30 percent discount when wholesaling

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30 percent discount when wholesaling

Joshua Ewing-Simone
Member since 2021 · 3 posts · 0 votes

How important is it to get a property under contract for a 30 percent discount when wholesaling? (ARV - 30%) Right now I am negotiating with a seller and with the numbers I calculated at a 30% discount puts me under another buyer. Should I hit the seller with the offer and move on if he says no or readjust the discount? This would be my first wholesale deal. Any help is appreciated thank you!

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
5y
Originally posted by @David Frandsen:

I like Brent Daniels(TTP) formula: ARV x .84 minus rehab cost, minus your wholesale fee.

Huh?  A 16%  gross margin means you'll lose money after holding and selling costs….assuming your ARV and rehab costs were perfect.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    5y

    Your "offer formula isn't just "ARV minus 30%" it's "ARV minus 30% And repairs/Reno costs". That's th "standard" formula investors use, but not often doable.

    2Reply
  • Landon Bleau
    Rental Property Investor · Toledo, OH · Member since 2018 · 309 posts · 264 votes
    5y

    Depending on how much rehab is required, you'll need to get it under contract for a lot less than ARV-30%. Your cash buyers will want to be all in (purchase price + rehab) for 70% of ARV, so if you're only able to get the property for 70% of ARV, it'll be very difficult to find a buyer who is alright with those numbers.

    2Reply
  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    5y

    30 percent discount of what? ARV, actual current value, what the seller wants for it initially? And even with that, what are you basing your 30 percent of x on, meaning what data are you using to determine the home's current value and future after repair value? Do you have MLS access? Knowing your market is what makes your formula work and that means knowing your market on a week to week and month to month basis, not employing a random book formula. Formulas and calculators are quick fixes, but most people that use them when they are new use them because they don't know the real-life answers and that makes for an investor about to make a mistake.

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  • David Frandsen
    Real Estate Agent · San Diego, CA · Member since 2014 · 205 posts · 123 votes
    5y

    I like Brent Daniels(TTP) formula: ARV x .84 minus rehab cost, minus your wholesale fee.

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    5y
    Originally posted by @David Frandsen:

    I like Brent Daniels(TTP) formula: ARV x .84 minus rehab cost, minus your wholesale fee.

    Huh?  A 16%  gross margin means you'll lose money after holding and selling costs….assuming your ARV and rehab costs were perfect.

    3Reply
  • Nick C.
    Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
    5y

    That Brent Daniels formula is going to lose a lot of first time flippers a lot of money. 

    3Reply
  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    5y

    @Wayne Brooks

    Yup. Profit margin compression in a hot sellers market. The flushing out of the wanna be wholesalers will be quicker than normal. Amazingly, no matter what experienced real estate professionals, investors, and lenders post, advise, recommend, etc., these inexperienced hear and believe only what they want. They ALWAYS underestimate the necessary expertise, experience, knowledge, ability, time, capital, and marketing necessary for success. Then when they fail at wholesaling they decide that STR arbitrage is the holy grail. LOL.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Don Konipol:

    @Wayne Brooks

    Yup. Profit margin compression in a hot sellers market. The flushing out of the wanna be wholesalers will be quicker than normal. Amazingly, no matter what experienced real estate professionals, investors, and lenders post, advise, recommend, etc., these inexperienced hear and believe only what they want. They ALWAYS underestimate the necessary expertise, experience, knowledge, ability, time, capital, and marketing necessary for success. Then when they fail at wholesaling they decide that STR arbitrage is the holy grail. LOL.

    I sometimes wonder why these folks dont just get into the business and learn it from the ground up and create a lasting income / career.

    IE   Licensed AGent and if you want to do commerical style real estate deals get in with that company broker.

    Mortgage lender   private /  or licensed RMLO

    Property management

    work for development company doing land Ack

    all sorts of jobs out there that will give you the skills to add to and grow your business.

    wholesaling is so tough for most.. granted some have the skills but not many.  So they waste time on a dream they are sold by the no money get rich guru rehash stuff..  You know same pitch as Amway. 

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  • Waylon Zook
    Etna Green, IN · Member since 2015 · 207 posts · 157 votes
    5y

    @Jay Hinrichs gotta agree with you...i would think it would be much easier to have a seller agree to sell their home for a 6% commission instead of for half the value to a wholesaler.

    0Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    5y

    Hopefully Zillow Opendoor offerpad etc etc etc. Start doing more and more advertising and we'll have a new "floor" for properties that need repairs. Last time I inquired they we're 6-12% off ARV plus repairs. And that's a company that's going to pay you cash, not look for a buyer. And you can stay 3-60 days.

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