What's the going rate?

Question

Hey Guys!

I'm generating a decent amount of wholesale leads in my area of Jacksonville, FL.  I've looked up these formulas and all and I don't find them particularly reliable because I've been on the project management side of investing for so long that I really have my rehab numbers down pat.  So, my question is generally, when I'm figuring my max offer to the seller what makes a buyer REALLY take a look?  I've been running my numbers at 25-30% profit for the end buyer assuming they rehab and sell.  I feel like my offers end up being ridiculously low, but I don't want to have a bunch of people under contract where my buyer will stand to make 15-20% with nobody being interested.

Tyler McLeod · Answer

I have heard from successful wholesalers that no matter how low you feel your offer is stick to your numbers. You need to make sure that there is room for your profit as well as the buyer's profit. This profit for quick deals usually means a buyer buying for around 60% ARV so they have plenty of room to justify a quick deal. Like Steve said you have to make offers. Brandon stated in a webinar that if you Analyze a 100 properties a month make 10 offers and one gets accepted thats not too bad. If you made 7k off that one deal could you justify the time and the 10 other offers you put in? Im new at this as well but I'm learning that it's is a hustle and numbers game! Best of luck to you.

Marc Bracy · Answer

@Steve G. I have had "believe in the process" pounded in my head like a drum! I am excited - tonight I'm buying my first house on a joint venture.  I have several good things coming down the pipeline and I am grateful for everyones advice!  I look forward to being able to GIVE advice in the future!

Steve G. · Answer

@Marc Bracy - Perseverance!

I read posts about wholesalers who take 9 / 12 months to get their first deal closed . . . take encouragement, in that it WILL happen.

• Find your buyers
• Ask what they're looking for
• Find something which meets their criteria
• Sell it to them

Always difficult finding something, then trying to sell it without a buyer in mind.

Marc Bracy · Answer

Jeff, my buyers list is not very broad right now.  I am working to find more buyers and target their interests, but it's been a challenge for me.  I appreciate your input and it makes perfect sense as I have called the few people I think would be interested in my deals to get their opinion.  I just do not want to create a bad habit of always coming in way too low in comparison to other wholesalers.  I assume that these people are occasionally shopping around and I want deals, but also don't want a seller to hear my number and just dismiss me completely because someone else is able to tighten up their numbers you know?

@Steve G. - Thanks again, I just want to make sure I'm getting it right.  I don't want to make a habit of buyers dismissing me because there is never enough meat on the bone as well, so yeah - its a fine line and a numbers game.  Just gotta keep learning and keep making offers!

You guys are great!

Jeff Rabinowitz · Answer

@Marc Bracy, how well do you know your buyers and what they are looking for? Some rehabbers are looking for fairly tight percentage profits based on the funds they have committed to a project, some are looking for a minimum amount per deal. Sometimes someone who usually takes only high profit deals or high percentage deals will take a lower profit deal if they have a crew they would like to keep busy, or to see if a new crew can execute. Some rehabbers only want deals that are similar to deals they have done before but they know those types of deals so well that they will occasionally risk one that looks a bit tight because they are very confident of their costs and abilities to manage the project. Sometimes a rehabber will take on a project because they wish to expand their skill sets and will do so if there is less profit than they would generally expect. Buyers buy for a broad range of reasons. The better you understand your buyers' business models, motivations, and what they are looking for, the easier it will be to put deals under contract that your buyers want.

Steve G. · Answer

@Marc Bracy - I think you've answered your own question - the numbers look pretty solid to me. I'd present the figures you've used above, to the seller and use it to explain your offer on the property.

Go through it with them, piece by piece and ask if "they" can make suggestions how you can modify the value of repairs, while ensuring an investor could still do a rehab. They need to keep in mind that an investor will need to get the property to a clean, fresh, saleable condition, and make a profit, to be interested in buying.

Usually this depth of involvement will show them how you arrived at your figure, and why you're only able to offer the price you have! It should also instil a level of trust which (possibly) wasn't in the relationship between you and the seller previously.

Getting the seller on your side is paramount to making them realise you're not out to take advantage of them - which (in my opinion) you should never do!

The only addendum to this I'd make, is that if you have a buyer in mind, you might ask them what profit they're happy to take, and work with them to hone the repairs to a level they feel comfortable with. As you have a lot of experience in rehab costs, I'm sure you could go  through the details and work pricing out to suit them!

I'd be interested to hear how it all pans out!

Regards

Steve

Marc Bracy · Answer

Yes, sure I can -

I've got a house in the Arlington area that I'm currently working and heres what I've got:

basic ARV after carpet, paint and minor fixes 140k, somewhere between 160-170 with a full rehab, but I'm basing my price off the 140k number because I'm not getting enough value out of a full rehab - basically spending 30k to increase the price 30k doesn't make sense to me.

140k

-30%(10k for my fee, 32k profit for flipper) = 42k

-10%(closing costs including realtor 6% ) = 14.3k

$2500(original closing costs approximation)

$8500 (flooring, paint and minor fix rehab cost)

140k - 67.3k = max offer of 72.7k

most of the formulas I have seen have me around 85k, but not sure how they get there.

My seller is at 105k right now, but I feel that they are motivated enough to drop some more, but not sure how to get there.

Linval T. · Answer

@Marc Bracy

You should try using the wholesale calculator at the link below. There is a video that explains how it works as well. I am sure you will find it very useful for your calculations and price projections.

https://www.biggerpockets.com/wholesaling-calculat...

Steve G. · Answer

@Marc Bracy - I've been through a similar scenario, and I can confirm what others have said on these forums - it's just a numbers game. You may feel that your offers are ridiculously low, but the more offers you make, the better your chances of getting an actual "Deal".

Can you give us an example of your figures on something you were looking to get under contract recently?

What's the going rate?

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