Updated almost 7 years ago on . Most recent reply
Wholesale deal analysis please!
Hi fellow BP family!
Need some opinions on my first wholesale deal that I am about to complete tomorrow.
I have the property under contract at $848,000.
The property is currently at 982 sq feet however has an 288 sq foot addition not permitted with the city yet. The cash buyer needs to have the contractor do some drawing of the new addition and send footage then submit them to the building department. After that’s complete the new da footage will be 1,280.
ARV at new sq footage is $1,100,000.
I am debating on how much to sell to the cash buyer because there’s some permitting issues and needs about 20-30k rehab.
What do you all think would be an appropriate wholesale price based on these numbers?
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#2 Marketing Your Property Contributor
- Flipper/Rehabber
- Wilton, CT
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#2 Marketing Your Property Contributor
- Flipper/Rehabber
- Wilton, CT
OK lets do some numbers. Get your smart cap on!
850K contract price.
ARV=1.1M (thus REAL ARV is 0.9 to1M)
1M-850K= 150K ( I call this number the Rookie Profit , RP)
THis is the rookie profit because all the rookie wholeslaers think that is the profit they will make.
So now we are now at 150K profit.
10% of selling price goes poof on fees taxes agent fees etc. etc.
That is $100K
We are now at $50K profit
Anyone selling a 1,1K house for a 300K discount WILL need at least, painting, new kitchen new bathroom, and that will cost you about 30K to 40K
OK so now there is 10K of profit left.
Keep in mind your fee is not even taken out yet.
Now who in the right mind will dish out $850K in cash to make 10K IF NOTHING GOES WRONG.
Again your fee is not taken out, and most likely whom ever buys is will buy it with OPM (Other Peoples Money), that stuff costs too.
I would say there is absolutely no deal to be made.
Far from it.
Look the best range for flips is between 100K and 230K. The higher the price tag the more uncertainty in ARV, the more risk the more holding cost, the more grey hair...
Stay away from this deal my good feller. Sorry to crush your hopes, but I personally would not come near this deal. But wjho knows I could be wrong as I know no details. But from my perspective... stay away!