First Wholesale Deal - Or Is It?

16 Replies

A big hello to everyone in the Forums, I'm on this site every day and am always amazed at the quality of people and the responses. I would love to know if those more experienced investors out there think that this property would be something you would consider purchasing from a wholesaler. I already realize its not a slam dunk deal but the market is so hot in this area, its the best I've seen for a while:

Purchase price: $105,000

ARV: $140,000

Monthly rent (based on recent comps): $1100-1150

HOA: $85/mo Taxes: $168/mo

Repairs: $5,000 (paint and little linoleum)

The property is a townhouse in the most desirable part of where I live, the area is in high demand.

If you have any thoughts on this I would really appreciate hearing them. Thank you!!

Sorry I should have included that after vacancy, repairs etc. the NOI is around $7,500 or $625 a month.

Hi Kate,

The numbers look too tight to me. Although, a landlord investor might be interested. If it was a SFH the chances would be better. Still, it doesn't hurt to give it a shot........Roland

@Roland Paicely   Thank you so much for your reply. I agree, and I think that's why I'm having trouble assessing the deal - its too tight and maybe I'm trying too hard to make it work.

Kate,

I've done some Lease Option deals.Based on the information about the townhouse the numbers can work.  It depends on how motivated the seller is and a few other things.  There is a way to make money on this.  I can help you with it.  But the seller would need to be on board.   Do you think the seller would be open to this?......Roland

@Roland Paicely   That thought had occurred to me, but unfortunately its out of the question, he has made it clear he just wants to sell it and move on, and from what I know of his personal circumstances I believe him. I do think its not a bad buy-and-hold property, but am trying to gauge whether the numbers would appeal to a buy-and-hold investor, or if the cash on cash return doesn't cut it.

@Kate Pierse   For a buy & hold it might be worth having.  Especially since it is in a very nice area.  Wake has a good reputation for steady appreciation also.  

I think the big drawback will be that it's a townhouse.  What do you think of telling the seller that it doesn't work for you but maybe it might work for one of your colleagues.  If he says yes then sign him up and market it to the Landlord types.  I think you'll have a good feel if it's a possible deal within 1 week.  That's been my experience.

@Roland Paicely   That is a great idea. Thank you so much for taking the time to make the suggestions. I will be very interested to see if its going to appeal to landlords.

An idea here is to use a joint venture with seller where you would come in and do the repairs to get it best possible resell condition and then resell the house make $10,000 and give the seller the balance. That would allow you to get a guaranteed rate of return $10k without conveying title. This gives the seller more money than doing the traditional wholesale flip.

The steps here is to buy it sub to with the JV agreement do the repairs and resell it with an agent at a competitive price.

Seller should net more money by doing it this way

@Brian Gibbons Wow I love the way you think! This could be a great alternative. Fantastic idea!

So you would purchase the property sub to (this would be listed in the contract) and then have a separate JV agreement that outlines everyone's responsibilities? Do you ever have a problem with due on sale clauses when you do sub to deals?

Not with a fast turn around, you are selling fast.  

I always sign a listing agreement at the time of signing the JV agreement and the subject to paperwork. I own it I fix it I resell it quickly.

A light rehab is different then a big rehab. The light rehab the cost $5-$10,000 is a good win win on the JV agreement as long as your profit is certain.

Do the math on a 70% ARV on a $5000 rehab that if resold is in the 150 range the seller only gets about 50% of appraised value whereas they can net a lot more money if you help them rehab the property and so on the JV with a modest $10,000 profit.

This thinking can be taken toward probate properties where the kitchen and bathrooms need remodeling but everything else is sound with the foundation the roof HVAC etc. just updating the cosmetics and reselling quickly at a competitive price could help perhaps some probate houses that have that grandma look to them that need updating in order to get top dollar.

If you're an agent and you can be a light rehab specialists you could let the world know that people don't need money to improve their properties if they jv with you and then you can get a commission plus a modest JV feet of let's say $5000 and make more money and solve peoples problems.

If a wholesaler is selling for $105K, that means he's in contract to pay less.  $105K is not a great landlord deal.  What this info means to you is that you can find a better deal.....since he did.    

If rents in this particular area are $1100 and it's desirable and easy to rent there, I'd aim for finding a better deal (in the $75K range).  It can be done.  

Ah, I missed that you are the wholesaler in this scenario. Well, then no I would not buy this deal from you unless I wanted to live there and thought $105K was a good price.

I just wanted to give an update and let everyone who was kind enough to help me assess this deal that we decided not to go ahead with it...it was too borderline and I wanted to heed the advice of those more experienced than me on this site!!

A big thank you to @Roland Paicely @Brian Gibbons and @Account Closed   for your input!

Purchase price is a bit high for a wholesale deal. Your margin is a bit slim. But if you plan on paying cash try and get seller to lower price. I gather your trying to buy fix and hold. But if not try to get it at a lower price to cover yourself if you want to flip it.

Purchase price is a bit high for a wholesale deal. Your margin is a bit slim. But if you plan on paying cash try and get seller to lower price. I gather your trying to buy fix and hold. But if not try to get it at a lower price to cover yourself if you want to flip it.

@Roland Paicely   That thought had occurred to me, but unfortunately its out of the question, he has made it clear he just wants to sell it and move on, and from what I know of his personal circumstances I believe him. I do think its not a bad buy-and-hold property, but am trying to gauge whether the numbers would appeal to a buy-and-hold investor, or if the cash on cash return doesn't cut it.

 It is cash or terms.  Low cash for the current market or a terms deal, sub2, lease option, etc.  That is what the investor market is looking for.

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