Do I need to inspect the property if wholesaling?
Fort Wayne, IN · Member since 2009 · 2 posts · 0 votes
I am new to wholesaling and was wondering, when I find a deal that works and I want to wholesale it, do I need to have it inspected or can I just have my investor buyer have it inspected? There's really no need to have it inspected twice is there? If my investor buyer has it inspected and doesn't like it or there is too much need for repair then I would get out of the contract with my inspection clause. The reason I ask is that I am wheelchair confined but yet I see the potential to thrive with wholesaling in this economy. Basically, I would be virtually investing in my own local area. How does someone handle the inspection situation if wholesaling out-of-state properties?
Thanks,
Brian in Indiana :wowo:
I've wholesaled a lot of deals that I've never seen. I let the buyers decide how much repair costs are involved because no two buyers are going to come up with same number. I used to go over properties and have contractors give me bids but soon found out it was a thankless task.
Real buyers couldn't care less what you think the ARV or repair estimates are. When I'm negotiating with the seller I use a rule of thumb that most houses need $8 to $15 a sqft in repair. I've generally come out pretty good estimating $10 a sqft on houses that I never see and my buy price generally affords me a decent wholesale fee.
I try to avoid looking at houses anymore. If I can get a contract negotiated over the phone then my potential buyers will let me know pretty quickly if my numbers are off and I can renegotiate from there.
I would never pay to have a property inspected that I am wholesaling. The buyer can do that if they like.
Hope it helps.
The decision whether or not to inspect depends on how much you intend to hold the end-buyer's hands. I've asked this question to several of my mentors, before I started wholesaling, and each one gave me a slightly different answer. Stated another way, your decision is a marketing one.
A more seasoned investor won't need--and might not want--you to include an inspection in your assignment package; however, a newbie or less seasoned investor might deeply appreciate if you were to include one in the package.
I prefer to not include include one in my package, but if I determine after I assess a potential end-buyer that s/he might need more hand-holding, then I'll offer to hold their hands to help them through the process. Although I realize that doing so makes that transaction less profitable from a strict bottom-line perspective, I believe that doing so helps improve the profitability of that transaction from a relationship perspective--and I'll choose relationships over dollars every time.
I invest in multiple markets, and I suspect my perspective on how to handle the inspection, appraisal, etc for non-local properties will differ from other perspectives. I'm a consultant, and I take a consulting approach to manage all of my real-estate investing activities (including wholesaling). I handle local and non-local properties exactly the same way: I do everything that I can do virtually, I assemble a team of pros (whom I trust--in each locale), and I outsource all of the work outside my area(s) of expertise.
Besides, I know very little about plumbing and even less about carpentry, so I wouldn't be able to tell the difference between good and bad work, but I can hire someone who can. If I were to show up on-site for any of my rehabs with a hard-hat, the only thing I'd be able to do is give my contractors a hard time--and maybe shoot the breeze a little.
Keep in mind that this is a business, and you need to treat it as such. While it might be cool to be a one-man-band (I actually play multiple instruments), it will take one longer to complete jobs if one tries to do everything one's self.
Brian,
I assume that you have a contractor go through the property for you to determine what rehab is needed. Otherwise how would you know if you had a good deal. If you do then I see no reason to go through it yourself. As long as the numbers work.
I've wholesaled a lot of deals that I've never seen. I let the buyers decide how much repair costs are involved because no two buyers are going to come up with same number. I used to go over properties and have contractors give me bids but soon found out it was a thankless task.
Real buyers couldn't care less what you think the ARV or repair estimates are. When I'm negotiating with the seller I use a rule of thumb that most houses need $8 to $15 a sqft in repair. I've generally come out pretty good estimating $10 a sqft on houses that I never see and my buy price generally affords me a decent wholesale fee.
I try to avoid looking at houses anymore. If I can get a contract negotiated over the phone then my potential buyers will let me know pretty quickly if my numbers are off and I can renegotiate from there.
I would never pay to have a property inspected that I am wholesaling. The buyer can do that if they like.
Hope it helps.