Hi BG Family,
I am new to REI and BG. Really appreciate all the info available on this website. I have been reading up a lot but have a slight confusion regarding Wholesale Calculations. I apologize if this question has already been answered
- Are wholesalers in California using this formula?
- MOA = 70% ARV - Repairs - Wholesale fee
- That means leaving 30% ARV for Buyers Profit and Fixed Cost (Purchase/Holding/Closing Cost)
- So for $500K property, leaving $150K for Buyers Profit and Fixed Cost
- Or using this formula?
- MOA = ARV - Buyers Profit - Fixed Cost - Repairs - Wholesale Fee
- If Yes, How do you come up with a number for Buyers Profit?
- Is there a rule of thumb like a % of ARV, a wholesaler should be leaving for buyers profit?
- If Yes, How do you calculate Fixed Cost?
- I have read J Scott article on BG regarding fixed cost but do you calculate that cost every time for Wholesale deal based on the property value and for California?
- Or is there a rule of thumb like a % of ARV a wholesaler should leave for Fixed Cost?
Thanks in advance for the help.
@Syed Ahmad I'm not sure about Cali but here in Cincy most wholesalers use option 1.
70% doesn't work out here with the home values are higher. Fixed cost with end buyer profit is a good starting point
Our market makes it more difficult to learn because of the high value of real estate. It is because of this you shouldnt use the 70% rule. You can wholesale deals for higher than 70% because of the profit. You may want to ask around for what type of profit buyers want. Some may want 50k for the trouble, others more or less.
MOA = ARV - Buyers Profit - Fixed Cost - Repairs - Wholesale Fee
Buyer's Profit varies so make you know your buyer's list. Some of my buyers want $25k but also are the listing agent so they get that additional 3%. Others aim for $40k minimum because they bring no money to the table so their ROI is high. You really just have to understand your buyer pool.
I heard in a podcast this morning that due to the declining inventory using 70% ARV was not working and this company was getting clobbered due to offering a much smaller amount than what their competition was offering using 80-83 % ARV. This company is in a large city with what is probably a hot RE market. Where I live with all the ups (and downs) the market never really gets that hot. I also don't think there is a great deal of competition. Am I wise staying at the 70-73% % ARV?
hey guys so what is the average $ amount made on a deal in the bay area? also do you guys recommend any title companies or RE attorney? I'm just starting out with wholesaling! Thanks!
@Syed Ahmad I am based in Southern California and most Wholesalers I know in my area use 75% on the average and 80% on the high end.
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