Real Estate Investor · Sunrise, FL · Member since 2008 · 79 posts · 0 votes
This is what I want to know when presenting an offer to a seller should offer 40%-70% of the ASKING PRICE or VALUE PRICE (Homes worth) ?
And what would be a good percentage to start off at?
Thank you all again who responds. Please be clear in your answer so that it is very understandable basically lamen's terms lolz :lol:
I appreciate everyone's responses because it helps me and other curious minds to become better and knowledgeable as a real estate investor and business owners.
Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
17y
Your offer has nothing to do with the ASKING PRICE and everything to do with the ARV (After Repaired Value) as Mr_Investor said.
ARV is the what the house will sell for after you have fixed it up. The most accurate way to do this is to determine it from what comps (comparable sales; similar houses in the same area) have sold in the last 3 months or so. From comps you can figure an average sold price per square foot and figure that with what your house's square footage is to come up with an approximate ARV. You want your comps to be as similar as possible to your subject house.
The basic wholesaling method of determining an offer is as Mr_Investor stated - 70% of ARV minus whatever the repairs are to get it to your comparable sales standards, minus your profit.
Understand that this a general rule, and I would highly recommend you do some in depth research into your market FIRST before you use that formula. If your market is in the toilet, you may get no one willing to buy at 70% of ARV minus repairs. You may need to be selling at 65% or even 60%.
Many markets are in a precarious position and combining that with the current recession and the lending issues right now, you need to know where your market is so that you can make educated assessments of values.
I also would highly recommend that you go to your local investment club and start asking rehabbers and landlords what they look for in their numbers.
Wholesaling is about two things. Finding deals and building your network to sell them to. Your network is your customer base, and if you don't know what your customers want you will NOT make it. Take the time and find out what YOUR customers are looking for. What numbers do they buy at? How much profit are looking to make on a rehab? How much cash flow are they looking for in a rental? How much work are they willing to put into a property? What areas do they like? How fast can they close?
You need to know these things if you are going to make it as a wholesaler. Do your homework first, so you know where you need to be when you go to sell your deals.
This is what I want to know when presenting an offer to a seller should offer 40%-70% of the ASKING PRICE or VALUE PRICE (Homes worth) ?
And what would be a good percentage to start off at?
Thank you all again who responds. Please be clear in your answer so that it is very understandable basically lamen's terms lolz :lol:
I appreciate everyone's responses because it helps me and other curious minds to become better and knowledgeable as a real estate investor and business owners.
Yeah MR.Investor is dead on. But i have a excel template i was working on that could do all of that for you really quick ill be happy to send you a copy. If you are interested just send a private PM.
Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
17y
Just to follow up publicly with some PM's that Courtney and I had.
I am personally in a stable real estate market that is still strong economically relative to most of the country, and I am using 65% right now instead of 70%.
With the general economy, the decreased buyer pool, and tightening credit standards from the banks and lenders, I'm becoming more conservative on my wholesale deals to make sure they move.
Specialist · Jacksonville, FL · Member since 2008 · 140 posts · 14 votes
17y
Hey Ryan, Do you think the same formula would fit for a REO deal? I'm low balling every REO deal (I mean really low!) but I would like to get my [b]acceptance rate up. Trying to pin point if its the EMD or the offer its self.
Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
17y
The formula fits for any property, but the mark down percentage would change for the particulars of your market.
There are some markets in free fall right now, and I personally would not feel completely comfortable buying in some of them for even 50% of current ARV minus repairs.
You will have to research your area, your market, and your investor buyers to determine where you should set your percentage at.