money? Any help is appreciated?

Also do you tell your motivated seller you are a wholesaler or do you present yourself as a cash buyer/investor that can assign the prop over?

That is always a tough question to answer when starting out.  You should do three things.  

1) Do as much research as possible. Know your comps, know the after repair value (ARV), know the cost of repairs, and maybe be familiar with the maximum allowable offer (MAO) formula which is 70% of ARV minus repairs. This last part is just a guideline.

2) Put together a buyers list and ask your buyers what a deal is. Get very specific--type of house, size, location, their MAO formula, etc. If they tell you they are looking for a pink giraffe, you'll know when you find a pink giraffe that you have a deal.

3) Get it under contract and try to wholesale it!  Have an escape clause in the contract, like "subject to partner approval."  Be honest with the seller and tell them what you do.  You have money partners, the end buyers, who provide the funds.  Nobody has an endless bucket of cash and different partners are in always moving in and out of buying mode.  Shop it around, and see if you get bites.  If the price is too high, ask buyers who are interested what price they would pay.  Then go back to the seller and tell them you have a partner that will approve it at their price minus your cut.  And make your cut small.

If its a deal its a deal .. they really aren't that easy to find .. so it's unlikely your 1st lead is going to even be worth writing an offer.  If they are motivated enough then go ahead and do the deal.

Originally posted by @Larry T.:

That is always a tough question to answer when starting out.  You should do three things.  

1) Do as much research as possible. Know your comps, know the after repair value (ARV), know the cost of repairs, and maybe be familiar with the maximum allowable offer (MAO) formula which is 70% of ARV minus repairs. This last part is just a guideline.

2) Put together a buyers list and ask your buyers what a deal is. Get very specific--type of house, size, location, their MAO formula, etc. If they tell you they are looking for a pink giraffe, you'll know when you find a pink giraffe that you have a deal.

3) Get it under contract and try to wholesale it!  Have an escape clause in the contract, like "subject to partner approval."  Be honest with the seller and tell them what you do.  You have money partners, the end buyers, who provide the funds.  Nobody has an endless bucket of cash and different partners are in always moving in and out of buying mode.  Shop it around, and see if you get bites.  If the price is too high, ask buyers who are interested what price they would pay.  Then go back to the seller and tell them you have a partner that will approve it at their price minus your cut.  And make your cut small.

Thanks for your reply, how do i determine the ARV?

Thanks for all replies so far.

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