Deal or No Deal? Wholesaler Newbie...

[Chelsea Nichols]

Hi guys! Thanks in advance for reading and responding. :)

I'm new to wholesaling and believe I have found a lead worth following. I found a FSBO home on Zillow that has been listed on and off for the past 5 years. The home is one of the last standing original properties (built in 1930) in an otherwise gentrified neighborhood full of new/new-ish townhomes priced in the mid $300k-400k range. I figure its probably unlikely that no one has approached this owner about purchasing his property, so he is likely watching the gentrification happen and hoping he can sell at the highest cost possible. He has listed his property between $295k-$330k over the past 5 yrs. The home is definitely distressed and would be a full tear down. However, it is on a triangular lot of about 5800 sq ft. The new townhomes in the area have been built on lots 1/3 of the size which leads me to believe a developer could potentially build three homes on this lot selling at $340k plus totaling $1m plus in sales.

I want to reach out to the seller, but want some feedback first on if this is a good deal. There are no real comps in the area since his home is one of the last of its kind standing. Ideally I can assign this house under contract for $275 max. Seller is asking $330k. 

Looking forward to the community's feedback!

[Anthony Hunter]

@Chelsea Nichols If the property is one of a kind you would probably want to use a cost based approach of evaluating rather than a sales comparison approach using comps. Which means you would have to get an estimate of the replacement value of the property’s components, the land, and the improvements on the land rather than valuing the property as a whole. So add up the separate value of the land and improvements to see what the property is worth using this approach.

Or you could speak to an agent and have them run comps with an expanded criteria. These won’t be your ideal comps but if you have nothing else to go off it could be better than nothing. As far as of it is a deal or not it would depend on what you get the property under contract for and what a cash buyer would be willing to pay.

I would have the seller send you some pictures of the property along with some estimates of the rehab and send those to your cash buyers and see what they’d be willing to pay for a property like that and you can negotiate your purchase price from there.