Is this a good deal.

12 Replies

Hi everyone I am very new to wholesaling and might be coming across my first deal. Im so nervous on how to move forward with this. I found a home for sell and the homeowner is willing to sign the contract, I just need reassurance that this is a good deal and that I would be able to sell it. Here are the details.

3 Bed, 3 Bath 1,100 square fee selling for 350,000.

No structural damage, needs about $40,000 of work.

ARV is $425,000 which a couple homes on the same street last year sold for around that.

Please help me I have no idea what to do. Will a buyer even spend that much money on a home? Every book I read or podcast I listened to never discussed wholesaling homes in this price range. Can it even be done? Thank you for your time. 

I'm a fairly new investor, but I will tell you what I think about the numbers based on my experience. 

You can wholesale at any price point.  Our current project is $500k.

If I took this deal using my hard money formula, assuming your numbers held up (rehab & arv), I would loose approximately $9,000. 

Having said that, I haven't had the privilege of not using hard money for a flip.  So, if I were able to use cold hard cash and not hard money, I might walk away with $9,000.  Hard money or not, I wouldn't take the deal personally.  The deal would look more attractive if you could get it below $325,000.   

My hard money numbers would look like this;

$425,000 @ 70% hard money loan to arv = $297,500

Up front hard money cost, 3% of $297,500 = $8,925

12% interest on hard money, 3 months of rehab and to get it sold = $8,925

Total hard money for 3 months = $17,850.

Hope this helps!

@Michael Algarin  

I'm not a wholesaler, but I would ask if the comps you looked at are comparable, meaning same sq footage, same number of bedrooms/bathrooms, etc. I would also look at the comps and see when they were last sold and how long they were on the market for and if any of those properites had to lower their price. That may give you an indication of what the area is doing. Also, how do you know it will only take $40K worth of work? Did you get some bids from contractors or are you just guessing? If you have a bid which you can show to a potential buyer, that may sweeten the deal even more because you have hard evidence.

Again, I'm not a wholesaler but I wouldn't think price is an issue with wholesaleing. If I have a $1 million dollar ARV house and I can buy it for $700K with $100K in repairs, is that a good deal? I would think so.

Spread too thin for that much investment. Figure long holding costs, because the percentage of buyers in that price range is small. Just think of a chart with house values ranging from $100,000- $400,000. On one axis, picture house prices. On the other axis, picture buyers.

The number of actual, qualified buyers drops significantly, as prices increase. 

@Michael Algarin   This is a terrible deal. First of all, the most you should pay for this property is $279,000 before any repairs. If you subtract repairs of $40,000 your purchase price should be no more than $257,000 if you pay more than that, only a stupid investor will give you a dime more than $257K. There are a lot of noise out there about wholesaling, but I always tell my students that only losers wholesale properties. If you know what you are doing, why would you leave money on the table. for example, if you were to acquire this property for $257,000, you might be lucky to whole sell it for $5000 or even $10,000. But if you take the whole deal down yourself, you stand a chance to make, at least $60-$80,000. My question is why not learn the process of taking down deals instead of killing it half way. If lions only make half kills, they will never have the strength to get a full belly and they will always be hungry. I flipped only three houses in 2014 and made $248,000. If I whole ssale my deals I would have made less than $30,000. But it takes some skill. So learn the skill or get someone to hold your hand who has done it.

I agree with all the "nay sayers"....Don't walk....Run from this one! 

Happy Hunting!

Thank you all for the quick responses. I see where you are coming from Mr.Dawodu and I definitely will look more into that. Much respect to all of you and thanks again.

Originally posted by @Toyin Dawodu:

@Michael Algarin  This is a terrible deal. First of all, the most you should pay for this property is $279,000 before any repairs. If you subtract repairs of $40,000 your purchase price should be no more than $257,000 if you pay more than that, only a stupid investor will give you a dime more than $257K. There are a lot of noise out there about wholesaling, but I always tell my students that only losers wholesale properties. If you know what you are doing, why would you leave money on the table. for example, if you were to acquire this property for $257,000, you might be lucky to whole sell it for $5000 or even $10,000. But if you take the whole deal down yourself, you stand a chance to make, at least $60-$80,000. My question is why not learn the process of taking down deals instead of killing it half way. If lions only make half kills, they will never have the strength to get a full belly and they will always be hungry. I flipped only three houses in 2014 and made $248,000. If I whole ssale my deals I would have made less than $30,000. But it takes some skill. So learn the skill or get someone to hold your hand who has done it.

 Is there any books you can recommend on learning this process? Theres so much information out there it gets overwhelming. Thank you for your help.

@Toyin Dawodu do you care to share a skill that you used to flip only 3 houses in 2014 to make $248K?

@Belinda D.  Yes. Glad to share. I have been doing this for over 15 years. I can smell a good deal even in my sleep. It's mainly due to experience. I offer personal coaching because technics are not enough. You need hand holding. You can check out my two websites for more details.

Www.gicdealfinders.info

Www.themagicofrealestate.info

@Toyin Dawodu , I have coaches in my local area, thanks anyway.

@ Michael download the free Ultimate Beginner Guide to Real Estate Investing I order a book call No and low money down by biggerpockets ^_^     

@Michael Algarin  Nothing to it. A twelve year-old buy can do it (with 20 years of experience). 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here